About Me 0116: Making Money Job

March 25, 2009

Dear Sir/Ma’am:

I recently completed filing my federal and state tax returns; more accurately, I assembled a bunch of paper, sent it to my accountant, he sent back a form which I am unable to comprehend, and I wrote out a check, signed it, and crossed my fingers and mailed it in – something similar to what Treasury Secretary Geitner did with one exception; I paid my taxes. I have read in the national media that President Obama is trying to find new profits to tax by eliminating deductions, like the home mortgage deduction, and reducing previously justifiable expenses; in short, raise taxes. From the highest earning taxpayer to the lowest, we are attacked by an ever expanding tax code whose only purpose ought to be to secure money to pay for those Constitutionally acceptable functions we cannot accomplish on our own as States, but alas this is not so.

Taxes are critical to the funding of necessary functions of our government that the vast majority of individuals cannot accomplish on their own. I could home school my children, sit outside my home with a rifle and a garden hose, and maybe band together with a few neighbors, and set up a small school and a neighborhood watch program called “You loot, We shoot.” But, It is far more effective and efficient to have a neighborhood based school system, police stations, and fire departments to accomplish the same objectives that is accountable to local taxpayers. Thus, I pay property taxes to accomplish the goal of providing an education, policing our streets, and putting out fires. On the State level the same cannot be said. The budget is so in the septic tank that the federal government has bailed us out via President Obama’s “stimulus bill,” because the state of New York promised too much, to too many, in the good years, and did not plan on a time when economic growth would contract. On the federal level we have an enormous problem, in the past 20 years, Republicans and Democrats, have taken the citizens visa out for a spending spree and we’re busted; $2 Trillion running deficit, $13 Trillion in debt – assuming the books balance, which according to the last comptroller general, they do not. By this time next year, if we have a flat gross domestic product, only 1/3 of the federal budget will be obtained via tax receipts, 2/3 will be borrowed or just printed – if you think we are going to have a flat gross domestic product next year I’ve got bridge in Brooklyn to sell you. You name the politician, by next year, an election year, they will all be promising more than can be delivered on the economy, and by extension the broken back of the taxpayer. Remember what Reagan said, “ . . . the more the plans fail the more the planners plan.” The schizophrenic nature that the government approaches the economy can best be described using President Reagan famous quote, “If it moves, tax it. If it keeps moving, regulate it. And If it stops moving, subsidize it.” The conclusion is crystal clear. When taxes are levied and dispersed on the local level we get more for our money, and we have the capacity to alter course if the government loses it’s way. At the state level the risk of fraud and abuse multiplies; and finally at the federal level this abuse multiplies exponentially. Last I checked my home state of New York does not have a printing press.

The current tax system on the Federal level is one giant loophole – 60,000 pages of it it is progressively regressive in nature – the more you make the higher tax rate you pay. For enough money the highest earners obtain lawyers, and accountants to find ways to keep more of what they earn. I applaud them, and their efforts and I would do the same thing if I walked in their economic shoes. The more money citizens and business owners keep the more they can save, invest, and spend, to pursue happiness to the betterment of all. Politicians use the tax code as leverage at the State and Federal level to, shall we say, encourage contributions from individuals and corporations to remain in office and feather their nests. This is not how this deal is supposed to work in the United States of America. Bad ideas must fail so good ideas can prosper – and in prospering we all benefit from an ever increasing standard of living.

We need to scrap the tax code and tax earnings and purchases at a combined rate of 10% – everybody pays, no exceptions. You make more money you pay more tax, you spend less money you pay less tax; since there are no more deductions, tax credits, exemptions there is no more tax day or tax season – you pay your taxes as you live your economic life. This will allow a refocused IRS to enforce a simple law, de-facto on the highest earners, and it will create a consistent stream of tax receipts that will be guaranteed to evolve from areas that are failing to those that are financially succeeding – hopefully removing the incentive for politicians to tax well run firms and to subsidize the pursuits of failing firms or ideas that have no bases in reality.

Have you had your cup of ethanol today?

Respectfully,

Joe Doakes

This guest post from Jacq Jolie is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. You can read more about Jacq’s story at Single Mom Rich Mom.

On 31 December 2009, I finished what I hope will be my last full-time, permanent job. I’ve worked a bit here and there over the past year, but it’s on my own terms, and not because I have to. I’m now semi-retired at the age of 45. But what does that mean?

About nine years ago, after reading Your Money or Your Life, I changed from an under-earning, confused woman to a woman with a mission: to never have to work again (unless I wanted to). In November of last year, I reached the Crossover Point, where the income from investments exceeded my expenses. (I think it actually happened sooner than that, but I hadn’t been paying attention.) At last, nine years after first figuring out what I wanted to work hard and save money for, I’d reached Financial Independence.

I’m fortunate that in the last few years, I’ve managed to raise my income so that I can work a few months a year and earn the same amount as I have working full-time (and overtime!) in previous jobs. I’m also fortunate that my wants remain relatively small and I never succumbed to lifestyle inflation. I’ve never wanted a big house, a fast car, or exotic travel.

In a “normal” year, I can easily live on about $36,000, including mortgage payments of about $15,000 per year (that I’m prepaying). So I knew that my Crossover Point was somewhere around $20,000/year with a paid-off house. In the next year, I intend to downsize and move to a (mortgage-free!) townhouse that will be close to public transit for those times I choose to work, and, more importantly, be low maintenance to allow for periods of long travel during the summers.

I’m trying not to plan too far in advance. I want to be flexible. My hope is that I can continue to work part-time or a few months a year for the next 5-10 years until a part of my pension is eligible for withdrawal. My net worth is somewhere around the $500-600k mark, not including pensions. Since I don’t have any intention of touching my savings for the next ten years, I’m hopeful that it will last as long as I need it. If not, I’ll go back to work full-time for a couple of years.

I think what Financial Independence has given me has been a confidence in life itself — that I can handle anything that comes up. If life is difficult, sometimes throwing a bit of cash at a problem resolves it. It’s also given me the freedom that I first dreamed of when reading Your Money or Your Life — that I could work because I enjoyed working, and that I could have my life be about more than work. I have the flexibility to leave any work situation that doesn’t contribute to my overall happiness.

Having lived very frugally for long periods in the past, I experienced frugality burnout earlier this year. I’ve consciously been spending more lately on the things that I’ve “deprived” myself of over the last almost 30 years I’ve been working. For example, my bed was over 50 years old and desperately in need of replacement. A new bed is being delivered this week, and I couldn’t be happier. I’ve also stopped thinking that I should DIY everything; I’ve had house cleaners come in this last month — something I would never have considered doing just six months ago.

Part of me still worries about the future:

What is it like to be looking for a job and networking once I get over 50?

Will it be hard — or impossible — to find work if I stay out of the job market too long?

What if the stock market falls again?

Are my investments too aggressive or not aggressive enough given that I hope not to draw down on them for quite some time?

Am I jumping too fast? Should I keep working full-time for a few years and get to that magical million and give myself even more of a buffer?

I only have a year of semi-retirement under my belt, so I’m not sure if that’s necessarily a “success”; I’m still just learning what works. I do know I’ll never go back to a regular job again though and definitely not go back to driving myself as hard as I have in the past again. My hope is that my approach is flexible enough and that I’m resourceful enough to survive and thrive through whatever lies ahead.

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Wednesday, December 8, 2010

Making Money Job

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