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Mr. Frugal Toque on why Tax Freedom Day is Bullshit

A Foreword from MMM:

I’m taking some time away from the computer this month as I swim in the torrent of self-imposed work caused by moving to a new house and selling the old one. But my friend Mr. Toque insisted that we run this rant on Tax Complainypants Disease, a topic dear to my heart. I’ve never really liked the whole practice of complaining about the government, since it is a distraction from our real job of living rich lives, which is obviously easier than ever. His numbers are Canadian, but you’ll find exactly the same complaints in the news here in the ‘States and elsewhere. So take it away, Toque.toque

Tax Freedom Day is Bullshit

If you’re not familiar with the concept of Tax Freedom, it is best explained thusly:

Imagine that your employer had to remit your whole year’s worth of taxes, to all levels of government, up front, before they could give you a single penny.  How far into the year would you be before you actually received any of your income?  That day is your “Tax Freedom Day”.

What you’re doing, essentially, is figuring out what percentage of your income goes to taxes and expressing that as a percentage of a year.  In previous years, I’ve calculated my own tax rate to be somewhere in the 25% range by counting all possible payroll and income taxes, property taxes, alcohol tax and sales taxes.

My more recent job came with a higher salary and that tax rate is hitting about 34% these days.  Since I’m now earning an “above average” salary, my personal Tax Freedom Day (May 5, 2014) ought to have been much later than the average one put out by the right-leaning Fraser Institute, shouldn’t it?

But no.  I’m being told that the average Canadian has a Tax Freedom Day that only just passed: June 9, 2014.  How strange.

These calculations were based on an average Canadian couple making about $100k.  Apparently, such a couple would be paying 43.5% of their money in taxes.  The first thing we have to establish is that this number is wrong.

If you were a married couple who came to Canada and were promised salaries combining to $100k, would you pay $43 500 of taxes to various levels of government?

Unequivocally:  No.

There are a number of utterly fatuous factors involved in arriving at that number and I want to hit a few of them right now.

Payroll Taxes  $9903

In Canada, the government collects a certain percentage of your income for the Canada Pension Plan and for Employment Insurance.  These have upper limits which, even for two people, can’t reach the $9903 in this document.  What the Fraser Institute has done here is to add the CPP and EI that your employer would separately remit to the government and claim that this is your tax burden.  So, of your $100k combined income, you lose nothing because of such employer remittance, and yet this is considered part of your 43.5%.

Sales Taxes $6764

In Ontario, where I live, the combined federal and provincial sales tax is 13%.  In order to spend $6764 on sales taxes, you would have to spend over $52k on items which are fully taxed.  Note that raw foods like meat, fruit, bread and vegetables, are not taxed.  Given that you’re probably spending at least $4000 per year on such food, I don’t see how you even have enough money left over to spend $52k on consumables.

Profit Taxes $3709

The bullshit grows heavy and rank here.  You don’t actually pay this tax at all.  You can’t even pretend you do.  Although I can’t be completely certain, because there is no clear explanation, the implication is that the Fraser Inst. is taking all of the taxes that corporations pay on their profits and then distributing this evenly across the population.  This $3709 is “your share” of corporate taxes because, I suppose, when corporations pay taxes, we all cry a little inside.  Or something.

Liquor/Tobacco/Excise Taxes $2335

Holy Shit!  Are you kidding me?  I’m not even going to talk about Tobacco.  But who the hell buys enough liquor that the tax bill comes to more than $2000?  Even if the taxes are 25% on liquor, and I don’t see any reason to actually pay them, you’d still be spending TEN THOUSAND DOLLARS per year on booze.  Shit.  Get some help.

The Fraser Institute vs the Toque Family

Here’s a chart indicating what my life was like, just a few years ago, when the Toque’s family income was approximately $100k. All figures on an annual basis.

Tax Fraser Institute Toque Family
Income $14,140.00 $16,758.00 This is for a $100k/$0k split[1]
Payroll + Health $9,903.00 $3,947.82 With one income, only one set of payroll taxes[1]
Sales $6,764.00 $1,800.00 13% of 24k of expenses, minus groceries[2]
Property $3,620.00 $5,000.00 We could have picked a smaller house
Profit $3,709.00 $0.00 No
Liquor/Tobacco $2,335.00 $0.00 I make my own wine and beer now[3]
Vehicle Fuel $1,135.00 $600.00 We still drive way too much
Other $953.00 $0.00 No[4]
Import Duties $346.00 $0.00 No[4]
Natural Resource $529.00 $0.00 No[4]
$43,434.00 $28,105.00

[1] In Canada, you can’t split income with your spouse, so people with a 50:50 division of income pay quite a bit less income tax, but more payroll tax.  I suspect they come out a bit ahead.  There isn’t much a salaried Mustachian can do about this, but there are some other areas where we make significant changes from the supposed “average” tax bill.

[2] The big savings, obviously, are on the sales tax.  Sales tax is not charged on real, non-processed food.  When you buy meat, dairy, vegetables, fruit and bread, you pay no sales tax.  This makes about 25% of the Toque household’s expenses sales-tax-free.  The rest of our expenses total roughly $14k for the year for a sales tax bill of $1800.  In order to run up a sales tax bill of $6764, you’d have to spend $52030 on taxable items – on top of any non-taxable groceries.  No Mustachian could possibly brook such idiocy.

Property taxes are obviously a self inflicted wound.  Mrs. Toque and I could move from our unexpectedly expensive house any time we like, but we’re settled in here and we’re willing to pay that premium.

I already commented on the bullshit “Profit Taxes”.  You do not pay this out of your $100k income.  It does not belong in this list.

[3] The cost of 48 bottles of wine from one of those make your own wine stores is about $200.  Even if you drink twice as much as we do, that’s still $400 a year for wine – and zero liquor tax because you don’t pay tax when you make your own.  What are “average Canadians” doing that they pay over  TWO THOUSAND DOLLARS in liquor taxes?

The amount I spend on gasoline is embarrassing.  I must learn to drive less.  I consider myself chastened.

[4] As for the “Other”, “Import Taxes” and “Natural Resource Tax”, I doubt very much that I see these in my spending anywhere.  This is probably one of those mystery taxes, like the Profit Tax, that someone else pays and the Fraser Institute believes “filters” down to me somehow.  If you wanted to take that concept far enough, I’m sure we could delude ourselves into believing that 100% of our money is eventually tax.

Summary of Taxes

So there we are.  We have a study that says “Oh. My. God!  43.5% of your money is going to taxes!  How will you ever live?!” and we have a Mustachian who has looked at his actual taxes for a similar year and determined that the number is close to 28%.  My point is that you shouldn’t freak out when you see studies like that.  Don’t worry, you still get to keep a lot of your money.  But even if you didn’t …

But wait, what about my Services?

I don’t know if you knew this, but governments actually do things for you.  In Canada, for instance, they pay for all of your doctor’s visits, surgery and hospitalization, public schools, police, fire departments, libraries and road maintenance.  The Toque family has two children.  If we had to send those two kids to a private school, I’m dead certain the cost would come to more than the tax bill you see there.

How come that isn’t part of the Tax Freedom calculation?

I’m sure it’s not because we’re just trying to freak everyone the fuck out about taxes, is it?  I’m sure it’s just an oversight.  Because that would be totally irresponsible if it was on purpose.

Stop Whining about Your Taxes

We’ve already established that we live in one of the most prosperous eras in the history of humanity.  The selection of food you can eat on any given night dwarfs anything the richest kings of the past could have commanded to appear at their tables.  There is a certain cost associated with maintaining the society that makes that possible.  There are people to heal, children to educate, roads to build and banditry to prevent.  When you start making a lot of money, it’s your turn to pay into the fund that got you here, so the next impoverished kid to come along can have the same shot your impoverished, post World War II refugee grandparents had.

What about my Mustache?

That’s the question you should now be asking.  Mustachians are not the sort of people who sit around moaning about how the government is keeping them down.  We’re the people who look at what we got, figure out what we don’t like, and fix it.

Does your local government have a high property tax rate?  Move to a smaller house.  Those are almost always cheaper.

Is the income tax rate high?  Put as much money as you can into tax sheltered retirement funds.

Sales taxes are high?  Why are you even talking about this?  If sales tax is a problem for you, stop buying so much shit.

But, but, but, gasoline tax!  Hm.  If only there were a way to live that avoided gasoline tax.  Help me out, here.  Anybody?  Bueller?  Bueller?

And if you really, really can’t stand the way the man is keeping you down in your province or state, you can always pick a different one.  Mr. Money Mustache did that and he’s quite happy with his adopted home.  I’m living in Ontario and I’m quite content with life here as I finish my final leg on the road to retirement.  But if I wasn’t happy, I wouldn’t just complain about it.  I’d rearrange my finances or move my family.

Why are you telling me this?

“Tax Freedom Day” is a disingenuous, selfish, short-sighted bit of fear mongering.  Every year I see the numbers and dates come out, I think “What privileged jackass decided to count only the taxes being paid and completely ignore the services being returned?”  Who, in either of our countries, has arrived at the point of having to pay taxes without having also been helped along on the path to becoming a taxpayer?

It wasn’t until I did the calculations, however, that I realized how truly out of whack the “Tax Freedom” percentage is from the actual experience of an actual Canadian.  So I should thank all of you for making me want to do the math.

I will be over here enjoying by 28% tax rate, even while others less informed are crying over their make-believe 43.5% rates.

Toque, out.

MMM Afterword: I should also note that if you are a rich do-gooder who is frustrated with the inefficiency of government compared to your own capabilities, it is still possible to evade taxes for the good of humanity: Simply have your business(es) operate as a separate entity from yourself (or even a nonprofit), pay yourself a small salary, then have the business go to town for the social good of your choice. You can choose to treat the employees really well, all while inventing better electric cars or solar panels, curing malaria and polio, or any number of other things – with high efficiency and very little tax burden. 

 

  • cptacek June 16, 2014, 7:34 am

    “Does your local government have a high property tax rate? Move to a smaller house. Those are almost always cheaper.”
    You could also run for local office. Control the spending of your local government and lower the property taxes for everyone.

    Reply
    • Steve@EscapeVelocity2020 June 18, 2014, 8:16 pm

      Governments tax things that they want less of. If income taxes go up, I’m more than happy to work less :)

      Reply
    • Kenoryn June 19, 2014, 11:29 am

      Also, if your local government has a high property tax rate, it probably has many public amenities. Don’t want high taxes? Move somewhere with few public amenities.

      Reply
  • Subversive June 16, 2014, 7:36 am

    Thanks for this. I hate the attitude so many people have regarding taxes, as if they don’t get returned to you in the form of services and protection. It’s all well and good to do everything you can to legally minimize your tax burden, but the assumption that taxes are nothing but a cost is just ignorant.

    Reply
    • Jamesqf June 16, 2014, 10:47 am

      I don’t think anyone is claiming that taxes are “nothing but a cost”. The point is that if I pay say $10K in taxes, I get back maybe $4-5K in services that I actually use or want to have available in case I or others might need them.

      As for the corportate profit taxes, of course we all pay them whenever we buy something, as the tax is added on to the price.

      Reply
      • Mr. Frugal Toque June 16, 2014, 11:03 am

        I think it’s important to understand that everyone is taxed along the way for everything you could possibly purchase.
        That restaurant meal you ate? What about the payroll and income tax of the staff? What about the sales tax on the capital (tables and chairs) and operations (food)? What about the tourist tax, if any?
        The corporate profit tax is, of course, only charged on the profit – that is, the money left over after the company has paid its workers and other expenses – how would it affect the person purchasing the product the company makes?

        What really matters is this:
        Person A makes $100k
        Person A sees a plethora of products and savings options.
        How much can Person A spend on products and savings options?
        It is misleading to tell Person A that only $56500 is available when, in fact, $70k+ is available and to base this calculation on the idea that “Hey, other people pay taxes, too.”

        Reply
        • Todd June 17, 2014, 2:40 pm

          While I would agree that the Fraser Institute used bullshit numbers in some of the categories, it is really important that people understand the payroll taxes that are paid by employee AND employer. You say that the employee never sees the money the employer pays so they never actually lost anything. That is disingenuous since you could easily make the argument that you would instead have a salary of say 105K if the employer didn’t have the tax burden. But then the government would lose their “share” of payroll tax income and simply raise your taxes to compensate. The reason they slice up that burden is so that the masses don’t easily see the true tax burden.

          As a contractor in the US, I am responsible for paying both the employee and employer side of the payroll tax. Therefore, my salary is truly less.

          Being ignorant of corporate tax burdens are not helpful to any argument and should be discussed. Many people simply have no clue what corporations pay and how that affects employees salaries and goods costs.

          Reply
          • David June 18, 2014, 6:56 pm

            But… then you’d also have to increase the denominator too.

            The tax percentage calculation wouldn’t be:

            (total taxes + employer’s part of payroll tax)/”sticker” salary

            it would be: (total taxes + employer’s part of payroll tax)/(“sticker” salary + employer’s part of payroll tax)

            Thus, while the percentage is larger, it isn’t much larger.

            Reply
          • Mr. Frugal Toque June 19, 2014, 7:07 am

            I’m growing a little weary of writing this same response, but here goes.
            If you are promised a salary of $100k, and the Fraser Inst tells you that you are taxed at 43.5%, you would conclude, because they want you to conclude “Oh, I’ll only have $56 500 to spend.”
            That is emphatically not the case.
            You will have something like $72 000 to spend.
            To be honest and fair, the Fraser Inst should have said “Before you get you $100k, your company has already been taxed in a way that might — MIGHT — affect your salary”. Then they could go on to clearly *increase* your salary to (for example) $120k, before taking off all these hidden taxes.
            Then you would see how you have $72k at the end.
            *That* would have been clear and honest.
            What they did instead is very misleading almost to the point of intentional deception and – additionally – is not clear on the subject of savings, and makes huge assumptions about spending habits that simply don’t apply to Mustachians.

            Reply
            • Mark June 19, 2014, 7:33 am

              What if I start under the assumption that in a zero-tax environment, I make 100K? Then we’re not talking about a salary of 100K + payroll taxes. We’re talking of a salary + payroll taxes = 100K. Then, the total number would come out to 56K.

              Honestly FT, you seem to be ignorant to what everyone else on here is saying to you.

