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Fat Chance

In theory if my money were well spent 100% taxes might relieve a lot of stress. In practice, the Libertarians got the right idea.

How much money is enough money? How much do you think you need to make you happy? What kind of salary do you need to satisfy your needs? Many people actually believe they know what salary level can satisfy their desire. "If I could just make $30,000 a year I'll be set". "When I get to $45,000 a year, life will be so much easier". "$60,000 a year and I'll be retiring at 45". Other people will preach money can't make you happy and "the more you get the more you want". Which way do you lean?

Speaking from personal experience, it is unlikely you can name the amount of salary it takes to achieve personal happiness. I achieved twice the goal amount for over two years prior to reaching the current contentment in my own personal finances. Even believing the warning "the more you get the more you want" couldn't prevent that situation from occurring. Satisfaction with the income level occurred only after a concerted effort to maintain a savings plan. It wasn't to long ago $18,000 satisfied all my needs, allowed me to put a couple thousand in the bank a year, and pay New York State sales and income taxes. That was ten years ago and in the interim a better job and better salary lead to overconfidence, over spending and the practice of carrying two car payments, a large house payment and two to three thousand dollars in credit card debt. So for about four years, financial gain decreased financial security.

Recently, an attitude change allowed a shift back to the fundamental philosophy of my youth and my family now is much better off. We are still allowed some toys. How else could you classify this web site? It would be nice if someday sales covered the expenses, but in the family budget these publishing costs must be considered discretionary income. It may fit under charitable donations though considering the extraordinary benefit to all extended by sharing these philosophies with society. Any doubt this piece was written by an egomaniac? The author knows this too but he really wants to state the conclusion: You can achieve financial independence, even if you make less than the poverty level, if you remain debt free and save five to ten percent of your income. Fortunately, the author hasn't proved this by personal experience so there is some trepidation of inflicting this statement on people struggling to put food on the table. But the author is not that far removed and he does have friends with incomes in this range. In fact, it was this observation that caused a re-evaluation of his own spending habits - despite a large difference in wage structure, many of the laborers he worked with tended to retire with thirty to forty thousand dollars in the bank while the managers carried five to ten thousand in credit card debt.

The idea of lower taxes works the same psychological way as an increase in salary. People think if they could just lower taxes their financial woes would cease. In reality those people whose finances are so messed up that a tax decrease could possibly help them offer the best excuse to raise taxes. For these families chances are the government negotiates more efficiently than they possibly could. These families don't fit into the final recommendation of lowering taxes so for now they will be dismissed with the caveat - a compassionate society would increase taxes so we could afford to take care of those without the discipline to take care of themselves.

Honestly, after experiencing the tax rates charged in South Carolina and Oklahoma and comparing them with those charges by New York the decision to move back into New York scares the daylights out of me. In a suburb of South Carolina a house appraised at $104,000 drew a yearly property tax bill of $640. A $45,000 house in Altus, Oklahoma cost $32 a month in property taxes. In Orchard Park, New York an appraisal of $60,000 means $290 per month. In Erie County 8% sales tax, in South Carolina and Oklahoma it's less. Both South Carolina and Oklahoma levy a property tax on vehicles. For instance a 1999 Chevy Venture carries a yearly charge of almost $400 dollars to register. This property tax makes up for some of the difference especially if a family owns multiple new vehicles. But the difference still is pretty large. It is important to remember when discussing taxes and tax rates consideration of the efficiency of the services desired must be the overwhelming determination of whether those services are publicly or privately funded. For instance, both Hanahan, South Carolina and Altus Ok provide public water. In Hanahan I could draw a glass of water. After letting it sit for a while 1/8 of a inch of brown dirt like substance would settle to the bottom. In Altus, if you use a dehumidifier just one gallon of water will produce one half a glass of gypsum. Both of the Southern water supplies wash dishes or clothes fine. But my family chooses to buy distilled water to drink. This works out to about a $5 a week extra tax compared to Western New York or Colorado where we don't mind drinking the water on a regular basis. So for our family if we could convince the city council to upgrade the system and that cost only turned out to be $10 more a month we would be ahead. The problem with this comes when you start to consider other families. Some families drink the water and will continue to drink the water, remember the water looks disgusting but it passes all safety standards. Some families won't drink water from the tap no matter how clean looking or safe. For both these classes of families improving the water supply increases the water bill. Could you imagine communities without sidewalks or shoulders on the road? Not to difficult if you live in the South. This helps to maintain lower taxes. The police and teachers earn much less equaling even lower taxes. There are 45 members of the South Carolina State Senate each earning $$ a year. New York employs 61 and pays them $$$$$$$. New York plows the roads in the winter Oklahoma doesn't get snow.

Examine the tax burden alone and you must decide to move out of New York. Many people do and many people will continue to make that decision. Examine the entire package and you see you receive many more benefits than those in states with lower tax rates. The problem isn't solely the tax rates are higher. The problem is the extra benefits are not great enough to justify the difference in tax rates. If we decide to pay our State Senators a full time wage we should receive work dedicated to providing the best service to the public. Unfortunately in practice these guys get more time to forge relationships with people and companies willing to scratch their back so all the work ends up substandard. When your State representatives are only part time occasionally an honest company slips in and some work gets done. A police force worried about public perception tends to treat the public a little better. Almost every municipality in the South equips their police cars with video cameras. Not only does this help prove a crime but it also has the secondary advantage of decreasing the smart-ass remarks and comments from officers. This not only relieves some of the frustration of the public but in the end relieves some of the stress off the police officer. The likelihood of seeing widespread use of this type equipment in this state is remote since those with security will not trade the advantages of attaining more convictions for the restraint that would be required. New York State residents pay greater taxes than almost every other state. They deserve the best service for those taxes or a decrease in that burden.

