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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. 

 

  • Someone June 16, 2014, 3:48 pm

    I agree with the business owner that the payroll tax part is a very real part that could of gone to you directly. It’s a deceptive slight of hand that should be made fully visible to employees and your falling for it to be honest. The $100k family is really should be called the $109’903 family. It’s the same reasoning behind why GST/PST/HST is something you see separately after the fact vs. before the fact, so you are actually aware of the tax. Sales tax changes aren’t as visible when it’s baked into the price. Mathematically it’s the same thing but human psychology wise it is not. I didn’t realize that part existed for years until i read about it in an article, since no payroll check stub shows the ’employer portion’.

    People don’t like taxes because they feel inefficient. In America you can pay similar to Canadian rates but get far less back for your dollar. Canada has less social economic inequality, obvious poverty or crime, a less aggressive government, nicer government services, a calmer police force and universal healthcare, cheaper college, less geographically restricted schooling and so on so they have higher ‘customer satisfaction’ compared to the USA. Come live in the USA for a while and you’ll start to understand why Americans feel the way they do compared to Canadians. Canadians feel like they’re getting something back, Americans not so much.

    Also as a Canadian you pay a bunch more in cartel pricing, import duties and so on that are completely invisible to you. There is a reason why everything is significantly cheaper south of the border. Also how much would you pay for an equivalent house lets say in upstate new york for example vs where you live in ottawa. Probably a lot less. The hidden taxes in the cost of goods is something you should be comparing too.

    So if you adjust what the fraiser institute is saying, you can say canadians pay a %35-%43.5 tax rate. I don’t know although how much you have to adjust that upwards for the higher prices canadians pay. Stuff can be %10-%30+ more expensive on average in Canada.

    Reply
  • David McKenna June 16, 2014, 4:03 pm

    I’d have to disagree with you, and agree with the Fraser Institute re: CPP and EI.

    When your employer has to pay payroll taxes, this increases their cost of having an employee and squeezes down your salary. Since all firms in the same geographic area have the same payroll taxes, the employer isn’t forced to eat the payroll costs.

    This is particularly important given the new Ontario Pension plan that the Liberals will likely introduce, which increases these mandatory deductions, to pay for a pension that cannot be accessed until age 60! How very unmoustachian.

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    • Mr. Frugal Toque June 16, 2014, 4:24 pm

      I agree that it affects the way your employer thinks.
      But it doesn’t affect your bottom line.
      If your company pays you $100k, you lose $3197.82 to CPP and EI. That’s the number you should use when you determine how much you have left to spend and/or save. Using $6395.64 is misleading.
      Also, there is no reason to believe that a corporation would pass the extra $3197.82 on to the workers. The workers are already paid at the local market’s going rate. What motivation would a corporation have to raise that rate?
      Half of me wanted to throw out CPP and EI anyway, since you get one back and the other is insurance. Be glad I left them in as “Taxes” at all. :-)

      Reply
      • Mark June 16, 2014, 5:47 pm

        That employer’s half of the tax can’t be paid without some impact to the “average Canadian family”; there’s a tradeoff somewhere. It’s either going to be in the form of lower income for employees, or lower profits for the businesses (we all like higher stock dividends and more valuable stocks, right?), or higher priced goods and services. Either way, that tax in aggregate does have an impact on that average Canadian family’s income and/or spending power… even if it’s not obvious.

        It’s also worth noting that the government isn’t going to allocate that money as effectively as the individuals being taxed would allocate it. If that weren’t the case, why not pay all of our income to CPP, EI, and other programs? Obviously, people would rather spend their money in ways that differ from those programs (and if that isn’t the case, the program exists for no reason).

        Is there a better way to capture the impact of those employer-paid taxes than the way the Frasier Institute chose to do it? The summary is definitely oversimplified, but the general idea is still pretty accurate.

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        • Mr. Frugal Toque June 17, 2014, 10:45 am

          “It’s also worth noting that the government isn’t going to allocate that money as effectively as the individuals being taxed would allocate it.”
          That’s not entirely true.
          Most people are pretty bad at saving for retirement, for instance, or we wouldn’t have so many seniors on Old Age Pension.
          Most places that have private healthcare aren’t nearly as effective at delivering the service – or at maintaining a healthy population – as publicly managed health systems.
          Don’t be so quick to hammer on the gov’t.

