Last year my family’s annual income exceeded $250,000. As a result, we will be one of the 2% of American families required to pay for the new spending proposed by our President.
I am struggling to figure out how I should feel about this.
My initial thoughts were dark, I’ll admit. If there’s anything I like less than paying taxes, it’s paying more taxes. And if there’s anything I like less than paying more taxes, it’s knowing that 98% of my fellow Americans will not be sharing this burden with me.
In a democracy, anytime you find yourself in a group of 2% paying for a group of 98%, you’ve got a problem. How do you persuade the 98% to switch from a program in which you pay for their government benefits to one in which they pay for their government benefits? Assuming they hate paying taxes as much as I do, I’m not sure how one does this.
My income dropped last year, and I expect will drop even more this year. At this rate, someday I will drop out of the top 2%. I suppose that is one solution, but I’m not too excited about it.
In any event, our fiscal hole is so deep it can’t possibly be filled by the top 2%. The President can tax us up to 100% and he’ll still need more, lots more. So someday my pain will be yours.
I work hard for the money. Even in the halcyon rich-friendly days of Bush I and II, when I was permitted to keep slightly more than half of what I earned, I often dreamed of working less hard. Too many late nights in the office. Too many lost weekends at the office. Too many interrupted or cancelled vacations. Now that my state and federal governments would like more than half of what I earn, my idle daydreams of quitting the rat race are shifting to active plans.
But I can’t just quit. While I earn a lot, I don’t have nearly enough to retire. I think of myself as one of the working rich – the minute I stop working is the minute I stop being rich. A few years ago I thought I’d have enough to retire in my fifties. Now with my house value plunging, and my 401(k) awash in red ink, it looks like I’ll be working into my seventies. So stopping work isn’t an option for me.
Instead I need to be more tax-savvy. In exchange for its burdens, a job offers a bundle of benefits. Some of these benefits are taxed, while others aren’t. Taxable benefits include salary, bonus and stock grants. Tax-free benefits include job security, time off, status and the freedom to do what interests you. As tax rates increase, the value of taxable benefits decreases, and the relative value of tax-free benefits increases. So if I can shift my compensation away from salary and bonus and into free time and freedom to do what interests me, my tax bill will be smaller but my life may be richer.
A classmate of mine from graduate school is now a professor. Every so often the green-eyed devil possesses him, usually in spring when his best students leave for starting salaries that exceed his. This seems unjust to him, but that is because he is only looking at one benefit to the exclusion of all others. Sure his students make more money than he does, but is that all that matters in comparing their jobs to his? Of course not. Tenure gives him complete job security, while his students are struggling to prove themselves in sink-or-swim environments. He has huge amounts of free time, including three months off each year, while students rejoice when they have a clear weekend. He enjoys the elevated status of a professor at a prestigious university while his students are grunts scrambling to hold on to the lowest rung of the ladder. And, best of all, he has almost complete freedom to pursue whatever interests him, while his students must toil away their youths serving their masters.
His students may earn more money, but who is richer?
My friend, whether he realizes it or not, is extremely adroit at tax avoidance. Clearly I have much to learn. And I feel his green-eyed devil possessing me.