On a federal level, the concept follows the same logic. If we decide to spend money on education then the efficiency level must exceed the efficiency level of the states. Citizens expect the military accountants to be good stewards of the money allocated to defense of the Country. Why should New Yorkers pay into a national highway fund only to have that money returned to them with restrictions if it the system doesn't provide a more efficient means of constructing highways? Demand that Medicare offer the best service at the lowest cost or demand relief from the taxes associated with this program. In order to assure all government agencies achieve the highest value for you tax dollar more emphasis on a long demeaned practice must be undertaken. Superiors need to re-establish micro-management policies.

Those responsible for producing hate micro-management. Rightly so when that employee or system works efficiently or when the manager displays no capacity to understand the process. What happened, as a result is no management occurs. This hasn't stopped those in charge from dictating policy. But more times than not that policy is implemented on paper so the boss believes his ideas are being followed. In reality each worker goes about doing what ever it is he feels like doing. If the agency is lucky enough to get a work force where 30% of its employees are dedicated to public service then the agency achieves some respect, if not you get the inefficiencies of Medicaid.

Advocating ignoring instances of cheating or waste because of the belief pursuing didn't justify the cost turned out as one of the great myths perpetrated on the general public. When the government or government agency becomes unable or unwilling to address the low cost items people start taking advantage of this and the problem escalates. After the problem becomes entrenched in the system those taking advantage of the problem become either to numerous to prosecute or a major supplier of other services and to valuable to kick out. So the public must now endure the extras cost of doing business with the cheaters or endure a large up front expenditure to change the system. All this will be avoided when the public demands agencies address minor incidences of cheating and waste.

The government collects taxes in many different forms. When examining tax levels you must go beyond just the personal income tax rates. The government takes in revenue from many different sources. Corporate taxes, excise taxes, transport taxes, Social Security, Medicare, airport landing fees, mineral right fees, bank transfer fees, the universal access fee and scores of others contribute to the operating budget of the federal government. Some people advocate a "flat tax rate"; some advocate a national sales tax. Other people believe we should just tweak the current system. None of these discussions address how these proposals will interact with other revenue sources currently in place.

How will a flat tax affect the Social Security and Medicare contributions? Currently, these two systems are a flat tax of approximately 14% with a special exemption for those with large incomes or investment proceeds. Do the proponents of the flat tax expect to incorporate the flat tax associated with Social Security tax into the new overall flat tax or will this new flat tax be in addition to the Social Security tax? Since most of the people advocate about a 15% flat tax rate logically it must be in addition to the 18% flat tax we already pay. The difficult part of creating a flat tax comes when you start examining exemptions. No exemptions. No exemptions. No exemptions! Sounds nice. How do you handle people that run their business under the rules of sole proprietorship? For instance a doctor runs an office where he employees two receptionist, an intern and two nurses. The office receives $700,000 in total revenue. The doctor pays his employees a total of $200,000. Since the doctor files a self employed tax return the flat tax proponents require the doctor pay 15 % on the $700,000 equaling $105,000 then the employees must pay 15% of their salaries equaling another $30,000. Do you still advocate no exemptions? Of course the doctor must buy equipment for his practice. Lets say the x-ray machine, film, bandages, heat, phones, billing cost and malpractice insurance total $300,000 for the year. Under the current system the doctor gets to deduct all these cost and then pays income and social security tax on the $200,000 net. After taking normal deductions for home ownership, children and investment losses he ends up paying about 20% of $120,000 and ends up with a disposable income of $176,000. Under the no exemptions flat tax the doctor pays the 15% up front and ends up with a disposable income of $95,000.

This program solves the overpaid doctor problem running rampant throughout the United States. Except doctors won't be working for half their pay anytime soon. So either the cost of a doctor visit will go up and the general public will indirectly pay the tax for them, or the doctor will not replace the old x-ray machine with modern technology. Or he may have you come to the office three hours early to fill out the paperwork because he fired the second receptionist and nurse. This isn't the most extreme example imaginable either. Think about a garage owner who employs eight to ten workers and stocks parts or the restaurant owner with thirty employees that will now pay income taxes on the food served. Prices will have to rise in order for the owners of these businesses to make any money.

Will corporations work under the same flat tax principal? If the answer is yes expect a greater decline in the manufacturing capability of this country since companies won't buy new equipment as frequently. You can also expect higher cost in grocery and retail stores. In fact every business with many employees or large amounts of inventory will experience a cost increase.

We may chose not to tax corporations under the flat tax proposal. This option ensures corporations a distinct tax advantage over sole proprietorship. This works fine if you prefer Pizza Hut over the neighborhood pizzeria. But even if that is the case your better off if the neighborhood pizzeria stays in business and forces Pizza Hut to offer specials and keep their prices ( I hate to use this word because it's not true) reasonable. So make the little guy pay the fees to incorporate. This certainly will help eliminate some competition. Corporations must love this proposal. Creating a flat tax on personal income while keeping deductions an option for corporations is nothing more than protectionist legislation for established corporations.

While we're talking about taxes could someone explain the reason why capital gains deserve a lower tax rate than income earned while producing something? Why does $50,000 received by selling stocks get taxed at 10% while $50,000 earned by a person making cars gets taxed 14% (Social Security) then another 15 or 20% personal income tax.

More to follow on this subject

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