          Reply
          • Mark June 17, 2014, 5:09 pm

            I hate to say it, but a lot of people have different priorities than us Mustachian folks. Many are bad at saving for retirement because they care about other things more (e.g. putting food on the table, or wasting it on stupid crap). I don’t think it’s the government’s role to force that decision on people, especially in the regressive, inefficient manner that the US government does today.

            Compare Treasury Bill returns to a balanced portfolio’s gains (they don’t compare favorably when you consider that the timeline for Social Security is long enough to offset increased risk). Consider how the bottom tier of workers will pay into the system longer (working at earlier ages) while reaping fewer benefits (dying sooner). Similarly, if I had a health condition that shortened my life expectancy, I certainly wouldn’t want to put up to 13% of my income towards Social Security as “retirement savings”. The system down in the States isn’t efficient, and it’s pretty unfair for a lot of people who are in pretty bad shape to begin with.

            Healthcare is full of all kinds of problems state-side, but it’s hardly accurate to call it a “private” system when the government is so deeply entrenched in it. I don’t really feel comfortable saying the government can do it all better when it doesn’t really give the market a good shot at it.

            Sorry for the US-centric comment; I’m not familiar enough with how the neighbors in the north roll to know how much better the situation is up there.

            Edit: jeez that’s a lot to read, sorry about that too :(

            Reply
            • Neil June 19, 2014, 1:02 pm

              “Many are bad at saving for retirement because they care about other things more (e.g. putting food on the table, or wasting it on stupid crap). I don’t think it’s the government’s role to force that decision on people,”

              There’s obviously going to be philosophical gaps, but might I ask what you think the government’s role is? Forcing people to save a small portion of their income for retirement is a way of preventing future societal problems that cost taxpayers money. Most people seem comfortable with the idea of guaranteeing that no one in our pleasantly wealthy countries should starve, but somehow making sure people save their own money to avert being a burden on the state in when they’re no longer able to work is an unreasonable step?

              Governments do sometimes make poor decisions. Requiring the Social Security fund to be invested T-bills is, to put it mildly, really fucking stupid. (For comparison, CPP is managed like a particularly large investment fund, and has averaged 7.1% annually over the past decade). This might be an argument for reforming social security, but not so much a good argument against enforced savings.

              That said, the flip side of the t-bill thing is that the extremely low interest rates are an indication of how confident creditors are that the government is good for the money (and not in a “we can always inflate our way out of it kind of way). A strong vote of market confidence in government financial management.

              On health care, my understanding is the government meddling is largely a result of market failures. It’s basically impossible for a truly free market to treat cancer, for instance, unless you’re Donald Trump and can pay for it out of pocket. Without government intervention to regulate, insurer’s will simply cap benefits so that the sickest people will have no access to treatment.

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              • Mark June 20, 2014, 5:44 pm

                Defining the role of government is tricky, but I’d lean towards a libertarian answer that primarily involves protecting the freedom of individuals. Babysitting people and charity work wouldn’t really fall into play there.

                Does the government really need to do that stuff anyway? It’s not like people started wandering the streets in a drunken stupor when they turned 65 before Social Security was created. People managed to eat before the Department of Agriculture was formed too, and people managed to learn before the Department of Education was formed.

                If there are market failures in the area of health care, the government is probably to blame for interfering in the market in the first place. Thanks to various laws, it’s non-trivial to become a licensed healthcare provider, so supply is greatly restricted. The government doesn’t seem to be interested in changing that too much.

                Instead, the government is focusing on increasing spending for services, which tips the supply/demand curve even more. Factor in advanced technology and treatment for an increasing number of ailments, and it’s no surprise that healthcare is expensive. Is that really a problem for the government to solve though? It doesn’t seem to fall into the domain of things the government should care about, imo. People should be free to buy and sell health services as they see fit. If some people want to charge a lot of money to offset expensive research and schooling, and others are willing to pay for it, that should be fine.

                Somewhat off topic, but I think it’s funny that the government primarily focuses on paying for medical services for the oldest, dying-est people who have the least to gain in terms of additional years of life remaining (under the best circumstances). It’s really jumping in on a losing battle there. Anyone who argues that the government isn’t inefficient needs to think about that a little bit.