              Reply
              • Mr. Frugal Toque June 19, 2014, 7:56 am

                If you start with that assumption, then you start in Somalia or Industrial Revolution England, where there are no government services and everyone has to pay for everything. There are no public libraries, no public schools, no labour protection or police protection. Children are starving in the street or dying in factories, stealing to keep alive. Food is randomly poisonous. Pollution is everywhere.
                You don’t get to start here, in 2014 Canada, or in 2014 U.S.A., take for granted what a couple of centuries of taxation has gotten us, and then say, “let’s take away all the taxes.”
                Believe it or not, I’m listening to you. I’m hearing your repeated rants about how taxation is theft and slavery. I’m just not buying it because I know what taxes get me.
                The trouble is that your lot aren’t listening. You all really believe that you get nothing from the government except an occasional paved road. This is clearly not true, yet all I’m seeing are repeated refusals to acknowledge that the stable, fruitful society all around you was purchased and regulated with the tax dollars of those who came before you.

              • Tim June 19, 2014, 12:42 pm

                Frugal Toque: this is a giant, overreaching complainypants response to Mark. Mark is addressing your methodology about a starting point for salary, and you responded with a diatribe about how we don’t live in Somalia and we get services for taxes. It doesn’t address his point at all, other than with dismissal and disdain.

                Personally, I agree with David, that including the employer’s portion of taxes should increase the denominator as well as the numerator. I haven’t read the original study, but real economists do exactly this when they calculate total compensation and taxes. Just as your net pay is not your salary, neither is your top-line salary your total compensation. Your total compensation includes employer-contributed taxes, as well as benefits like pension, other retirement contributions, health insurance (in some countries), etc. Whether the money comes directly from the employer or the employee is as irrelevant to calculating total taxes as whether the taxes are paid with each paycheck or one check each year.

                This is standard economics, and your responding to these points with diatribes about Somalia and government services adds nothing to the conversation. One can quite easily see that you’re erroneously calculating taxes and still want government services, perhaps even higher than they currently are!

              • Mr. Frugal Toque June 19, 2014, 1:11 pm

                Alright, I’ll try answering this technically.
                What you’re saying is that your employer offered you a salary of 100k? Or did you employer offer you a salary of something else?
                What an employee cares about, and what this report pretends to show, is how much money one has left over after taxes.
                If you get a salary of $100k, a wise Mustachian has $72k left after taxes.
                If you want to include all of the profit taxes, hidden payroll taxes etc. then you have to add them to the $100k to get, perhaps, $127k.
                Then we could says “72k/127k = 56.5%” therefore, you’re only keep 56.5% of “your” money.
                That would be honest.
                That would reflect what is actually happening.
                127k is what your company spends.
                100k is what your income is.
                72k is what you have left to spend.
                Is my position clear?

              • Tim June 19, 2014, 1:52 pm

                Frugal Toque:

                Now you’ve got it. I have no problems with your latest update. I think it’s important to know both the explicit and implicit taxes in your overall compensation.

                I wonder why you deleted your previous post, though.

              • Kyle June 20, 2014, 5:37 am

                I’ve gotta tell you, as an econ minor and lover of history, all this dramatic stuff about how without the government saving the day we’d all be dying in factories, eating poisoned food, uneducated, and cities would be burning really gets under my skin. I think I’ve been out of the public school system for too long and forgot people actually believe this stuff.

                I’m somewhat new to this blog and really enjoy what you have to say about personal finance. This blog is exciting because it gives a more unconventional way of looking at things, and I think you need to recognize that. I’m working my way towards a more mustachian way of looking at spending and saving. I really think you guys should stick to finance and stay away from politics and economics.

              • Mr. Frugal Toque June 20, 2014, 5:39 am

                Because the rant in question was misplaced. It belonged with all the other stuff about how we get nothing for our taxes and taxes are slavery and/or theft.
                I meant to remove it when I realized this, but you responded, so there it lies.

        • Mr CB March 11, 2015, 11:23 am

          Maybe I have this wrong, but businesses want to maintain a certain profit margin (or maybe better said income for the business owner). If they make $100k/yr profit and pay a tax on profit of $15k/yr they have $85k in income (minus other taxes). If the government changes the tax rate to 20% the business owner would then be making $80k in income. As most business owners (at least the ones I know) will not want to take a loss in income they will adjust price accordingly to make $106,250 in pretax income to maintain the $85k they get to take home. The only way to make the extra money is to reduce costs, increase revenue by selling more or raising prices. When a business raises prices on a product for the consumer isn’t that a way of passing on the taxes to consumers?

          Reply
          • Mike M March 12, 2015, 11:05 am

            I partially agree. Taxing corporations does raise the price of products indirectly. But only somewhat – the tax burden becomes shared between the business and the consumer.

            In theory, business have already maximized their revenue through price points. Increasing the price will only reduce revenue as fewer units are sold. In reality, this is rarely the case, and the market can absorb a small price increase. I think if you looked at academic economic studies, I’d expect the tax burden to effectively be shared between the consumer & business owner over time as a new price equilibrium is reached.

            Reply
      • Subversive June 16, 2014, 11:32 am

        “f I pay say $10K in taxes, I get back maybe $4-5K in services that I actually use or want to have available in case I or others might need them”

        I believe you are likely under-estimating the true value of the services, and what it would cost to provide them for yourself should you try to do so. There is a lot of waste and inefficiency in government, but there are also huge efficiency gains that an individual could never hope to achieve on their own.

        Reply
        • Jamesqf June 16, 2014, 11:14 pm

          I’m not thinking of waste & inefficiency, primarily, though of course that is an issue. It’s the “services” that I don’t want at any price, and indeed would pay (and have, through political contributions & volunteering) to get rid of. Things like the DEA, BATF, TSA, and so on – a US-centric list, but Canadians can substitute their national equivalents.

          As for why we all wind up paying corporate profit taxes, it should be obvious: any company that wants to remain in business must make a profit on its investment. Say the necessary profit is 4% (so we FI folks can manage our SWR from investments). So if it costs $100 to make a widget, the company must sell it for $104. Add a profit tax – say at 50% to keep the math simple – and the price has to go up to $108.

          Reply
          • eccdogg June 17, 2014, 12:58 pm

            Right, again this is US centric, but I get “services” such as a military that is well over twice as big as it needs to be, farm subsidies, drug wars, a surveillance state, drone wars, bank subsidies/bailouts, subsidies for crazy student loans, a retirement system that gives me back a fraction of what I could earn investing myself. An entitlement system that systematically transfers income from the relatively poor young to the relatively well off old and so on and so on.

            At the state and local level I have less to complain about because I actually do see some value, but I honestly think half of the govt spending at the federal level makes my life WORSE.

            Reply
          • eccdogg June 17, 2014, 1:40 pm

            Right,

            This is all US focused, but I don’t like paying for ‘Services” like unnecessary wars, a military that is twice the size it should be, bank bailouts, auto bailouts, subsidized loans, farm subsidies, the surveillance state, crazy student loan debt, a forced retirement system that provides an awful return compared to what I could get investing and might not be there anyway, a drug war, imprisoning people for victimless crimes, a transfer policy that takes from the relatively poor young to pay the relatively rich old, and on and on.

            If the Federal govt just focused on defending the actual US, providing a minimal safety net, and basic infrastructure we could have half the taxes we do and I would pay them with a giant smile on my face.

            I have less issue with state and local taxes because I actually do see the services they provide, schools/parks/libraries/police/garbage etc. But State and local taxes are small compared to federal where at least half provides very little benefit.

            Reply
          • BillyP June 17, 2014, 4:48 pm

            Companies do not price products based on their costs. They price products based on the amount that will maximize profit according to market demand, while at the same time minimizing their cost of sales. The CORPORATION pays the profit tax based on it’s earnings. The CONSUMER finds the best deal he can on a particular product and makes purchases accordingly. Try selling something to someone at a higher price than market with the explanation that your necessary profit is X% and they, the consumer of your product have to pay up to get you there. Why would anyone do that if they can get the same thing for cheaper some place else??

            Reply
            • Kyle June 18, 2014, 4:45 am

              Billy, who do you think ends up paying the cost of corporate taxes? You cannot seriously be saying it is just levied against this inanimate “corporate” entity and affects no individual.

              Reply
              • BillyP June 18, 2014, 8:22 am

                Not saying that at all. Corporate profit taxes do have an impact on the company’s shareholders. That’s who pays it, not an unaffiliated consumer. James’ explanation implies that the tax is simply passed down to the consumer, based on some arbitrary profit requirement of a company. That’s misleading and cannot hold in any competitive industry. I’m certainly not pro-taxes, but I’m at least trying to be fair about what I’m actually paying.

            • EcoGuy June 18, 2014, 8:25 am

              Ok.
              One says that the tax burden is all up to the consumer, the other says it’s all up to the company.

              This is a very classical question in economic science. Read about tax incidence on wikipedia.

              To sum up: You are both right.
              The company tax can be passed partially to the consumer.

              Moreover, on a given market some companies are barely making profit (the marginal producer).
              Then after the tax is raised, these companies will go out of business because the new tax burden they bear put them in the red. So there’s now less offer on the market, so the price goes up, so more of the tax burden is passed to the consumer.

              Markets are not static, with immutable and predetermined conditions. Change happens.
              So when you think about the impacts of a change on a market, you have to think not only about the accounting data, but also about the changes of the market conditions, which then changes the accounting data!

              To finish my contribution: markets are not independent. They are connected. The economy can’t be thought as a well engineered system which is formed of nearly independent sub-systems that you can tweak one by one. The economy is a complex system where all is more or less connected to all.

              Reply
              • Mr. Money Mustache June 19, 2014, 8:28 am

                Thanks EcoGuy – it is nice to see discussion like this framed in economic terms rather than all the bullshit political ideology.. right readers?

                This is why Mr. Toque and I have been trashing an unusual number of comments on this post. It seems folks just want to come in and state their opinion, rather than thinking of things as more of a calm academic discussion where we might learn something from each other.

                Getting a comment approved here is easy:
                – read the whole article
                – read ALL comements that came before you so as not to repeat a point that was already made
                – frame your discussion with the goal of helping other readers rather than just telling the author or another commenter about how wrong they are. Cite some real sources if you have facts and figures to share.

                We’re pretty lax about enforcing these rules.. but some are just so ridiculous they have to go.. like the dozens of “Taxation is Theft!” reruns, and the follow-up “How come you aren’t approving my comments you asshole!!??” posts.

              • Mike June 20, 2014, 12:16 am

                MMM and FT,

                My issue with this post is not the facts. I think most of us can agree that the numbers are basically BS and represent a perfect storm scenario. My issue is that you didn’t make this post to call out the BS. You did it to start a shit storm, which I’m sure it did and now you both have low paying part-time jobs filtering out the comments that are submitted.

                I can see filtering out the pointless “It’s theft!” posts, but then you are more than happy to allow the “Bravo! Thank you for telling the truth. I’m so tired of….yada yada yada” posts which add absolutely nothing to the conversation, but they agree with you 100% so it’s okay. Come on, guys.

                This post was just a way to rip on right wingers and libertarians. Do you not want them to be involved in Mustachianism and enjoy this community of people that are interested living more meaningful lives?

                I’m someone who realizes that it is pointless to get stressed out about what the government is doing, but I’d still probably classify myself as a libertarian. No matter how inefficient, we need to have some basic services and safety nets because we are trying to have a civilized society for F sake. But because I think we waste a shitload of money you seem to feel the need to rip on me with your posts from time to time. I honestly don’t get it. We all agree that the “middle-class life is an Exploding Volcano of Wastefulness”, but when someone comes to the same conclusion about the government you get all bent out of shape.

                I don’t even really get too worked up about about it most of the time, I just think it’s a shame to be so wasteful. Wasted money could have gone toward something that actually makes a difference. I don’t understand why that point of view puts me on your shit list. More importantly, I don’t understand why you want to start a shit storm in the online community you have built.

                Please explain it to me for I am but a simple computer scientist with a limited brain capacity.

              • ThriftyD June 20, 2014, 10:27 am

                Mike, I think most of the tenets of Mustachianism agree strongly with Libertarianism, whether intentional or not. Afterall, what is more Libertarian than reducing waste and taking personal responsibility, whether it be in your personal life or in government?

                If everyone lived a Mustachian lifestyle we’d see a very efficiently run country as government safety nets would be almost unnecessary. If people lost their jobs it wouldn’t be a big deal becuse they socked away so much that they’d have their own personal safety net.

                The key with these tax/government related posts is to rembember MMM’s article about your “Circle of Control.” The CNN/Fox News/MSNBC crowd gets all bent out of shape when pundits spew rhetoric and bs and use scare tactics to get people riled up and worse, divided, over issues that are well beyond their circle of control.

                I don’t think MMM ever means to impose his political leanings on anyone and bash people who may think differently. I think he tries to demonstrate that one can live a happy, frugal, rich life regardless of what taxes are and what government policies are. Unless we have a dictator that is taking away our possessions and freedoms by force, I’d say we in the western world (US included) have it very good!

                The key is to focus on the things that are in your personal Circle of Control. You have control over how you vote, the choice to run for office, or in this specific case you have control over your taxes by working to minimize your tax burden by wise financial/accounting planning.

                http://www.mrmoneymustache.com/2013/10/07/how-big-is-your-circle-of-control/

                Cheers!

            • paul June 18, 2014, 1:49 pm

              Billy- I don’t think companies explain it that way… but as taxes and regulations increase, you see prices for the entire industry increase to compensate. As CEO, try telling your shareholders that EPS will decrease X% because you don’t have pricing power to recover a cost increase… I suspect that is actually a more difficult (albeit shorter) conversation. If the US decides to impose a new 10% tariff on plastic manufactured goods, you’ll see a nice 10% increase in your Walmart bill following the measure :)

              Reply
              • BillyP June 18, 2014, 2:14 pm

                Paul: many companies do not enjoy pricing power in a competitive market. Do you think a newspaper could simply raise prices if its corporate tax rate went up? Banks are one of the most heavily regulated industries, and even more so since 2008, yet the fees they charge customers really haven’t increased in the past 5-10 years due to competition and not wanting to alienate their customer base. My original point is valid: shareholders, not customers, pay profits taxes. Say supposing you own 100 shares of a company that had a pre-tax EPS of $1 per share and a post tax EPS of $.70 per share after a 30% corporate tax was imposed. In that situation, you can take credit, as an owner, for paying $30 of taxes on your share of the company profits.

      • Jamesdb June 16, 2014, 11:50 am

        This reeks of some major complainypants disease.

        “Oh, I’m in a high enough strata that I lose 5k to the government which also supports people who can’t work good for themselves. Since I’ve never been a child, I’ll never be disabled, and I’m never going to get old, purely because of my own inherent moral superiority, it is egregious that I should ever have to contribute towards support people in those unfortunate circumstances!”

        1) You’re probably getting way more direct, personal value out of those services than you realize, and
        2) You’re not exactly hurting for it if they’re bothering to take it, are you?

