“The emperors of today have drawn conclusions from this simple truth: whatever doesn’t exist on paper, doesn’t exist at all” - Czeslaw Milosz

Talking about paper, India’s prime minister – Narendra Modi – took one of the ballsiest steps by a politician. He announced that overnight both paper currency Rs. 500 and Rs. 1,000 would be deemed illegal (note the keyword ‘illegal’).

There are usually two reasons why something is done. The good reason and the real reason. The good reason given to all the media, and is still being trumpeted around was in the name of corruption, to stamp out the “black money” from the system.

For those not familiar with the Indian concept – say a property developer sells you an apartment. If its market value is Rs. 100, he’ll ask for Rs. 50 via the normal banking system and Rs. 50 as cash. It’s this unaccounted for cash, with no ability to trace its source or destination that Indians call “black money”.

But the real reason, which people are only going to find out… is TAXATION.

Every country whose government relies upon taxation to cover its expenses, knows the problem it has cash. True, corruption exists and is easier with cash. But there are ways around it. Nevertheless… governments are now waging a war on cash.

The U.S., Europe, Australia and even China – want to kill cash because it makes it easier to track and tax people. So what India did, was nothing short of genius – it was swift and created just enough panic for people to take action.

Now, in a country like India – where only 2-3% of the population pay taxes. You can imagine the how heavy that tax burden is, currently at around 33% directly and could probably reach 50% indirectly.

And common man, as so many like to picture themselves don’t fancy paying it. In India, it’s more prevalent – you don’t get any of the facilities or benefits that you would as U.S. citizens – so it’s easy to justify “why should we pay?”.

Don’t worry, once the government has closed all the loopholes and widened the tax net. The people a.k.a. mob will demand more. And if Mr. Modi is smart (and has the political will again) or at least supported by a smart team – they will rehaul the tax code and make it simpler and possibly the lowest in the world.

Who would complain about paying a 10% tax if they get all the benefits of being in a society?

I did a quick survey on reddit – one of the most brutally honest places to get feedback. And the question was…

What is / was your #1 single biggest pain in the ass, regarding wealth building?

And the answer was – Taxes. (no surprises)

And I love one of the ode’s to taxation. Feel free to print this out and paste it on your wall to remind you about your biggest wealth destroyer or at least give you something to think about.

Tax his land, tax his bed,
Tax the table at which he’s fed.
Tax his tractor, tax his mule,
Teach him taxes are the rule.
Tax his cow, tax his goat,
Tax his pants, tax his coat.
Tax his ties, tax his shirt,
Tax his work, tax his dirt.
Tax his tobacco, tax his drink.
Tax him if he tries to think.
Tax his cigars, tax his beers,
If he cries, then tax his tears.
Tax his car, tax his gas,
Find other ways to tax his ass.
Tax all he has, then let him know
That you won’t be done ’til he has no dough.
When he screams and hollers,
Tax him some more.
Tax him ’till he’s good and sore.
Then tax his coffin, tax his grave.
Tax the sod in which he’s laid.
Put these words upon his tomb,
“Taxes drove me to my doom.”
When he’s gone, do not relax.
It’s time to apply the inheritance tax.

OR... if you're a Beatles fan, then the words of George Harrison rings true in the lyrics of Taxman:

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold I’ll tax the heat,
If you take a walk, I’ll tax your feet.
Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman.
Now my advice for those who die
Declare the pennies on your eyes
‘Cause I’m the taxman, yeah, I’m the taxman
And you’re working for no one but me.

And if you can't reconcile the fact that we pay a heavy penalty for making money, just sing their song... "Let it be..."

P.S. Incase you’re wondering. The answer is yes… I file my tax returns every year!

P.P.S. The US top tax rate in 1963 was 91%, dropping to 70% during 1964-81. The top rate for British taxpayers in the mid-1960s reached 83%. The wealthiest among them paid a 15% super tax on top of that, pushing taxes as high as 98%. The pain came out in the Beatles 1966 song “Taxman.” (HT: Martin Armstrong)