              • ThriftyD June 21, 2014, 8:25 am

                Mark has some good points. And even if MMM doesn’t intend for it, I think Mustachianism is VERY Libertarian from a personal standpoint. Just think, if everyone took care of themselves, lived wisely, preserved resources, saved money, and lived frugally like MMM does, we wouldn’t need all these government safety nets. People would have their own safety nets for times of personal/family struggle, loss of job, health problems, etc.

                -We’d be so fit from riding bikes and doing physical labor that medical costs wouldn’t be as big an issue as they are.
                –None of us would be phased by corporate marketing/advertising so companies wouldn’t grow so large that they’re deemed “too big to fail.”
                -People wouldn’t have to rely on banks for loans and they wouldn’t overextend themselves on homes they can’t afford and we’d avoid the housing bubble
                -People would read and educate themselves to form opinions on their own rather than passively agreeing with the Fox News/CNN pundits so they may start to understand the true costs of war and question our government on foreign policy instead of just walking to the beat of the “‘Merica!!! USA ALL THE WAY!” drum.

                So many of the things Mustachianism lifestyles promote are very libertarian. That said, there is a strong progressive sense of community, sharing, helping neighbors, etc. And that’s great too. But when able-bodied folks can take care of themselves and live frugally and wisely, they’re better suited to help those friends, family, and neighbors who cannot care fothemselvs. I.e. the disabled, the elderly, the sick, the poor, and the young.

      • PRG June 18, 2014, 7:18 am

        If the question is “what is my bottom line?”, you are 100% correct that you should not count the employer contribution when starting from an income that excludes it. If the question is “how much of what I earn goes to taxes?”, as the Fraser Institute appears to be answering, both your income and taxes paid should include the employer contribution. The mathematical effect of such a change is, of course, to increase the percentage paid in taxes (although not by as much as excluding the addition to the denominator).

        If the employer contribution goes away and is not longer a cost to your employer, does the work you do become less valuable? Those competing for your effort doing it have additional funds with which to seek the best employee. This money would go primarily to the employee for the same reason the vast bulk of people earn more than the minimum wage.

        Reply
    • CB June 16, 2014, 5:43 pm

      “When your employer has to pay payroll taxes, this increases their cost of having an employee and squeezes down your salary.”

      So by this logic, the Fraser Institute should first increase your $100k salary to $105k to account for the employer portion of CPP & EI, then reduce it by $5k for the employer portion of CPP & EI. Net change: zero.

      The author’s point stands. The Fraser Institute has in effect double counted this tax. The tax was taken into account when giving you a salary to begin with. To then further reduce your salary to account for employer contributions to these funds is double counting.

      Of course employer contributions to CPP & EI effect salaries, employment rates, corporate profitability etc. But they do not effect the amount of tax that the average Canadian individual pays directly, which is what the FI’s report intends to highlight. No one is saying they are irrelevant to the economy, just that they are irrelevant to this particular calculation.

      Reply
      • Dick Jones June 17, 2014, 7:55 am

        The net change in the percentage is not zero. Illustrative example:
        30K of 100K is 30%.
        35K of 105K is 33.3%

        I do not know if Fraser Institute added the 5K to both the numerator and denominator or not. If they only added it to the numerator then that of course is not accurate.

        Reply
        • Mr. Frugal Toque June 17, 2014, 10:42 am

          I can’t be sure if it was on purpose or not, but all of the documents I read were very vague on the how the actual arithmetic was done.
          How were “profit taxes” calculated? Was any RRSP saving assumed? What were the income splits between spouses? How much sales-tax relevant consumption was used?
          That’s why I provided my (simplified) numbers and tried to be more specific about how I arrived at them.