        Reply
        • Jamesqf June 17, 2014, 1:18 pm

          1) Do please explain how I get ANY direct, personal value out of the DEA. Granted, since I choose not to use drugs, I’m not experiencing major direct adverse effects, but then I’m not directly affected by anti-gay marriage legislation, and I still oppose that.

          2) Why does it matter whether I’m “hurting for it” or not? It’s mine, and I object to having it taken away from me and used for purposes of which I profoundly disapprove. By analogy, I have an axe in my toolshed: I might not be much hurt if you came and took it away to chop your own wood, but I’d be upset as hell if you used it to chop up your spouse & kids.

          Reply
          • LW June 17, 2014, 8:15 pm

            The DEA regulates physicians and other providers who can prescribe narcotics to patients who need them. In Massachusetts, we have had a bunch of deaths of people using fentanyl as a street drug and dying because it’s 100x more potent than morphine/heroin, so it’s pretty easy to overdose. Though the DEA is for sure flawed, I think that trying to keep track of opiate prescriptions seems like a good idea.

            Reply
            • Jamesqf June 18, 2014, 11:15 am

              Your argument is flawed. First, if we didn’t have the DEA and the ‘War on Drugs’ insanity, physicians &c would be free prescribe narcotics &c for pain relief using medical judgement, instead of being caught between doing what is best for the patient and fear of being busted for over-prescribing.

              Second, if we didn’t have the DEA, people who wanted to use drugs could get morphine & heroin (or even safer alternatives) produced in standard doses and with quality control, instead of having to take their chances with whatever junk street dealers think they can sell.

              Reply
              • LW June 18, 2014, 6:45 pm

                I don’t know any doctors who don’t prescribe opiates for fear of “over-prescribing.” The whole point of the fentanyl example is that people don’t know how to (or care to?) dose themselves and it’s so so easy to kill yourself (somewhat?) unintentionally. There are many opiate alternatives that physicians prescribe that people can’t harm themselves with (or it’s at least much harder) like suboxone. And in other countries, people can get things like morphine in a controlled setting as a harm-reduction intervention. It all requires oversight. Again, DEA is not a fantastic institution, it’s just not black and white.

  • Jennifer in Ottawa June 16, 2014, 7:40 am

    I foresee an increase in provincial taxes in order to pay for the running bad joke that is the Ontario government and so I am really really hoping that the Federal Government’s promise of implementing tax-splitting comes to fruition. Our household income is currently at a 75:25 ratio, and an income-split would take my husband down a tax bracket.

    We are new Mustachians (as of Saturday), and see lots of bloat in our monthly spending that we can trim. Having a few more little green employees in our pockets instead of the government’s would certainly help us in our journey.

    Reply
    • Mr. Frugal Toque June 16, 2014, 8:40 am

      What you’ll find, as you become more Mustachian, is that taxes will stop bothering you.
      For one thing, you’ll be paying a lot less of them as you max our your RRSPs and discontinue Buying Nameless Stuff. When you realize how low this can go (especially if it comes with bringing your husband down a bracket via the RRSPs), you’ll find taxes much less disturbing.
      For a second thing, your position of financial stability and your slowly reducing need for material accumulation will make you more tranquil with respect to life in general – and this will include the realization that government scandal, waste and corruption actually affect your life to the tune of a very small amount of money.
      The last way it will affect you is that you will have a lot more time to enjoy the parks, libraries and other accoutrements of a modern society. You’ll start to say things like, “Wow, I don’t feel so disgruntled about my taxes since I get all this awesomeness a short walk from my house.”

      Reply
      • CVAND June 16, 2014, 10:07 am

        Thank you Mr. Toque for pointing a out the silliness of complaining about taxes.

        I wish in the US that the government would tax processed foods. Here (0r at least in all of the cities/states I’ve lived in) all “food” including potato chips and soda are not taxed. I believe that, like tobacco and liquor taxes, these products have a potential for huge detriment to society, as evidenced by our near 50% obesity rate in our country.

        Furthermore, the conditions associated with obesity will cost the country trillions of dollars down the road in added healthcare expenses, partially because we have the least efficient healthcare system in world but also because diabetes and cardiovascular disease are high morbidity associated conditions.

        Sorry this is tax complainypants (albeit that I’m complaining that some things should be taxed) but tax free soda is just ridiculous.

        Reply
        • ThriftyD June 16, 2014, 10:37 am

          CVAND, I’m not sure what cities/states you live or have lived in but here in Wisconsin, junk/snack food and soda is subject to the state and local sales tax. Sales taxe is also assessed on “prepared foods,” which includes any and all food that is prepared and ready to eat upon purchase (think restaurants, hot dog carts, hot foods at a gas station, and even salad bars).

          Sales tax is not assessed on unprepared foods, whether canned, raw, packaged, etc. However, again, that does not include junk food like chips, sodas, candy, etc.

          Reply
          • Rod Flash June 16, 2014, 12:54 pm

            In VA all food and drink is taxed, although prepared food is taxed at a higher rate. So it’s totally dependent on where you live.

            I personally think that people who decide that the gov’t should tax things that they don’t like but other people do should have a much higher base tax rate. Call it a Sanctimonious Tax.

            Reply
            • Trevor June 17, 2014, 9:08 am

              It’s more about baking externalities into the price of the product.

              Driving, for example, has a lot of negative externalities: carbon emissions, other emissions, using up a limited resource (oil/fuel), additional wear & tear on roads, congestion, etc. To disincentivize driving, we artificially increase the price of driving through higher fuel taxes.

              The opposite idea is also true; if we want to support local farmers and families eating well, we should reduce taxes on unprepared foods. Conversely, if we want to limit the healthcare costs and other negative externalities associated with smoking/obesity/a processed foods diet, we can tax those products more.

              Taxes are an effective way to incentivize different behaviours, in a reasonably efficient way–particularly behaviours with negative externalities that aren’t included in the price, like health care and environmental costs. There’s nothing sanctimonious about wanting to include these externalities in the prices people who choose to consume these products pay.

              Reply
            • Janel June 18, 2014, 8:34 pm

              Incorrect. Food and drink purchased for home consumption in VA is NOT taxed.

              Reply
        • Jamesdb June 16, 2014, 11:51 am

          I live in Washington state, where we do tax soda. In fact, we tax it extra. But we don’t tax most processed foods.

          Reply
          • CVAND June 16, 2014, 12:44 pm

            I think most states tax prepared food that otherwise have a sales tax.

            I, however, have never lived anywhere that differentiates an apple from a Twinkie in its sales tax formula.

            As I stated in my previous post, I think an apple and a Twinkie should be distinguished to incentivize healthy eating or dis-incentivize by adding an extra tax as Jamesdb mentioned Washington state does for soda.

            I also think that subsidized food programs (“Food Stamps” etc. ) should further incentivize healthy food over processed crap to encourage the poor to eat more healthy foods. An example would be as follows: A family gets $100 but every non-processed item “costs” 50 cents on the dollar so in effect a family could buy $200 worth of healthy foods instead of $100 worth of junk.

            I’m not suggesting that poor people only eat junk; I just think that giving the poor greater access to healthy foods would have long term positive affects for everyone. Healthier children will do better in school and have a greater chance of escaping poverty.

            This gets to the point of instead of complaining about taxes and ragging on the so-called “takers” we should be thinking of more efficient ways that public funds can be delegated so that our dollars help improve lives and give opportunity.

            Unfortunately, Frito-Lay, Coke, et al. will oppose such measures because their livelihood is selling this crap to as many people as possible and manipulating officials to that end.

            Reply
            • Mark June 16, 2014, 12:53 pm

              The problem then is the government still doesn’t know what is healthy and what isn’t. We’d have taxes on sodas, but sugar-free sodas would be tax-free. We’d have taxes on foods with good fat content, but foods high in sugars or useless carbs would be tax-free. I think, on the whole, it’d be quite dangerous to have government taxing healthy foods less.

              Reply
              • CVAND June 16, 2014, 1:35 pm

                I agree with that and there would be lobbying involved that would make the whole thing very convoluted.

                The food companies have been manipulating the idea of what is “healthy” so much that everyone is so confused. An example would be that some people think that a baked potato chip is healthy. Also, we have been made to believe that things that are not actually food are reasonable to eat i.e. Cool Whip, pasteurized processed cheese. It has been a steady decline that really needs to be corrected and we know that the companies will not do that without government encouragement.

                So a regulation such as this would have to be based on chemical manipulation, not the product itself.

                I know some people feel the government cannot do anything right and I understand that sentiment. However, an unbridled food market has led to an obesity crisis as I mentioned earlier.

    • frugal galaxy June 17, 2014, 1:52 pm

      Jennifer,
      We are more like a 55:45 split but it’s enough to put him in the next higher tax bracket. To compensate all/most our retirement contributions are made in his name. He makes the contributions equally to his own account and my spousal account so we stay balanced, but he gets the tax break which brings him down a tax bracket. If he runs out of contribution headroom and we still want to contribute more then I take over doing all the contributions equally to my own account and his spousal account. We purposely max out his contribution room first because it’s the most benefitial tax-wise, but after that I take over.

      Reply
  • PatrickGSR94 June 16, 2014, 7:47 am

    I don’t really see the point in even thinking about this. Taxes are taken out of my paycheck each one I get, and then I usually get some back when I file my tax return each year. Why in the world would I ever think about or care about the imaginary notion that my employer would have to pay all my tax up front first before paying me, and what day that would land on? I have a fixed salary and a fixed income, and the imaginary scenario doesn’t actually happen. So no matter what day of the year the “tax freedom day” would land on makes absolutely no difference to my life.

    So no sense in even thinking about it. :)

    Reply
  • turboseize June 16, 2014, 7:47 am

    But…but… That’s socialism!

    SCNR. ;-)

    What really annoys me is when taxes are wasted. Oh, and of course I like complanining about taxes, like every complainypant does like complaining. Taxes are in fact robbery: your money is being taken way by force (or the threat thereof). Taxation thus, in it’s very nature, is crime.
    But every crime can be justified: if it is necessary to prevent greater harm and if it is done in the mildest way possible. And here comes the “services” mentioned by mr. frugal toque.
    Having lived both in Russia and Germany, my wife surely prefers her current 30 something % income tax burden to the russian 13%…
    Good infrastructure, (nearly) free education, rule of law and no (visible) corruption come at a cost!

    Reply
    • Mark June 16, 2014, 7:59 am

      The key would be “visible” corruption. Certainly at the local levels, corruption runs rampant. I imagine it’s the same until a high enough level. I would point to things like the IRS scandal and wonder if corruption isn’t rampant?

      Reply
      • turboseize June 16, 2014, 8:15 am

        I have no doubt that corruption exists in Germany. Just look at BER or the two last bavarian justice scandals… the point is: you are not directly affected. (Only indirectly, as tax payer when tax money is wasted or decisions are made not to public benefit – which is bad enough.)
        In Western Europe, you are not expected to bring “gifts” to school teachers or university professors, you usually can’t bribe the police, there are no “personal contributions” expected when dealing with the administration etc – which all, I was told, was common practice in Russia during the 90s. (I have also been told that the situation has improved greatly during Putin’s and Medvedev’s terms of office.)
        So while corruption may never really die out, the absence of visible corruption is no small feat! We take it for granted, but it is not.

        Reply
        • Mark June 16, 2014, 8:28 am

          I guess when you start following local politics, you see it more.

          A real estate “developer” in St. Louis has received over a billion dollars from the city to re-build in the ghetto. So far, he’s built one warehouse just outside of downtown and not anywhere near the ghetto. He gives money back to the politicians to keep them in office. That’s the corruption I am talking about.

          Reply
          • turboseize June 16, 2014, 8:35 am

            Which, as I stated, will probably never die out – and which of course is despicable and should not be tolerated. But still – if that’s the only corruption we have to deal with, we’re better off than most of the world.

            Reply
            • Venturing June 17, 2014, 4:59 am

              I had never considered the link between taxation levels and corruption but it certainly seems to hold true in New Zealand’s case. We have relatively high taxes (in line with the countries semi-socialist leanings) and are currently ranked the least corrupt country in the world by Transparency International.

              Reply
    • Zeb June 16, 2014, 8:32 am

      I like your attitude about it but I disagree with your belief that taxes are robbery, because I disagree that it is your money. It is taken by force or threat thereof, but it is the rightful property of the society that has provided you the opportunity and ability to be productive (or consumptive for some taxes). The way I look at it, my neighbors have decided the price of participation in the economy they operate. If I participate, I consent to that price and owe it to them.

      Reply
      • turboseize June 16, 2014, 8:46 am

        That is a very dangerous way of seeing it. In consequence, individuals would owe everything to society/the state. (As you cannot really opt out, as you implied). Not only taxes, but also their productivity etc… Where do you draw the line?

        Reply
        • Joy June 16, 2014, 2:51 pm

          Live 6 months to a year in a 3rd world country.
          Then you will be thankful and, happy to do your part. :)

          Reply
          • Mr. Frugal Toque June 16, 2014, 4:01 pm

            Bingo!
            Or, live in the country you’re in, but 100 years ago. See how much you enjoy your commute when it smells like horse manure.

            Reply
            • paul June 18, 2014, 3:26 pm

              Ha! I like this. Clearly certain government services are good and more efficient than private enterprise could provide… the question is where to draw the line. Which is exactly the complainypants point on is the Tax Freedom Day really relevant.

              That said, we have had the benefit in the past 50 years or so here in the US of receiving services greater than our tax payments… so it seems a bit rosy. The question isn’t whether these services are worth today’s tax prices (~16% GDP), but is it worth 20-25% once the bills actually roll in (sustainable revenue=expenditure).

              Reply
    • Maxim Ч. June 16, 2014, 7:59 pm

      I LOVE socialism :-)

      I actually wish that the State would take more from us in taxes and provide a bit better services.

      And having spent some time in Russia, it’s actually somewhat amazing what services one can receive with a small bribe and some bitching for that pittance of 13%. Actual free education by competitive entry is a big one.

      Reply
      • The Satanist June 16, 2014, 9:34 pm

        I often feel like self-described socialists, or admirers of socialism, put the cart before the horse.

        At the moment, the US government spends a lot of money on a lot of things. What its citizens get in return does not justify most of that spending. It would be one thing if the US government was incredibly competent and forward thinking, and did a lot for us with a little money–then I’d bet a lot more of us would say, “Yes, let’s give the government more money, so that it can do even more for us.” At the moment, though, a lot of us (correctly, in my mind) think that any additional money the government takes from us is likely to be wasted in some form or another.

