Dollars & Derman

According to the World Economic Forum, there is a stark reality—around 50% of adults are financially illiterate. I’ve started this column with the hopes of educating Gilman students with a basic level of financial and economic understanding by meeting with alumni in the business world. For this first article, I will discuss the basics of paying taxes, and what I learned from my interview with Gilman alumnus, Michael Brennan ‘92.

Mr. Brennan graduated from the Loyola University of Maryland and stayed for graduate school to earn an MBA (Masters of Business Administration) with a concentration in accounting. This concentration in accounting led to him spending his whole career working strictly in taxes. He began with an internship at Deloitte, an accounting firm part of the “Big 4.” Mr. Brennan explained the Big 4 — comprising Deloitte, E and Y, KPMG, and PWC — is “one of the most highly sought-after jobs because they are very selective” Mr. Brennan left this job after six years and took a few other jobs before he ended up at his current job as the director of corporate tax at GEA Group, a German company that is one of the largest technology suppliers for food processing. 

At GEA, he explained his primary responsibility is to answer these two questions: “How can I reduce tax liability? How can I help a client become more tax efficient?” In simple terms, this means: how can he minimize risk the most and how can he make it so that his clients pay the least taxes possible on their income. He takes a competitive approach to saving his clients money—he explained, “Tax laws are there to be taken advantage of.” 

The primary taxes being paid by people who work for companies are: federal taxes, social security taxes, medicare taxes, and state income taxes. State income taxes vary within states, and to a high degree; the tax rate of owning a home in Baltimore City is double that of owning one in Baltimore County. For federal taxes, 0 - 37% of someone’s income depends on how much money they make. Unlike income taxes, Medicare and Social Security taxes are taken out as a fixed percentage of an employer’s income to help support the elderly, disabled, and people whose primary income source died.

To handle all of these different taxes and many others, Mr. Brennan’s best advice is: “If you owe it, it’s not going to go away, it’s better not to wait… your (tax) problems won’t go away by putting your head in the sand.” However, if you have any confusion regarding paying your taxes or you have a special circumstance, you should seek help. This advice may not apply to everyone at Gilman now, but it will at some point. Once a person gets their first job (no matter their age), that person is a part of the tax-paying class and can suffer from legal repercussions if they don’t pay their taxes properly. Mr. Brennan explained a good mindset to have when approaching taxes: “When in doubt, seek help, and make sure it’s reputable help.” This advice goes beyond taxes and applies to the business world as a whole—there is always someone with more experience than you, so if you are unsure, just ask. One of the most important concepts in business and life is bringing an educated, well-thought-out, and safe process to minimize loss and risk.