          Reply
  • Conservative Guy June 16, 2014, 5:09 pm

    I’m honestly curious to hear where the following reasoning goes wrong. I want to buy a (useful, mustachian-approved) widget that has a $10 pricetag. The owner of the widget business puts a $10 price tag on the widget so that he can make, let’s say, $2 profit. So his cost is $8. Of course something like 20% of his cost is taxes that his business and his employees pay (not to mention the thousands he spends every year in tax compliance services and govt mandated health-care costs), so his non-tax related cost is $6. The same markup on this cost would give us a retail price of $7.50. But of course, if his own income wasn’t afflicted with taxes, he could cut his profit a little, so that the retail price ends up being, let’s say, $7. Now, in order to make a spendable $10, I have to make $12.50 so that I can pay all my taxes (local, state, federal, payroll, and don’t forget my employer’s “hidden” portion of the payroll tax). I’ve now earned $12.50 so that I can buy what should be a $7 widget. Maybe you don’t want to call that a 44% tax rate. I don’t care what we call it. Call it a 44% shmax rate if you want. Maybe we can agree that shmaxes suck, even if taxes aren’t so bad. Of course I get a few services back, but the services that I get which are legitimate by my lights (infrastructure, law enforcement, defense, and maybe a little R&D) is a *tiny* portion of what I pay. I’d gladly give it all back for a 44% reduction in my shmaxes. But, really, I’m open to being educated about why I’m not looking at this correctly.

    Reply
  • Andrew June 16, 2014, 5:20 pm

    For any one individual to complain or not complain about taxes is probably about as significant as any one individual voting or not voting, so I usually don’t waste my time with either activity. But in the aggregate, citizens complaining about taxes and voting probably help keep taxes from mostly becoming excessively high and keep exceedingly bad politicians mostly out of office. I can only wonder how high taxes would be if no one ever complained that they were too high. Probably more than 43.5%.

    Reply
  • Ben Updike June 16, 2014, 5:31 pm

    I am married, with three kids. My children are young and my wife stays home to take care of them right now, so I am the sole earner. We have a seven year old son. Sometimes he is ungrateful for the home-made dinner he is given. He has no idea how much money it costs to run a household, much less how nice it is to have a free lunch. Instead he grumbles.

    I think most people who complain about taxes are like my son. I don’t mean to say we owe a paternal respect to the government. I mean that most people have no idea of the enormous scale of services that their local, state, and national government provide them, and no idea how much those services cost. I am a tax lawyer, and have worked for my state for going on seven years. It has taken me years and lots of time to be able to comprehend the scale of the government, and the various costs of all the things the state does. I finally can say that I understand generally how much income the state has, where most of it goes, and how it benefits me. And that is just the state. The national government is several degrees more complicated.

    The only thing larger than the services we receive for paying are taxes are the benefits we can’t easily recognize because we are protected from things that never happen to us. We can drink our water, breathe our air, travel without fear. We are protected from natural disasters. And from crime by a hard working group of government employees that prevents much of the worst of society from injuring the other part.

    I live in the U.S.A. and am very happy to pay my taxes. The value of the taxes I pay compared with the value I receive from the government makes my taxes the best money I spend. And I mean that it is a better value than the money I put away for my (hopefully) early retirement. Without the governments in my life, there would be no happy place for me to retire to.

    Reply
  • Glenstache June 16, 2014, 6:33 pm

    I think that Frugal Toque’s tables of how his taxes are collected should be matched by a table (or tables) of how those dollars are spent, and the other contributions to the greater pie that is total government revenue. This link has a nice summary for Canada for 2012:http://www.fin.gc.ca/tax-impot/2012/html-eng.asp

    Here are the key bits:

    Where the money comes from : Summary
    Corporate income tax (13 cents)
    Earnings by Crown corporations and revenues from the sale of goods and services (11 cents)
    Employment Insurance premiums (8 cents)
    Non-resident withholding taxes, customs import duties, energy taxes and excise taxes and duties on alcohol and tobacco (8 cents)
    Personal income tax (49 cents)
    Revenues from the Goods and Services Tax (11 cents)

    Where your tax dollar goes: Summary
    Canada Health Transfer (10 cents)
    Canada Revenue Agency (3 cents)
    Canada Social Transfer (4 cents)
    Children’s benefits (5 cents)
    Crown corporations (3 cents)
    Defence (8 cents)
    Employment Insurance benefits (6 cents)
    Other major transfers to other levels of government (7 cents)
    Other operations (12 cents)
    Other transfer payments (13 cents)
    Public debt charges (11 cents)
    Public Safety (4 cents)
    Support to elderly (14 cents)

    Some of this is jargon to me, but the details are all spelled out in the link. For example, “Other Operations” includes little things like Justice and Transportation.