        Put another way, I wish the state would provide me with better services. If it was able to convince me that money was the only thing stopping it from giving me free on delivery quality education or healthcare, I’d give it more money. However, as far as the US government is concerned, money is not the problem. The problem is waste and stupidity, and I don’t think it makes sense to want to give more money to such a wasteful organization.

        Think about it like this: if the US government couldn’t force you to give it money, would you really give it as much money as you do now, without demanding that it shape up and fly right? I mean damn, we’re a community that doesn’t want to waste a few dollars on lattes and donuts, and we’re branding those of us who are annoyed about how little bang per buck the government gives us as “complainypants”? Come on!

        Reply
        • Maxim Ч. June 17, 2014, 5:25 pm

          I actually don’t give two shits about what the US government does. I live in the civilized Dominion of Canada. Though we are head and shoulders (lightyears, really) ahead of the United States in things like rights, personal security, services, and the like, we still have much work to do.

          Reply
  • Mark Ferguson June 16, 2014, 7:48 am

    I could not agree more! I am a high income earner and I pay a lot of taxes in te US. I also have my company incorporated and own 10 rentals which keep my taxes lower. Most high income earners don’t come close to hitting the tax rates that everyone complains about because of deductions and other tax deferments.

    I think most people complain about taxes because they are told to complain about them by their political leaders and they go with whatever those leaders say. When you go to a country that has a much lower tax rate you realize how much our government does for us. Sure it could be run better, but if you really want our government run better, run for office and try to change it.

    Reply
    • Mr. Frugal Toque June 16, 2014, 11:07 am

      I think most people complain about taxes because they’re really bad with money.
      When you live your life on the edge of your credit card’s limit, any minor change in tax rates is a huge deal to you. All of your political thought is subject to the whims of people frightening you about taxes.
      If you had the power to step back, you might realize that getting your government to do something for you can be a lot more effective and efficient in some cases. But you’ll never realize this if your head is buried in Past Due notices.

      Reply
      • Kamil June 16, 2014, 1:46 pm

        Hi Mr. Frugal Toque,

        While I agree with your assessment of the fear-mongering of anti-tax groups like the one you mention, I think many Americans complain about taxes because they really have experienced a decline in services. Schools are just so-so, public college costs are climbing, and infrastructure is crumbling. I do not think corruption (at least he illegal kind) is the root cause but misplaced priorities.

        Can you say, Iraq?

        I shudder to think how many billions of dollars and thousands of US and allied lives and tens of thousands of Iraqi lives were lost in that quixotic escapade that continues as I write. How many billions more will the Obama administration spend to fix what seems to be an intractable problem spanning hundreds of years? Imagine what the US education system would look like if we had not invaded Iraq and invested even a fraction of these funds in schools, better pay for teachers, subsidies for STEM education?

        I can only hope that Americans have learned some lessons from the last 10 years and press our leaders to devote taxpayer resources in a manner that actually benefits this country and does not burden generations to come.

        Reply
        • Mr. Frugal Toque June 16, 2014, 5:21 pm

          “I think many Americans complain about taxes because they really have experienced a decline in services.”
          This is one of the great disadvantages of living paycheque to paycheque: it’s very difficult to take a long view of things. It leaves you ripe for manipulation by the “there’s no such thing as a good tax” crowd. Even though public schools, libraries and parks are the most efficient way to get educated, read books and experience nature, people who are running the red line on personal finances can’t see it that way.

          Reply
          • Mike M June 16, 2014, 10:50 pm

            Libraries & parks use an infinitesimally small amount of tax dollars.

            The vast majority of tax dollars goes to pension/social security, health/Medicare/Medicaid, military (US only), and schools.

            In the US, we could triple STEM funding, quadruple our library & parks budget, quintuple our non-automobile transportation budget, and the bottom line wouldn’t even notice.

            Reply
            • Mumtaz June 17, 2014, 6:58 am

              The folks in my government office refer to libraries, parks, and other niceties as “decimal dust.”

              Reply
        • paul June 18, 2014, 3:33 pm

          Unfortunately, I suspect if we diverted 100% of Iraq war-costs into education, education would look much the same as it does today. In the late 90s we tended to spend in the low 30 trillions… in the 00s we were more or less in the 60T range, topping out at 100T… today we are back down around 40T. I certainly couldn’t say education changed much in those 15 years despite the radically different investment levels. It’s a cultural issue that isn’t easily fixed by throwing cash at it.

          Reply
  • Ms. Must-Stash June 16, 2014, 7:56 am

    YES! For those of us in North America or many European countries, let’s all just say “thank you” for the useful services that our governments provide, acknowledge that there’s still lots of work to do, and then go about trying to improve things even more. Also, for perspective, I highly recommend reading an interview with any number of young, educated people in countries where the government REALLY could use work – it will help put things in perspective and make all of us with reasonable governance appreciate what is working well already that we take for granted. For example, check out this great article on Pakistan: http://www.csmonitor.com/World/Asia-South-Central/2014/0529/Faces-of-Pakistan-s-future-From-tech-entrepreneur-to-mufti-educator

    Reply
  • Mark June 16, 2014, 7:57 am

    My complaint is that taxes are higher than they ought to be. The untold waste that is lost in the huge bureaucratic machine. The undocumented welfare; The poorly directed welfare spending resulting in the welfare state. The 22 year old, fit, men standing around doing nothing. The untold vast amounts of military spending. The waste in unnecessary foreign policy spending. The waste in poorly directed infrastructure. The corruption.

    It all adds up and sure, I can’t do anything about the current percentage I pay, but I can lobby my legislatures to fix the damn mess!

    I write this as someone working for a government contractor who witnesses the waste first hand.

    Reply
    • Zeb June 16, 2014, 8:26 am

      “The 22 year old, fit, men standing around doing nothing. The untold vast amounts of military spending.” That’s redundant.

      Reply
      • Mark June 16, 2014, 8:30 am

        HAHAHA! I guess I try to word my posts such that I don’t come off as a leftist or a rightist, but someone who doesn’t tolerate wasteful government spending.

        One thing I’ve found is that in the ‘ghettos’ unemployment of young men is near 50%, but these same young men refuse to do physical, construction-type work where they have to “break their backs” in labor every day.

        Reply
        • rocketpj June 16, 2014, 8:52 am

          Sounds more like an opinion than a fact.

          Unemployment and underemployment of young people is a serious problem. There are some solutions, but not likely to be found by making judgements about ‘the ghettos’.

          Reply
          • Mark June 16, 2014, 9:46 am

            But a fact based on a lot of experiences in the ‘ghettos.’ The facts are that construction unskilled labor is one of the hardest jobs to fill, yet able bodied young people account for a large amount of unemployment.

            If we’re not going to be honest about it, we can’t solve it. Sure unemployment won’t be 0% if everyone is willing to work these jobs, but it would be lower.

            Reply
          • CTY June 16, 2014, 10:26 am

            UNDERemployment of the young?–sounds more like the young crying wah, wah, wah I can’t earn enough to enjoy the gluttonous living I am entitled to. Or maybe its the parents complaining because they have to pay their kids bills so they don’t go without necessities like cell phone data plans, cable and new cars.
            Poor kiddies, they are too good to start bottom.

            Reply
            • Michell June 16, 2014, 8:39 pm

              Actually, unemployment of youth is really high right now. Not, in fact, due to “idle” youth – which is only about 6% of the youth who are unemployed, but because jobs that youth used to fill as an entry into employment are now typically taken by older, displaced workers. It is something of a classic catch-22. Youth can’t get entry into the labor market in the jobs that they used to, and can’t compete as they get older due to not having work experience. This trend has been increasing since the 1990’s, but the Great “Recession” has magnified and accelerated this trend. Unemployment of youth is somewhere around 35%, I think. I just read the study this morning, but don’t recall exact numbers. It is not because youth is any more whiny or lazy than we ever were…it is a combination of factors from lack of employment factors, to increased graduation requirements, to focusing on post-secondary education in hopes of getting into a decent job after college. I have a Master’s degree in Counseling and Human Services, and am a nationally certified vocational rehabilitation counselor with a state agency, so I am not just spouting off without knowing what I am talking about. If you think it is rough out there for adults trying to find work, imagine being a teenager competing for a job at McDonald’s against an experienced adult with an AA degree or Bachelor’s degree. It isn’t pretty. Add to that the effects of mass media and embedded poverty in very low income areas and you have a mess on your hands.

              Reply
              • Mark June 16, 2014, 8:42 pm

                Please then … explain why no one can find people who are willing to do laborious jobs? Physical labor jobs are the ones with the most current openings, but your 94% of youths aren’t willing to do them.

        • Huxley June 17, 2014, 7:13 am

          Slightly racist, classicist, and blaming the poor all in one post. Classy!

          Reply
          • Mark June 17, 2014, 5:15 pm

            Interesting take. Where was race mentioned by anyone? Where were the poor blamed?

            Reply
            • Kevin June 26, 2014, 3:57 pm

              “One thing I’ve found is that in the ‘ghettos’ unemployment of young men is near 50%”

              I mean, you didn’t explicitly state it but c’mon. And do you have any actual data to back up your statistics? Seems like a bunch of anecdotes and gross over-generalizations.

              Reply
      • mike June 16, 2014, 10:03 pm

        I think this is in pretty poor taste, all things considered.

        Reply
    • Joseph Ratliff June 16, 2014, 8:46 am

      And this waste is the main complaint most people I know have about taxes.

      Yes, taxes provide us useful services etc… but they need to be managed more effectively, more efficiently, so we get the most from our tax dollars.

      That’s what you’re doing when you’re sheltering your money, getting the most out of it, right?

      Reply
    • stellamarina June 16, 2014, 5:35 pm

      Add to that list all the huge pension plans for government workers that are fast becoming the biggest use of our tax dollars!

      Reply
      • RetiredAt63 June 17, 2014, 4:38 am

        I hear this from the Canadian government too much. Pension plans are part of work benefits, and employers provide them in some form or another. If the employer in the private sector has misused its pension funds, people scream (think Nortel). But they act as if public and para-public pensions (teachers, nurses, etc.) are handouts from the taxpayers. No – first, the employees have been contributing (I contributed >50% of my pension funding, not 0%) and second, pensions are a cost of doing business for the public sector just as they are for the private sector, and should show that way in the public accounting. Traditionally in Canada, the trade-off was security and lower salary in the public sector, versus more money but less security in the private sector. The end result is that public sector pensions are also being calculated on a lower salary base.

        Several years ago the Canadian government looked at the CPP – it was OK but a bit iffy. They treated it like any employer treats a pension plan – they raised premiums a bit and changed payouts a bit to encourage people to hold off on taking it. CPP is not a handout – just look at your tax forms, you (if you work in Canada) have been paying into it all your working life. So have your employers. So just because it shows up on the government books doesn’t mean its a drain on the government coffers, it was paid for. Same for Quebec, the Caisse de dépôt et placement is supposed to make money to fund all those pensions.

        And to toss this into the mix – I hear talk show hosts moaning about people retiring too early and not contributing to society in their taxes. Um, if you have planned your retirement, early or late, you have income in retirement, and you are paying taxes on that income. I sure am paying taxes on my pension.

        Reply
        • Maxim Ч. June 17, 2014, 6:26 pm

          My problem is that the Canadian public sector now has more security AND higher salary…and that is bullshit. These people, who are getting paid through my tax dollars, are making far too much money. I am a die-hard trade unionist (Proud member of the International Brotherhood of Electrical Workers), but I have serious problems with unions in the public sector where they hold legal monopolies. With monopolies, shit can get ridiculous REALLY fast. Just look at BC Liquor Stores as an example: Cashiers there start at $20/hour. TWENTY DOLLARS AN HOUR. Everywhere else under our labour market conditions this kind of labour earns minimum wage, $10.95 or whatever it is. I am highly in favour of a union-member-wage-premium, but 100% of a premium? That’s a bit ridiculous and just came about because of a bullshit monopoly.

          Reply
  • Even Steven June 16, 2014, 8:00 am

    I’ve always kind of thought of taxes as a necessary evil. Yes I pay taxes on my house, etc but I also go to the library, drive down the sometimes nicely paved street, ride the bus/train, go to the park. I’m certainly using every extent of the law to lower my tax rate, but it still comes up as a necessary evil that of course I try to avoid.

    Reply
  • Geek June 16, 2014, 8:04 am

    I’m pretty sure all mid-level incomes take taxes into account-either through increasing over time, or by default. If everyone pays taxes then we’re all back on equal footing and it’s as if no one’s paying them at all from an income perspective. If half the people earning 200k paid no taxes and the other paid 50k, that would be a problem.

    Seeing the bill still hurts, nobody likes ‘losing’ money, but meh.

    And yes, I know, there’s ways to get out of some of your taxes, but in general, we all pay them.

    Reply
  • Mr. Frugalwoods June 16, 2014, 8:05 am

    Taxes are what they are. If I had a choice I’d spend more on education and less on blowing stuff up… and that’s how I vote. But I also recognize that we get tons of amazing services from the government that folks don’t necessarily think of. Clean water and rule of law aren’t a given in the rest of the world.

    It’s also true that by living Mustachian you can reduce your tax burden down to some ridiculously low levels. And when you stop accumulating the tax code _really_ benefits you. In the simulations I’m running it looks like I’ll likely get a bit of credit back once fully FIRE. And that’s nuts!

    Reply
    • Mr. Frugal Toque June 16, 2014, 9:07 am

      Don’t get me wrong. I always vote and I always vote for the “less blowing stuff up and more parks&schools” parties. But I don’t always get my way.
      I managed to find a government website that showed me what my property taxes would go down to once I retired and stopped having so much income. That was pretty nice!

      Reply
      • Tara June 16, 2014, 12:45 pm

        How is your income correlated to your property taxes?

        Reply
    • Huxley June 16, 2014, 9:21 am

      “I’d spend more on education and less on blowing stuff up… and that’s how I vote.”

      That certainly rules out the two major parties in the US. I’d love to have a (realistic) option for this in national elections.
      Unless you’re in another country that is

      Reply
  • Engineer1442 June 16, 2014, 8:32 am

    There is plenty to whine about with taxes.

    For my local taxes, I don’t get a lot of value. My local school system has .72 administrators per teacher. They recently wanted to purchase a $150 million dollar building to centralize administration (with a rather nice gym, subsidized meals etc) with no actual cost savings, yet we still have students going to school in trailers. Despite being a highly ranked school system, the budget emphasis is on administration and not on the actual teachers and students.

    The area I live in provides 2/3rds of state tax revenue, but only 1/3rd actually is spent in the area and thus the infrastructure is overburdened due to a large influx of people moving here for jobs.

    Federal is a whole other story. Since I work for the feds, the amount of waste we have is silly. GS-15’s getting paid 150k to do time sheets and move furniture. Contractors being billed out for $250-400 an hour when GS-7-9 direct hires could do the same work for 40-70k per year.

    Reply
  • Mrs PoP June 16, 2014, 8:34 am

    In addition to choosing a smaller house, in the US (no idea how it works in Canada), if you don’t like your state or locality income tax burden, you can move to a state without an income tax. I like to think of our local taxes as “choose your own adventure” type of taxation. High property tax rates? Get a cheaper house. High sales tax rate? Buy less stuff. Expensive car/boat/motorcycle fees? Own fewer of those toys…
    We choose to live in a place where tourists and temporary residents pay significantly higher taxes than those of us that live here full time. And when the tourists start arriving around the time we get sent our property tax bill every fall, I give the incoming hoards of old people a silent “thanks” for kindly subsidizing my full time life in a tropical paradise*.

    * But the thanks goes both ways, I’ve had these same old people say “thanks for paying into social security – I appreciate the monthly check!” =)

    Reply
  • Big Guy Money June 16, 2014, 8:37 am

    It’s really amazing how little the average person understands about how taxes work. About a year ago, I had a 1/2 hour ‘discussion’ with my sister-in-law because she was complaining about how much the government taxes people with higher salaries. She was complaining that their income was taxed at a full 35%.

    I (patiently) explained that the tax system is progressive, and only the income that’s over $XXX,XXX would be taxed at a full 35%. Then I showed her how much in annual income they’d need to make in order to pay 35% income tax on ANY portion of their income. It turns out they were nowhere close to that income level.

    So much for paying 35% income tax! Grrrrr….

    Reply
    • Mr. Frugal Toque June 16, 2014, 8:45 am

      Those are exactly the sort of people I meant to target with this article: the ones who really drank the kool-aid on the 43.5% tax rate.
      Your taxes are NOT actually that high. Please do the math and realize what’s going on. I can do it for my numbers, but you have to do it for your own. (Incidentally, thanks for helping educate your sis-i-law … it takes a village, after all.)
      I also worry about people who refuse raises because “I’ll just end up in a higher tax bracket and have less take home pay”. Sigh.

      Reply
      • Big Guy Money June 16, 2014, 9:39 am

        Hey man, just trying to help where I can! Apparently our education system doesn’t think understanding stuff like the tax system and personal finance in general is too terribly important.

        It’s funny because she’s a know-it-all, and in the past I probably would’ve just let it go while everyone else in the room complained in agreement with her. Now it seems when someone says something stupid (no matter what it is), I feel compelled to stomp said stupidity.

        Reply
        • Mike M June 16, 2014, 10:56 pm

          In my experience, ignorance about our income tax system is exceedingly common, even amongst otherwise intelligent people.

          The “I pay 35% in taxes” bit. The “I give to charity so I lower my tax bracket” nonsense. It’s amazing.

          Reply
          • Mark Curtis June 17, 2014, 12:00 pm

            My MIL is the world’s worst know-it-all. My wife berates me continually on my “stomping said stupidity”. I simply tell her
            those people who think they know it all just
            bug the HELL out of those of us who really
            do know it all.

            Reply
            • Big Guy Money June 19, 2014, 10:06 am

              Haha, great quote Mark! In our family, I’m known as ‘That Guy’ – the only one who will put someone in their place if need be. If you’re anything like me, I don’t seek it out – the stupidity comes to me!

              Reply
          • Mark June 17, 2014, 12:49 pm

            What about people who give to charity every 3 years so they can maximize their deductions?

            Reply
  • EL June 16, 2014, 8:43 am

    Taxes are always a dreaded issue, and that is why you have to max out if possible all the benefits to reduce it. If you move to a income tax free state and max out all retirement accounts you will be very tax lean.

    Reply
  • bob werner June 16, 2014, 8:46 am

    Pointing out the inefficiency and corruption of Government is not being whiny. The good thing about Canadian forced taxation is that very little goes to a national war machine. Although, it would be better if all taxes were completely voluntary.

    Since MMM readers are generally pretty math capable let me give you some fairly typical tax number for US readers.

    Income – 100K, Net worth – 500K, Federal income taxes – 20K, Medi/SSI taxes – 15K, State taxes – 4K, retail sales taxes – 3K, property taxes – 4K, Misc taxes – 2K, Imbedded taxes (what you pay extra for every good and service due to producers paying taxes – 18K, Inflation taxes (this is the least understood but largest tax. The government essentially just prints more money and thus devalues your investments and cash. According to shadowstats.com this is running around 6% for the last few years) 30K (6% of 500K)

    Total income 100K
    Total taxes 96K

    I wish I were making these numbers up. I guess readers could argue with whether inflation is really a tax but you would not win that debate. I guess you might also argue that imbedded taxes are not really taxes but again most reasonable people would agree that this is really how pricing works and why buying used goods is so cheap.

    The reality is — and this is why MMM readers are able to save money — is that the easiest taxes to avoid are the consumption taxes. If one avoids buying 90% of the stuff so called normal consumers do they can save 25K in retail taxes and if they have no current assets they will not have the 30K inflation tax. That is how a 100K family most easily avoids taxes and saves a stash.

    Avoiding taxes should be a part of every smart MMM readers plan. Think about this — Property taxes on a 40K home (very doable and nice in rural Midwest) could be as low as 500 per year. Property taxes on a 400K home run in the 10,000 ball park in many areas of the US. Over a 40 year period the uncompounded tax savings would be around 400,000.

    So yes, taxes do matter— avoid them as possible and if you think your not paying enough in taxes feel free to give away as much money as you like to any entity or person you desire.

    As a long term Government employee, I can tell you money is being pissed away.

    Reply
    • Mike M June 16, 2014, 11:01 pm

      I strongly disagree with the inflation tax bit.

      If your money is under your couch, sure. But if you’re invested in the stock market, you’re pretty protected against inflation over the long term. Investors want (cue Bond villain) “a reasonable rate of return.” Generally that’s around 7% of their investment into a company. If inflation pushes prices higher, companies will also make more, returns will be higher, and stock prices & dividends will go up accordingly.

      As long as inflation stays relatively low & constant so there’s not too much shock to the economy, I just can’t get too worked up about it.

      Also, 6% sounds dodgy. Are prices really doubling every 12 years?

      Reply
    • Mark June 19, 2014, 12:51 pm

      You are making these numbers up. “Imbedded” and “inflation” taxes are not real. You won’t pay anywhere near $20K on $100K in income after deductions and exemptions (unless you are not counting dividends or interest from taxable investments as part of the $100K but still pay taxes on those). FICA on $100K is no more than $12.4K (and let’s not forget that your employer actually pays half of that). If you honestly believe that you pay $96K in taxes on $100K in earnings, then congratulations to you on finding a way to live on $333/month.

      Reply
      • Mr. Money Mustache June 19, 2014, 10:10 pm

        Yeah, that 96% business was pretty funny. When I add up my current net worth, then add up all the gross salary I’ve earned in my life, they are almost the same. In other words, not only are taxes pretty low, but the sum of taxes AND spending is still almost a rounding error when compared to the returns that investments generate.

        It is VERY easy to become wealthy in this unregulated, low-tax country we live in.. it would be foolish to let this convenient fact elude you.

        Reply
  • Lumburgh June 16, 2014, 8:48 am

    I’m gonna go ahead and disagree with you there…

    (1) You are looking at the “employer remittance” from the point of view of an employee. As an independent contractor, it’s pretty obvious that the payroll tax (in the US for social security/medicare) is indistinguishable from an income tax, and as an employer, the “employer remittance” as you call it is figured in to the rates they charge customers and your salary. Ceteris paribus, no employer remittance means higher income for you (but of course ceterises usually aren’t paribus).
    (2) Do you own shares of publicly traded companies? Then the taxes those companies pay are taxes you pay, since you own the company.

    Note: The message of “don’t give a shit about the gov’t/taxes and take control of your own life and quityerbitching” is something I can get behind, though…

    Reply
  • Million Dollar Ninja June 16, 2014, 8:52 am

    I understand people complain about taxes, but we get great services for them. True, some of it is wasted – okay a lot of it is wasted, but some goes to good use. Here is the U.S. the roads are very nice, the street lights work, the parks are clean, there are libraries everywhere, the police are somewhat fair. I come from the Dominican Republic where we might pay less taxes but everything is a mess.

    Reply
  • Joe (arebelspy) June 16, 2014, 8:56 am

    This Mr. Frugal Toque is one smart fellow.

    Reply
  • Matt June 16, 2014, 8:58 am

    I agree it is a waste of time and effort for us mustachians to complain about the government, but I am grateful that others do. I am also grateful that there are people complaining about the fate of those less powerful and disadvantaged and fighting for equal playing fields through programs funded by said government. It’s this great battle, and our ability to have it, that keeps our country great!

    Reply
  • Rocketpj June 16, 2014, 9:03 am

    I love this post. The Fraser Institute and its ilk (Cdn. Taxpayers Federation etc) use averaged, scary numbers to push the perspectives of their well heeled corporate funders. The ‘average’ income of my family and the Bronfmans is probably well into the millions, but that doesn’t mean I am making millions.

    A person who is paying attention should be able to minimize their taxes legally and rationally. And the rest is a part of the price of living in a society that functions as well as ours does. My kid’s school is great, our town is safe, there are parks everywhere. Last Thursday my 4 year old got an awful gash on his head and I took him to the ER – I didn’t have his health card on him, but they found him in the system and treated him right away, no direct charge. I don’t mind paying taxes to help ensure that kind of service is available when I need it.

    As for government waste and corruption, I agree we need to minimize it. Some things that are considered waste by some of us are considered essential by others. Personally I can’t figure out why we are subsidizing some of the most profitable companies in the world while simultaneously starving our education system. And I have no idea why anyone thinks it is a clever idea to spend tens of billions on obsolete-out-of-the-box fighter jets that aren’t even suitable for Canada’s North.

    The one thing that does really bug me is the apparent willingness of our current governments to incur massive debt – something that we all know on a personal level is a disaster that only constrains future spending and investment. The current federal government inherited years of surplus and INSTANTLY went into deficit, increasing debt every year since while running on a platform of ‘fiscal responsibility’, which is absurd on its face.

    Reply
    • Toni June 16, 2014, 10:02 pm

      Yes, and let’s remember how they did that (instantly turned a surplus into a deficit)….they CUT taxes!! I heard an economist talking about the “necessary” service cuts after the Recession; the hard decisions that the government had to make in the face of shrinking revenue. The interviewer asked how the cuts to the GST had affected the situation. The economist said, “Oh! Well, if they raised the GST back up 1%, there wouldn’t be any deficit and none of these cuts would be necessary, of course.” Hah!

      Reply
    • Alias July 27, 2014, 8:41 am

      I am glad that someone finally in all of these comments brought up the point about government deficit/debt. Whatever rate taxes are at, if the government is in a deficit situation, we are borrowing to finance our lifestyles/government programs. Perhaps the debt in the U.S. is the price of the Iraq war (or the Iraq war plus all of the alleged wasteful spending going on)?; in Canada perhaps the debt is the price of all of this alleged wasteful spending. I am not quibbling with the exact numbers (i.e. that the war costs equal the debt). My point is that REGARDLESS of the policy choices and alleged wasteful spending, if your government(s) is(/are) running a deficit, then your community is not paying the full cost of its freight. Your taxes are actually being artificially lowered through the borrowing. (Probably very good reasons for this – see Keynesianism – and very poor ones – see “your government is politically motivated to not raise taxes so as to not take a political hit”.) This is yet another reason to really stop complaining about your tax rate. Perhaps you should be complaining that your government is not taxing you enough to pay for all of its programs that you as a society voted for.

      As for the alleged “wasteful government spending” as a government employee I do see it. However, quite a bit of waste is spent on oversight. We must have 3 people checking every time we spend any money at all. Oversight costs on each and every transaction, no matter how trivial. In Canada, read Donald Savoie if you are interested. Surely the U.S. has similar academic writing.

      Reply
  • Mike June 16, 2014, 9:07 am

    While the message of “tax freedom day” is off target, I’d rather have people discussing taxes than living in ignorant bliss. It’s important for people to understand how their money is being spent; both in their own households and in their collective household (city, state, Congress, etc). Too few people understand what it takes to provide services, where benefit checks come from, and how much wasteful spending occurs that could be put to better use. Remaining educated and vocal about government policy and spending has a huge effect on future investment decisions and potential returns. (All while bearing in mind MMM’s lesson about not worrying to death about things you cannot control, of course).

    Reply
  • Mr. Boots June 16, 2014, 9:07 am

    Good stuff, Mr. Toque. I like the news flash that governments actually do things for our society. It’s amazing how many tax abolitionists avail themselves of 50 miles of paved roads and bridges on the way to making the income they so zealously protect.

    My state is facing a large budget deficit for the coming fiscal year, so there is lots of water cooler chatter about whether “they” are going to raise taxes. I get weird looks when I say, “who cares.” By focusing on things that are actually within your control, like your savings rate and use of pre-tax retirement accounts, it can be pretty liberating to tune out the complaints about “how our tax dollars are being spent.”

    Reply
    • Mr. Frugal Toque June 16, 2014, 9:58 am

      I think that’s one of the benefits of financial stability in general:
      We can take a step back, realize how small a thing that tax hike is going to be, and make our personal and political decisions based on wider issues than just “AGH! I will be totally bankrupt if my taxes go up by $50! I must vote for whichever party shouts ‘TAX CUTS’ in the loudest voice!”

      Reply
  • Free To Pursue June 16, 2014, 9:17 am

    “Sales taxes are high? Why are you even talking about this? If sales tax is a problem for you, stop buying so much shit.”

    So true. It’s so much easier to complain than to look at our own actions.

    As a fellow Canuck, I view the taxes we pay as paying for services that we or that our extended family needs. Every tax year, I look at the total paid and think that money went towards keeping:
    – Our family in good healthy
    – Our roads in reasonable condition
    – The next generation educated
    – Learning accessible to all via library and free university services
    – Public transportation affordable
    – Green spaces plentiful and well-maintained for us all to enjoy
    – The arts available and accessible
    – Spirits up for people who fall on hard times, by giving them a softer place to land
    – Services for the elderly available and accessible

    If I were to try to pay a direct portion of our earnings towards keeping all these services going, I can’t see how we could do it. Privatization is often more expensive than the cost of government inefficiencies/evidence of corruption. Just look at how much money goes to administration costs and billing when a service is privatized.

    I am grateful every day for the environment we live in. It is truly amazing.

    Personal empowerment and appreciation are so much more productive than being a member of the “complainypants”.

    Reply
    • Oh Yonghao June 16, 2014, 12:29 pm

      A friend of mine lives in Washington with no income tax but 8.4% sales tax. I live in Oregon with no sales tax but a 9% income tax after $15k, so basically anybody that makes money pays the 9% marginal rate. We both make the same amount of money, but somehow I get a tax return every year and he ends up owing.

      After deducting the tax free items like food, his 8.4% sales tax probably ends up getting him into the same tax rate as I pay with my 9% marginal rate on income because he doesn’t just spend the money that he has, he maxes out his credit cards too. Basically his entire income is taxed at 8.4% less what he spends on food. I put money into retirement accounts and maximize these, lowering even further my income tax burden.

      I would love to move across the river and work there, sales tax only states are very mustachian friendly, but I do find that I much enjoy the services offered here, such as reliable public transit which we use a couple times a month. I really enjoyed this article because it helps to highlight that our tax burden isn’t that great anyway, and even so we enjoy many benefits along with it.

      Reply
  • John June 16, 2014, 9:27 am

    Tax incidence is a real issue (see, for example: http://en.wikipedia.org/wiki/Tax_incidence). The fact that the incidence of a tax does not necessarily fall on the person who writes the check to the government is well documented empirically (as well as quite obvious if you think about the last time you wrote a check to the government to pay sales tax).

    While it’s technically true that someone earning $100k a year will not lose any of *that* money to taxation, the fact is that most economists believe that the incidence of the payroll tax falls almost entirely on employees, even when employers are writing the check.

    I’m disappointed to see someone I respect being so insultingly dismissive of a point of view which is, frankly, very well supported.

    Reply
    • Mr. Frugal Toque June 17, 2014, 5:41 am

      The attitude of the Fraser Inst. seems to be this:
      “You have a $100k salary. How much money do you really have after taxes are paid?”
      “It’s only $56500! Agh! Taxes are too high!”
      In reality, you have a lot more than that left over.
      I would also like to read these economists who suggest that, if the company didn’t have to pay that CPP and EI “tax”, they would automatically pay their employees above the local market rate.

      Reply
      • John June 17, 2014, 11:18 am

        No one pays their employees “above the local market rate.” The market rate changes. And it must change! If there’s a tax paid by the employer, there are currently two separate market rates for employees. Say employers are willing to pay $110,000 for employees, $10,000 of which will be paid as tax. This is the market rate that employers will think about. Employees, on the other hand, are willing to work for $100,000 in total compensation. This is the market rate that an employee faces.

        If the tax is eliminated, there will no longer be two rates–the two existing rates must converge. So at least one of them must change: employers will pay less than $110,000, and/or employees will get more than $100,000. What happens in reality? It depends on the “elasticity” of supply and demand–how much the number of positions offered increases as the price falls, and how much the number of applicants increases as the price rises.

        However, in this case, the empirical evidence is very strong: the effect of payroll taxes is primarily borne by the employee in the form of reduced wages.

        “Most analysts conclude that both the employee’s and employer’s share of the payroll tax is borne by the employee.” (Joint Committee on Taxation of the US Congress)

        “While payroll taxes are levied equally between employers and employees, the broad consensus among economists is that payroll taxes unduly burden the worker. That the distribution of tax incidence does not correspond with the actual levying of taxes is generally accepted.” (National Bureau of Economic Research)

        I don’t agree with the Fraser Institute’s worldview or attitude. But you are way off base to ridicule the concept of tax incidence.

        Reply
        • Cyndy June 17, 2014, 5:46 pm

          I think the globalization of the labor market ensures that supply of labor will be high for the foreseeable future and the pressure will always be downward. If the difference between keeping an experienced employee and hiring a inexperienced replacement was only the $10K in your example, perhaps not, but who’s tax rate is 9%??? If payroll taxes were magically eliminated overnight, realistically an employer could save more like 30% to hire someone willing to do your job for the same amount of money you used take home. Do you really think there is no one in the world to take him up on it?

          Reply
      • Mark June 17, 2014, 1:21 pm

        “I would also like to read these economists who suggest that, if the company didn’t have to pay that CPP and EI “tax”, they would automatically pay their employees above the local market rate.”

        I agree with John. I hate to say it, but that quoted part shows some extreme economic/financial ignorance.

        What I mean is that the market rate will clearly go up. It’s just a matter of it going up .005% or going up 10%. I can guarantee it won’t stay the same.

        Reply
  • David June 16, 2014, 9:37 am

    The one tax I wish I could stop (but I can’t) is the 1.1 trillion we spend each year murdering people in countries that have not attacked us with our military. If you divide the 1.1 trillion total annual military expense by the 120 million households in the USA you come to a monthly bill of $763 per month per houshold. It’s an awful lot to spend each month on the military when they haven’t even delivered us a victory since 1945…yet we all cave in and praise them for their performance.

    Reply
    • Mr. Grump June 16, 2014, 11:06 am

      That’s a pretty bold statement. What do you propose? Disband the military and protect our interests at home and abroad with charm and good looks? Or do you naively assume that withdrawing to within our boarders would cause everybody to suddenly like us and stop wars all over the world? Or wait, I got it, everyone should watch out for themselves and alliances, treaties and demarcation zones be damned.

      I only wish you would tell a veteran to their face “you haven’t delivered us a a victory since 1945.” You make it sound as if the military is the one who starts wars and not the president or congress that you and I elected. Don’t blame the military, blame the politicians.

      Reply
      • Rocketpj June 16, 2014, 12:26 pm

        The US spends more on your military than the rest of us combined, which seems insane. You would be surprised how little people give a crap about your country when you aren’t bombing them.

        When’s the last time you thought about what’s happening in Kazakhstan? Do you really think Kazakhs are spending their time thinking about how to hurt the US? They are trying to live their lives, just as we all are.

        It is a lot cheaper to defend your own borders than it is to dominate the whole world. Imagine what a country you would have if you spent even half of that massive firehose of nonproductive military cash on things like schools, hospitals, science, basically anything that isn’t blowing stuff up.

        We in Canada and you in the US are extremely lucky, geographically speaking. 3 oceans and friendly neighbours make us very difficult to attack. Barring nuclear war, the whole world could try to invade us and would eventually lose (at least to you, there aren’t so many of us). One thing the last 50 years have taught us is that modern technology makes unwelcome occupation impossible to sustain (and painful for all).

        Here in Canada our own government has been drinking the Koolaid as well, which sucks. We don’t need the ability to bomb strangers in strange countries. I accept we need the ability to keep others from bombing us, but that is a different bag of onions.

        Reply
        • The Satanist June 16, 2014, 9:06 pm

          You know, quite a lot of the military’s budget goes towards scientific ventures and research, and increasingly money is spent on hospital services due to all of the veterans that come home without arms or legs.

          It’s also entirely true that the US spends far more on military matters than similar western nations. But the reason that other western nations can spend so little on military matters is–you guessed it–that they can lean on the US for defense! You only need to look at how concerned about the issues in Ukraine the US is right now for evidence of this. This is something that should clearly not have much to do with the US at all, but who do you imagine would step up to defend western Europe at the next sign of Russian expansionism? Call me crazy, but I think it’s going to be the same nation that’s acted as the protective shield for the west for the past fifty plus years.

          Whether or not the US should spend so much time and money trying to protect other western nations is another matter. But to point out that the US spends a ton on military matters without accounting for how much the west, and the world, benefits from it is the same as complaining about high taxes without considering what we get in exchange for them.

          Reply
          • Maxim Ч. June 17, 2014, 10:38 pm

            Don’t kid yourselves. You haven’t acted as a “shield to protect every other western country” for the last fifty years. More often than not, you actually start pointless wars on shaky pretenses that lead to deaths of “western people” and take whichever gaggle of idiot politicians you can bribe or coax along with you.

            And even if you did spend all this money to “act as a shield for the Western World”, you’re still shooting yourself in the dick. Why do this? Let countries defend themselves, or join alliances as necessary. Who wants to be the guy who ALWAYS buys dinner? What purpose does it serve? Some kind of pissing contest due to a fragile ego?

            Spend your money lifting your millions in poverty. Maybe educate your people. Maybe even provide them with healthcare! Spending it on bombs is such a waste.

            Reply
            • The Satanist June 18, 2014, 12:35 am

              I completely agree that the US should leave Ukraine, Germany, South Korea, Japan, and others to fend for themselves.

              But the idea that the US hasn’t protected the west during the very long period of time that we call the Cold War is simply without merit. I don’t know how someone could look at the Marshall Plan, the Berlin Airlift, and the more recent beefing up of outposts in eastern Europe and deny that the US helps the West with defense–a lot.

              Likewise the writing off of the past several decades’ of US military action as “starting wars” is unnuanced enough to be ahistorical. Sure, things like Vietnam and Iraq haven’t turned out very well, but I don’t know how you could possibly research and understand the issue very much, and then conclude that the goals of these conflicts was merely to start wars, to grab resources, or other things along those lines. Even if you do, it would be impossible to account for the several wars the US has fought that have benefited other nations far more, such as the Korean War, the Yugoslav conflict, the first Gulf War, not to mention the World Wars.

              It’s easy to take how much the world has benefited from the US’s military actions, especially when you live in a nation that’s more or less insulated from the military troubles of the rest of the world, but very few people would even float the notion that the world would be better off if the US hadn’t struggled against the Soviets during the Cold War, or that the first Gulf War was an example of highly successful foreign intervention. The US has absolutely made its military mistakes, but again, it’s highly misleading to over-emphasize those mistakes while taking the US’s successful and selfless military spending for granted.

              Reply
        • mike June 16, 2014, 10:43 pm

          Given the amount of money it takes to develop and field an effective missile guidance system, we’d save a ton of money if we actually did bomb indiscriminately.

          Reply
    • Jennifer in Ottawa June 16, 2014, 12:54 pm

      The only thing is, there are Very Bad people in the world, who would like nothing better than to roflstomp all over Very Good and Moderately Good People, and do their level best to do so on a daily basis.

      It behooves the Very Good and Moderately Good people to do something about this, and unfortunately that costs money. Ignoring what occurs beyond one’s own national borders or backyards is the surest path to a future full of misery. The Greater Good is quite often about something even greater than you think.

      That in a nutshell is what this whole blog is about. What you sacrifice today you will have in spades tomorrow. Yes you have to keep an eye on today and the here and the now, but you also have to keep an eye on tomorrow and the then and the there. If you don’t think that what is happening “Over There” and “With Them” has anything to do with us and what is happening “Over Here”, you are being rather shortsighted.

      Reply
      • rocketpj June 16, 2014, 7:12 pm

        Sure, there are very bad people. And being involved in the world is a good idea. Being involved by bombing indiscriminately, invading countries for poorly thought out reasons with dreadful wishful thinking as your guide – that is not a good idea and is not helping.

        Does anyone currently alive think that the invasion and occupation was a good plan and a well thought out strategy? Does anyone think it did any good or achieved any goals, even the BS realpolitik goals some people assumed? The only thing it accomplished at all was to get a lot of good people killed, a few bad people killed, and a select group of people very rich (at the expense of your national debt, economy and future).

        That kind of military expense, nobody needs.

        That said, this is getting off topic and I’m not sure I have much more to add. I’m open to talking about it in the forum though.

        Reply
  • kiwano June 16, 2014, 9:40 am

    So because I stuck around in school for a real long time (I’m sure some people were retired already younger than I left school), my employer can claim fully refundable scientific research and experimental development tax credits covering 40% of the cost of employing me (including things like any office space, internet connection, equipment, etc. necessary to keep me going, not just my salary). Does this mean that I can make like the Fraser Institute with their “profit tax” calculations etc., and claim that my tax-free day for 2014 was actually some time in late 2013?

    Reply
    • Mr. Frugal Toque June 16, 2014, 9:51 am

      In the Before Time, when I would get easily angered about anyone who was Wrong on the Internet, I would totally write them a letter about that.
      But I don’t do that sort of thing anymore.
      Also, you would probably just get a form letter back from them about how Tax Freedom Day is just a “useful tool” for “Canadian taxpayers” (not citizens, of course, but taxpayers) that they provide free of charge and you should take it with a grain of salt etc. etc.

      Reply
  • Richard June 16, 2014, 9:55 am

    The employer portion of the payroll tax is a real cost. I know this as an employer and a business owner. When I decide to hire someone I don’t set their salary and then suddenly realize I need to come up with another $5,000 /year to send to the government. Instead I decide what I’m willing to spend on them and then deduct all the costs that will go with that. Only some of those costs are revealed to the employee. A lot of business owners are more mustachian than the average people so you’d better believe they watch their costs.

    The profit tax doesn’t affect everyone, only those who have some ownership in any business (and even then tax integration may cancel it out but that’s an advanced accounting topic). I’m hoping that includes most readers of this blog. Even aside from our own savings, most pension plans are a form of Karl Marx’s dream. As for how to distribute that cost when some people are disproportionately affected by it I don’t know the right answer. If the average includes mustachians then surely it also must include people who earn millions of dollars per year from their business or spend hundreds of thousands of dollars on luxury goods. I just watch what I’m paying.

    Overall I don’t think ignorance is the way to go. Sure the way the media reports the story may be too dramatic, but why go all complainypants about it? Just study the facts that are relevant and adjust the things that are in your control, Personally I noticed the profit taxes are a much better deal than payroll and income taxes so I take advantage of that by minimizing and delaying spending.

    With some adjustments for the payroll taxes your employer is sending to the government instead of giving to you, and the indirect taxes for the investment portfolio I imagine you’ve amassed at this point, your effective tax rate is around 35% (it’s distorted a bit by the fact that it includes taxes on your investments but it’s only divided by your own earned income; accounting is hard). That’s still lower than the 43% advertised in the media. And that’s great. What a nice way to remind people of how they are foolishly misdirecting their spending! Hopefully it inspires a few to look at the breakdown and think of how they could be more efficient.

    Reply
    • Mr. Frugal Toque June 16, 2014, 10:55 am

      This report isn’t put out to let business owners know about the cost of adding employees. What you’re supposed to understand from this is that, while you may be earning $100k, you aren’t actually seeing all that money.
      The Fraser Inst. wants you to believe that 43.5% of your money is going to taxes.
      This is clearly not the case. From the numbers they’re using, it’s very obvious that you have a lot more spending power than they indicate.
      What’s useful to people is this: how much money can I spend/save after I pay my taxes? That number is a lot more than the $56500 the report indicates.
      I won’t dispute that there are different factors that change what goes into the decision to hire an employee. That’s just not the purpose of this discussion.

      Reply
    • brian June 16, 2014, 1:56 pm

      Corporation taxes are borne by owners of capital in the form of lower profits, labor in the form of lower wages, and consumers in the form of higher prices. As mustachians we should be or aspire to be all three. I agree it’s mostly a waste of time to think about tax freedom day or to spend much time complaining about taxes. This comment is right on. Some random guy on the internet gives it a thumbs up.

      Reply
      • Mr. Frugal Toque June 16, 2014, 6:53 pm

        The tax specifically mentioned in this analysis is a “Profit Tax”, that is: a tax on the profit.
        Profit is decided by subtracting the manufacturing cost from the market cost of the product.
        Changing the profit tax rate will not affect the market cost or the manufacturing cost, only the amount that goes to the shareholders. Perhaps someone with some experience in the field of economics could correct me, but I believe that this is what is meant by “Profit Tax”.

        Reply
        • Mark June 16, 2014, 7:00 pm

          Mostly that is correct, but I would add (and I only add this because of something another person posted) that a profit tax necessarily increases the costs of goods. It might only be by .0005% or it might be by 100%. The point is that an owner needs a certain profit to risk losing money. If the government taxes 50% of my profit, I need that much more money in the profit column to make a risk worth taking.

          Reply
        • rocketpj June 16, 2014, 7:19 pm

          Profit tax also only comes after all the costs are deducted – which includes wages of executives. In the case of many small corporations, they make zero or close to zero profit because their CEO (and 50% or 100% shareholder) gets a car, cell phone, office etc. etc. which are all costs on the expense side of the ledger.

          Of course, your corporation has to make enough money to pay for the car or whatever, but if it does that money is not taxed when it is spent on a company car or internet bill etc. There is a huge and much exploited grey area around costs, expenses, wages and profits for small business owners. The entire ‘business class’ section of the plane is based on this fact.

          Additionally, GST/PST/HST costs for business inputs are often refunded as well.

          Reply
  • Marie June 16, 2014, 10:14 am

    I went to the Fraser site to see what they were all about. It seems they are are mostly a Canadian pro-free market non-profit.
    As an American (the country south of you that got all fussy about a tax on tea that was to support government services provided by the crown) I’m not all excited to pay more taxes, but I don’t complain too much about Federal taxes because we maximize on activities that have us paying less than the going rate.
    I do complain about local taxes because I cannot see my local pols and bureaucrats as enlightened persons who provide great services for the taxes provided. In the past few years, my councilman was sent to prison for corruption, and the year after that another councilman was indicted and just recently another councilman admitted guilt for taking bribes. Oh and the mayor may have possibly, maybe been involved in a shadow campaign with bribes. Then there was the lady in the tax office who managed to embezzle over $40million dollars for shopping trips. And other offices in the municipal government have reputations for being unresponsive or responsive for the right price.
    The city is now pushing forth a BS service tax on gyms and yoga studios, but not hair salons and barber shops, because the hair stylists have more political pull.

    Reply
  • Mr. Grump June 16, 2014, 10:48 am

    Taxes should be like donations to charity where you can earmark where the dollars go. If I want to support welfare I click the welfare box if military I click military. With so many people on different welfare programs receiving “free money” from the government I don’t see how we will ever overcome or lessen the nations debt load or people’s dependence upon the government. Alas, I wish I had skipped this article as I am now grumpy over the fact I read it.

    Reply
    • cb June 16, 2014, 3:51 pm

      While I get the idea, I think this would work REALLY poorly in practice. In my opinion, we should use a lesson from business and hire the people we want, then let them do their job. Micromanaging politicians is a sure way to create wasteful programs, too much politicking, and the general waste that goes into the system. You already vote by electing officials, adding a layer of voting with your dollars will just add to the political madness that’s created gridlock and a grim outlook.

      If you want to see an example of people making a PISS POOR decision when they get the chance to vote directly on their tax dollars (doesn’t happen often in Canada) check out the controversy on the referendum that lead BC to go back to PST/GST after having already converted to the economically efficient HST in BC. Putting things that should be handled by professionals to a populist vote easily manipulated by media mavens is a sure path to bad decisions and inefficiency.

      Reply
      • rocketpj June 16, 2014, 7:24 pm

        That whole fiasco was an embarrassment. Amazingly, people were somehow listening to Bill freaking Vander Zalm as some kind of tax crusader (he who was run out of office for corruption).

        We elect representatives because we need them to take the time to balance priorities based on the needs of all of us. I don’t know squat about issues in, say, the Yukon, but I accept that there are important things there that need attention. But if you frame some simplistic choice and make me vote about it (i.e. new hospital for the Yukon or more teachers for your kids’ school) then I will vote selfishly.

        Reply
      • Mr. Grump June 16, 2014, 11:58 pm

        I agree, that more than likely my proposed system for earmarking tax dollars to be spent in certain areas would probably fail, for many of the reasons you list. But I also dream I could be the left fielder for the cincinnati reds when in reality all I would do is make everyone watching laugh as I peed my pants in my first at-bat. However, the clowns we have elected have has trillions in debt so I say we change the tax code some how. Flat tax? Only a sales tax? I don’t know.

        Reply
  • jd June 16, 2014, 11:05 am

    Unless Kelsey Grammer has started complaining about Canadian tax rates, the name of the organization to which your article refers is the ‘Fraser Institute': https://www.fraserinstitute.org/

    Anyway, I agree that it’s better to find legal ways to avoid taxes than to waste time complaining about them. My tax rate is probably < 20% because a lot of my income comes from eligible dividends, which are lightly taxed, and like yourself, I don't spend a lot of money on items on which sales tax applies.

    Reply
    • Mr. Frugal Toque June 16, 2014, 11:14 am

      Haha! Awesome. I can’t believe I got that wrong.
      At least I got the link right. We’ll fix that up shortly.

      Reply
    • Chris June 16, 2014, 12:06 pm

      The author got the name of the institute wrong? Hilarious!

      Main takeaway here is that everyone should think for themselves on this matter. Should be obvious, but people like soundbites that reinforce what they already believe. Don’t see this changing soon…

      My opinion is that of course we pay the employers part of payroll / SS type taxes. Otherwise, more would be available for paying employees in an open market. We also pay corporate taxes as well. Capital will seek a given rate of return in a given environment for a given risk. This return is NET of taxes, hence taxes are built into the profit equation and thus the product price.

      We do personally take the approach of living on about 25% of our net income and while we’re accomplishing our financial goals, it does piss me off a bit when I realize that I pay more in taxes than I live on. I agree that it’s best to focus on the options we have and make choices accordingly.

      Reply
  • Glenstache June 16, 2014, 11:20 am

    “I like to pay taxes. With them, I buy civilization.”
    ― Oliver Wendell Holmes Jr.

    Reply
    • turboseize June 16, 2014, 1:18 pm

      Well said!

      As with everything, you can pay too much. But civilisation is one of the few things I’d rather pay too much for than not have it.

      Reply
  • Beric June 16, 2014, 11:42 am

    Can we agree that every dollar that government takes from you is a form of taxation, whether it’s “duties” at the border or mark-ups by government-owned liquor boards? So, in BC the minimum markup on liquor – wine in this instance – 100%, spirits are marked up 170%, and that is before you pay your 12% in sales taxes. Given that, I could make a case for my $2000 in liquor taxes. (Tried making my own and sucked at it :-) ) That said, I’ll not quibble about government services here, we could do that over a nice Dark Horse rye :-)

    Reply
    • Mr. Frugal Toque June 16, 2014, 8:16 pm

      We could agree on that for all levies, taxes and such things.
      Where we might quibble over a shot of Crown is for certain fees that are attached to specific services. When we built our house, for instance, there was an $850 charge for a crew to come in, lay down a culvert in the ditch and cover it over with stone. I’d have trouble calling that a tax, especially since it’s charged direclty to me, not spread around all of my neighbours.
      But mostly, yes, I will agree that any general fee collection mechanism falls under a “tax” for the purpose of this discussion.

      Reply
  • James June 16, 2014, 11:47 am

    Awesome. I get very tired of the scaremongering that comes out of the Fraser institute. This also of course, leaves no mention of tax optimization like RRSP contributions and charitable donations. (honourable mention to sales tax avoidance – aka “buying less shit”)

    The mantra that I keep coming back to is what my mom always said when tax season rolled around: “There are worse problems to have than paying taxes.”

    Reply
  • John Onderdonk June 16, 2014, 12:06 pm

    Hi Mr. Frugal Toque,

    I am 65 as of last week and a small business owner in New York State. I feel so privileged to have the life style that I currently enjoy. I want to comment on your search for the answer to the gasoline tax. I ride my bike to work and only put about 3000 miles on my 20 year old Ford Escort each year. Good for my wallet–Good for my health. Win/Win.

    Reply
  • KS June 16, 2014, 12:18 pm

    I don’t mind paying taxes, and since I am not in one of the special categories who directly benefit from most of what I pay for, I focus on getting the most value out of the general wealth that’s taxpayer-funded, such as public facilities like parks historic and cultural sites, ‘free’ exhibits and materials, etc. I figure those are my pieces of the pie in exchange for the services like schools that don’t really benefit non-parents, and I enjoy them during most of my leisure time. As a DC metro area resident, I thank all of you and ~330 million others for funding my world-class plethora of indoor and outdoor educational and recreational facilities, museums, parks, history, etc. Been here 30 years and I still have not seen it all!

    Reply
  • Leslie June 16, 2014, 12:20 pm

    I had a great public school education from kindergarten through college. As an older person I feel it is my turn to give back by paying taxes so others can have the opportunities that I did.

    Also, I lived in a foreign country for about 6 months where the police are very underpaid. There is no income tax in Mexico. The drug dealers are more than happy to help out the police by supplementing their low salaries. See the problem?

    Reply
  • Rowan June 16, 2014, 12:28 pm

    I’d say that given the current level of prosperity in the US and Canada, more of our taxes ought to go to improving the lot of all in society. For example, why doesn’t the US have awesome public transportation? This service, like providing clean drinking water to every home in the country and (in the past, at least) launching humans into space, would be neigh impossible for one person to accomplish alone, which is why government is a necessary good. My complaint is not that the taxes are being collected, the problem is that with our overall prosperity (we are at the pinnacle, folks), things are awesome for everyone and could even be a lot better.

    Reply
  • Patrick June 16, 2014, 12:28 pm

    Wow, you do drive a ton. Aren’t you in Ottawa? I’m in Sudbury, car free, and it’s harder than it needs to be but I make it work. Moving to Ottawa soon and when I went apartment hunting I couldn’t believe the amount of bikes I saw. It brought a Mustachian tear to my eye.

    Living car-free in Ottawa is gonna be a breeze. Granted, I chose to live downtown, but these are choices we all make.

    Reply
    • Jennifer in Ottawa June 16, 2014, 1:01 pm

      The only snag you will find in your plan is the seeming non-ability of the City of Ottawa to properly clear snow. You will be taking your life in your hands if you attempt to cycle on city streets between December and March. By mid January all side streets are reduced to essentially one lane because of the snow left on each side of the road. If you stick to the bike-paths proper you’ll be much better off.

      I lived and worked downtown for a number of years and cycled everywhere; to work, to the market, to the burbs to visit friends. Had a grand time and shed a lot of sticky weight in the process. I owned a bus pass for 4 months of the year and rented a car when I wanted to travel out of town. Ottawa is probably the best city in Canada for cyclists. I’m sure you’ll love it.

      Reply
      • Patrick June 16, 2014, 2:15 pm

        Funny you say that, have you ever seen Sudbury? I visited Ottawa before the thaw, in early March, and couldn’t believe the lack of snowbanks downtown & byward. The snow clearing is pretty damn good. Back in Sudbury at that time, the snowbanks were completely covering many parking meters downtown. The city had to release a statement “Just because you can’t access parking meters, does not mean parking is free!”

        Yet I cycled all winter just fine in Sudbury. Narrow roads just means motorists need to be more patient – I’m used to impatient motorists. Cycling in Sudbury trained me for the worst.

        And worst case, we’re right by the transitway with the 95 bus running more often between 1am-5am than buses in Sudbury run during rush hour…

        It’s gonna be AWESOME!

        Reply
  • Seb June 16, 2014, 12:37 pm

    Move to dubai or Abu Dhabi. 100% tax free. Granted there are some drawbacks, but the financial bonuses more than make up for this.

    Reply
    • sekritdino June 17, 2014, 8:24 pm

      Yeah I dunno if living somewhere with such a mysoginistic culture and the fear of being raped then arrested when you try to report it is worth no taxes.

      Reply
      • Mr. Frugal Toque June 18, 2014, 9:11 am

        It’s hard to put a price tag on civilization, isn’t it?

        Reply
      • JK June 21, 2014, 5:30 am

        Ahhh, its the ignorance indicated by your comment that allows the big ass military industrial complex to continue and require more of your tax money and more of future American generations’ tax money so they can blow other people up in the name of the interests of America. Which of course, when our military blows up other people and their stuff then understandably it will piss a lot of those people off and they will in turn get angry at America which will be interpreted as a threat to American interest by the military industrial complex and the taxpayers who support it and any proposals to reduce the size and tax money supporting this complex will be shouted down as un-patriotic, etc etc etc…

        I’ve lived over here (Middle East) for past 5 years and it aint all that bad. Plus I dont see how Americans can feel safe going to their shopping malls, movie theaters, high schools, elementary schools, [fill in the blank] in comfort when the threat of being shot their-in by a fellow American are so high as compared to the un-civilized parts of the world like the Middle East.

        Reply
  • 5 O'clock Shadow Jeff June 16, 2014, 12:52 pm

    I have to respectfully disagree with you, Mr. Toque. I don’t disagree with you about the futility of complaining but I do want to ask you to consider the following:

    First, Payroll Taxes. Let’s say that the sum of all the costs (including Payroll Taxes) to employ you is $100K. If there were no/less payroll taxes, then the company would have more money to pay you a higher salary. So, I would definitely include this as an indirect tax.

    Second, Sales Taxes. Yes, the Mustachians can reduce this to a pittance, however, I can easily imagine a typical/average household spending 25% of their income on sales taxable purchases. In fact, I’m somewhat surprised that it’s not higher.

    Third, Profit Taxes. I think you have to include this as a legitimate tax because the taxes that the company pays to the government, it doesn’t pay to it’s shareholders and since Mustachians are socking away large sums of money into stocks, this tax hits you right in the wallet.

    Lastly, everyone has, and is entitled to, their own opinions and here’s mine: my utopian government would be a reflection of my values (being frugal (not to be confused with ‘cheap’), it would find ways to maximize every dollar and be deliberate and thoughtful on how they spend the money that is funnelled to them from employees/employers instead of haphazardly spending as if there’s no tomorrow. I have to think that a lot of Mustachians would agree with that point.

    Reply
  • Patrick June 16, 2014, 1:23 pm

    Frugal Toque – Some of your points are valid but other are not;
    for example, you pay no import duties? You realize that your Japanese TV or your Chinese built blender all come with import duties – how do you get away without paying any?
    http://www.cbsa-asfc.gc.ca/travel-voyage/dte-acl/est-cal-eng.html
    Years ago when I worked for a winery I recall that the LCBO fee and taxes was 53%, so if you buy a bottle of wine at the LCBO for $10 your paying $4.70 or so for the wine the rest is tax and LCBO fees. (it also becomes part of the contract that you cannot undercut your LCBO retail price). Point is good for you for never ever buying wine or beer or even having a drink in a restaurant that however would not be a typical Canadian.
    Your taxes paid need more explanation in Ontario $100K earned by one individual triggers taxes of 26,600 inclusive of payroll taxes http://incometax.calculatorscanada.ca/ontario
    your paying 20,705 in Ontario is this after RRSP and other deductions?

    You make a valid point but in my humble opinion I will suggest that the tax Burden in Ontario is more onerous then you are suggesting.

    Reply
    • Mr. Frugal Toque June 17, 2014, 5:52 am

      The LCBO and the Beer Store seem to be hiding some taxes then, when they declare wine and spirits to be in the 19-29% range. I still make that zero in my column and I still think that spending $5000 on alcohol would be crazy.
      My point with import duties is that I can’t see them. When I go to buy a Canadian made item ‘x’ or a Chinese version ‘y’, I see the same price. The fact that one includes an import duty really doesn’t affect me. I still have a certain amount of money to spend, and trying to find all of the “hidden” taxes quickly leads to a determination of 100% tax on everything. (Just add a layer of hidden taxes o the next guy in line).
      For income tax, I used StudioTax ( http://www.studiotax.com ) for the calculations. It’s free and certified for 2013. I assumed a spouse making $0, I didn’t count any deductions for my two kids, only for CPP, EI, and $18000 worth of RRSPs (RRSPs are absent from the link you posted, note that if you lower the income to $82000, it gets much closer to my number).

      Reply
      • Patrick June 17, 2014, 9:54 am

        Thank you for the reply. To be fair your $18,000 RRSP contribution does not relieve you of the taxes owed on your $18,000 of income it only defers them into the future when you access those funds (in theory at a lower tax rate). I’m going to respectfully question the argument that if you can’t see import duties its not a real tax – in most cases there is little to no Canadian version so you likely are comparing all items with some duties on them (isn’t everything made in China now?). I bought gas this morning at $1.40 per litre I know in Ontario slightly more than $.40 of that is tax but it is not disclosed anywhere its still a tax and without it my price would have been under $1.00 per litre.
        Your argument that the Fraser institute calculations are biased and incorrect is a valid one, but your assertion of a 28% overall rate of tax for a single $100K earner in Ontario is light – I would humbly suggest the truth lies in the middle.

        Reply
  • JoyBlogette June 16, 2014, 1:26 pm

    You should send a copy of this post to the authors of the Fraser article. I would be interested to hear their justifications for the liquor/tobacco tax being so high and Natural Resource Levies, etc.

    Reply
  • HappyDane June 16, 2014, 1:50 pm

    In Denmark the income tax on the average dane is 42,3% and VAT is 25%. We do however get to life in the happiest country on earth and get free healthcare, education and many more services. However… houses here are insanely expensive….. I’m not complaining. But ERE is not really possible unless you want to live in a shed :o)

    Reply
    • Leslie June 17, 2014, 11:05 am

      That sounds great! How hard is it to emigrate to Denmark? :)

      Reply
  • Liquid June 16, 2014, 2:01 pm

    I thought that Fraser Institute study was off when I saw the numbers too. I don’t keep track of my taxes too closely but 43% just sounds too high. I think most people would be around 30% depending on how effectively they use tax efficient vehicles.

    Good thing you don’t live on the West Coast, Mr. Frugal Toque :) In B.C. we have the carbon tax and other levies on our gasoline. About 40% of what drivers in Vancouver pay to fuel up are various taxes. For people who drive a lot transportation makes up a big part of their budget.

    Reply
  • Less (Antonym) June 16, 2014, 2:08 pm

    A better celebration would be the date at which you have earned all the money you NEED for the year. Then we could all revel in how far we have come from subsistence farming in the dark ages, and gladly hand over a chunk of the excess for all these extreme luxuries that our respective governments supply.

    Reply
    • Mr. Money Mustache June 16, 2014, 10:27 pm

      YEAH!! That is really what these tax complaint articles are about. They are about abundance. As in, “we have so much more than we need, and it is so easy to earn so much more, who gives a fuck about the tiny details of where the surplus goes!?”

      Another way to think about it: very few countries (if any) have lower taxes AND a more civilized society than the US. In principle, libertarian ideas sound great. In practice, you end up with a Pakistan-style warlord/dictator society when you let things become too much of a free-for-all. On the other side of things, Netherlands and Denmark are amazing places, with much higher taxes.

      The world is a giant, ongoing taxation/government experiment. Observe the results elsewhere and decide which country you want to emulate.

      Reply
      • eccdogg June 18, 2014, 8:22 am

        I don’t remember the US looking like a Pakistani warlord/dictatorship society when the US Federal Government spent ~$8k/capita under Clinton vs the $11.5k/capita (adjusted for inflation) we spend today.

        What amazes me is that some mustachians are laser focused on efficiency for their own budgets but the govt just gets a pass. All “services” are assumed necessary and are being provided in the most efficient manner.

        This certainly makes sense given the fact that really the only thing you can control is your self, but does not make sense when you are advocating that taxes should not/cannot be lower. I would expect a mustachan to look at govt spending and say “where am I getting value and where am i not and do we really need to spend what we do to be happy”. Exactly the questions we ask of our own budgets.

        When I ask that question myself I come to the conclusion that MUCH of the spending is worthess and unproductive.

        Reply
        • Mike M June 20, 2014, 6:20 am

          Okay, that’s fair. I think having a discussion of today’s $11.5k/capita and 20 years’ ago $8k/capita is a worthwhile discussion. But hardcore libertarians would like to see it somewhere around $0-2k/capita.

          And yes, I also agree – the social safety net the United States provides is horribly inefficient. I’m not even saying we shouldn’t have things like Social Security or national healthcare – just that our versions of these things are pretty lacking. And the stuff I really benefit from – Police, fire, roads, parks, libraries… it barely registers on the budget. Schools are the exception – they’re a significant portion of local & overall taxes.

          But I look at the $0-2k/capita budget of libertarians, and question if they’ve really thought through what such a society would look like. I don’t think they have.

          Reply
  • Green_Knight008 June 16, 2014, 2:20 pm

    I’m always a bit surprised by this blog’s love of paying taxes. I have to ask-do you really think that your respective governments’ are more efficient at spending your money than you are?
    From a factual perspective, the Profit taxes which you are defining as a corporate tax are paid by the people that purchase either goods or services from that corporation. So it is actually fair to include them. Any money being paid by your employer to the government is also money that could be either paid to you or used to reduce the costs of goods and services-or paid to shareholders (which are often employees!), so I would again argue it is fair to include them, as there is an opportunity cost there to the citizens.
    If the government didn’t waste billions of dollars, I’d be more inclined to support your position, but so often the government wastes money, fails to maintain the things that they should be such as infrastructure and security, and then say they don’t have enough money and need to raise taxes because they built a statue of a camel in Pakistan or whatever other boondoggle they’ve wasted the money on.
    Imagine how much faster you would be able to grow that mustache if you were paying 10% less of your gross income in taxes. For a blog that focuses on cutting spending, ignoring this aspect of additional savings seems hypocritical to me.

    Reply
    • CB June 16, 2014, 3:27 pm

      It’s hard to say about the corporate profit taxes since we don’t know how they were calculated. But if it’s simply the amount of taxes paid by Canadian corporations then divided by the population? Highly suspicious. That would ignore goods that are exported, potentially ignore the various ways that businesses are not double taxed when they buy from other business etc. If that’s the method, it’s very crude and looks like it was implemented just to make the numbers more sensational.

      In terms of the blog’s overall mentality, see the previous article about sphere of control. Additionally, some people feel that the government is an insane waste machine, others believe that it does a relatively good job of serving the public interest and providing services we want efficiently. I am certainly in the later group, although, like Mr. Frugal Toque, I’m Canadian. I assume you are American and I concede that things are a lot messier south of the border.

      Reply
    • Mr. Frugal Toque June 16, 2014, 4:11 pm

      “…do you really think that your respective governments are more efficient at spending your money than you are?”
      Yes. For instance, publicly funded health care systems are far more efficient than private ones. Publicly funded fire departments are great too, unless you want the fires from the poor end of town to spread. I’d hate to see what a publicly funded police department would look like, and if you charged the poor for education, their kids would end up stealing the hubcaps off your Beamer.
      Private systems and public systems both waste money. I’ve seen *that* cloud from both sides now, so I don’t find anything magical about the free market in that regard.
      And what I’ve learned from massive tax breaks, such as the 10% you suggest, is that the damage it does to our society makes things worse over all while enriching a small number of people. Maybe my government is just better at maintaining things – like health care and public schools – so I don’t feel like the money is wasted. You won’t find very many Canadians who would let our health care system slide, not for any tax break.

      Reply
      • Green_Knight008 June 16, 2014, 10:36 pm

        You are correct sir, I am from that country to your south. While I have read the sphere of control content (which do make sense) since we get to vote in both countries we do have some small ability to control this sort of thing-even more if we spend some time to illustrate the problems to people willing to listen and think about it (lack of which is what causes the majority of problems in an elected government imo).
        I assume that you meant privately funded police departments-which do exist, btw, and actually are less expensive than the government version (in America).

        Really though, do you think the 2.5 million dollars the Canadian government spent last year on ads for the Canadian Jobs Grant program-2.5 million dollars in ads that aired for a program that didn’t exist at the time, and still doesn’t now! I don’t know if Canada is quite as terrible for this sort of thing as America is-the US government is great for stupid stuff like this-and I’m sure that if I looked a little further (or you did) that one would find plenty of examples like this in Canada, although I’m equally sure there will be less than in the States. I just saw a longer list of them in Canada but I think one makes the point well enough. I just don’t believe that you yourself would spend your money that foolishly based on what I’ve read in your prior posts.
        From my perspective in the US, we have 40+ federally funded law enforcement agencies, from the Marshalls Service to NOAA (that’s the National Oceanic and Atmospheric Agency)-seems pretty redundant to me, and certainly not very efficient. Canada has 9 I could find-maybe not too efficient either, but sure better than the States.
        Most of what you mentioned as necessary is funded in the US by local (city & state) taxes, not federal. Again maybe this is different in Canada-yet your average American pays the majority of their taxes to the Federal Government (hey, takes a lot of cash to run those 40+ federal police agencies, not to mention the military, and still have money left over to destroy 7 billion dollars (2013) worth of military equipment instead of selling it or shipping it home.)
        Having worked for (and currently working for) both US private and government entities, my view in America is that the government far outstrips any private entity I have ever worked for when it comes to wasting money.
        Canada did a lot of cutting during their austerity, arguably with good results, arguably with bad-but that could mean that your country is a little leaner in the waste department than the US right now-the US being massively bloated. Instead of tax cuts in the US we engaged in “stimulus” which pretty much all ended up in the pockets of the ultra rich-while the lower & middle class employment numbers suffered for multiple years and household wealth barely recovered, so I guess I’ve observed the exact same problem with the opposite solution employed.
        It’s not paying the taxes themselves that I object to-nor the basic government services such as infrastructure and security-which I mentioned in the first post. I do object to funding 40+ federal police agencies, destroying 7 billion worth of military equipment (which the government then repurchases in the States so you can double that number at minimum), and multiple government agencies that have failed at their primary reasons for existence-I truly think that the tax rate in the States could be dropped by 10% and the government would not be unable to provide the basic services of government-but they might not be able to afford to waste so much money.

        Overall, it was an interesting article, even if the numbers you’re discussing are inflated in Canada, there are groups in the US that claim the US citizens pay a higher overall rate than these numbers (I’ve seen 53% quoted, but never bothered to check it out).

        **I personally do think the Canadian government is better at efficiency than the US, so there likely is some effect of that citizenship lens on my opinion. Since both yourself and Mr. Mustache are Canadian born, I suppose that the opposite is likely also true, which may well be why both of you are so comfortable paying taxes. That said, it never hurts to look at the other side of the issue. After all if no one ever does then you can just about be certain someone will take advantage of it sooner or later.

        Reply
    • Leslie June 18, 2014, 12:05 pm

      It would be hard for the average citizen to purchase the services of police and fire professionals. The idea is the services that everyone uses are cheaper when paid for collectively instead of individually. So, using money in that way is more efficient, freeing up time for me to do my own job and to make more money. People tend to make a better living when they specialize in one area and are not spread too thin. Here is an example: our street had trees that were pushing up the sidewalks and people were tripping on the raised part. The city came out and fixed this by digging up the sidewalks, cutting the roots, and pouring new concrete. I paid a few hundred dollars to the city in the form of business and sales taxes last year. If I had paid for the new side walk out of pocket in front of my house it would have cost me about 2–3,000 dollars. I would have also spent a lot of time interviewing contractors and checking their references.

      Reply
  • Kate S June 16, 2014, 3:03 pm

    If sales and income taxes are really and issue for you, move to Alaska, where there are neither, but you’d better allocate lots of $ for heating costs and enjoy some loooong, dark days and rainy ones too (daze?). Right now, you can enjoy the land of the midnight sun.

    Reply
  • Lighthanded June 16, 2014, 3:06 pm

    Agreed, Green Knight– government waste is rampant. In protest, I run my modest income through a corporation in order to pay as little in taxes as legally possible. In recompense, I self-tax to the tune of thousands per year by giving directly to the local public school. This enhances the education of my kid and many others, helps to provide good, local employment of teacher’s aides and a librarian, and, in concert with many other parents doing the same, increases my property value due to the proximity of one of the better local schools, all in one swell foop. I plan to continue giving even after my child graduates; I like having a measure of control over where my taxes go.

    Reply
  • CB June 16, 2014, 3:15 pm

    THANK YOU. Thank you. Thankyouthankyouthankyouthankyou.

    I spent most of father’s day debating (*ahem*) with my father in law about taxes, political reform, etc. You couldn’t have summed up my feelings more clearly.

    Reply

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