    Reply
  • Andrew June 16, 2014, 6:46 pm

    I think the 43.5% tax rate is un-realsitic. It’s like when people complain that it costs $250k to raise a child to age 18 not including college tuition. It’s nonsense.

    I know there are a lot of “hidden” taxes that go into this 43.5%… excise taxes, import taxes, value-added taxes, inflation, etc, etc, etc. But looking at my own numbers for FY 2013 I calculate I paid a total of about 18.5% in state & federal income tax, social security and medicare tax, property tax, sales tax, and car registration (they call it a fee, but we know it’s a tax). What I paid in social security and medicare tax is a significant portion of this but I expect to get it back when I retire so if I just subtract it out now that drops my tax rate to about 11%. Either way, 18.5% or 11% is a far cry from 43.5% but I have a hard time believing that “hidden” taxes fill in the gap. So I don’t have anything to complain about, especially since taxes haven’t prevented me from reaching financial independence by age 36. But with that being said, I wouldn’t complain if my tax rate was 0% either. :)

    Reply
    • Mark June 17, 2014, 12:02 pm

      I think the US is close to 42-43%. But that is total US taxes divided by total US production. So, it might not apply to any given individual but it is the average tax rate, in aggregate, of the nation.

      Reply
  • Jake June 16, 2014, 7:18 pm

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

    I don’t think most people actually realize how much they can save on taxes by maxing out such accounts. It can make a big difference especially if you keep it up for several years. Plus, there is the delayed-gratification aspect of giving money to your future self that comes with investments (tax-advantaged or not). I wonder if those complaining about taxes worry what their tax bill will be a decade from now?

    Reply
  • RA June 16, 2014, 7:22 pm

    Bravo. Oliver Wendell Holmes – “Taxes are the price we pay for a civilized society.” Also heard as, “I like paying taxes. With them, I buy civilization.”

    For the Yanks on board, the Fraser Institute is something like the USA’s Heritage Foundation.

    Sometimes folks forget that the colonists didn’t complain about taxation …. they complained about taxation *without representation.*

    Reply
  • Chris. June 16, 2014, 7:29 pm

    Many “taxes” are hidden. Deficit financing leading to inflation is a good example of this. We don’t directly pay this cost, but it will affect everyone to some amount through wages or returns on capital not growing at the same rate as the growth of money. Inflation is a complex phenomenon and I won’t pretend to understand it more than PhD Economists, but it is definitely something that affects us.

    Reply
  • Maxim Ч. June 16, 2014, 8:05 pm

    Uhhh…what did you expect? It’s the Fraser Institute! A right-wing “think tank”. It’s their JOB to try to convince us that “the government takes all our money” and “taxation is evil” so that we elect a bunch of liars who run on promises of smaller government and lower taxes (and then, as experience shows, run up the highest deficits in history, slash services, and STILL take almost just as much money!).

    Reply
  • dick jones June 16, 2014, 8:13 pm

    The approach of minimizing sales and property taxes is a good one, as it minimizes consumption and increases savings as well.

    But as for cheering high tax rates, I have to wonder if the tune around here would change at all if future tax hikes primarily targeted recapturing revenue from bloated tax-deferred retirement accounts, eliminating solar panel subsidies, taxing qualified dividends as ordinary income, and removing rental property related tax advantages.

    All I’m saying is, the tax code encourages mustachianism, so it is expected that mustachians would approve of it.

    Reply
  • Michell June 16, 2014, 8:35 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
  • BlueNote June 16, 2014, 8:41 pm

    The incidence of taxation is a difficult thing to calculate. In the case of corporate taxes I am sure prices are raised to cover those taxes and some of it falls on the consumer and the rest on the corporation (prices go up, quantity demanded go down). Ultimately it depends on the elasticity of supply and demand as shown in this at this site: http://en.wikipedia.org/wiki/Tax_incidence

    The article was still entertaining I just wanted to make a point about the incidence of taxation because people seem to think that if you tax a corporation they pay it and the consumer is unaffected. When the government taxes cigarette corporations almost all of the tax is passed to the consumer because demand is so inelastic (unresponsive to prices) due to the addictive nature of the product. However if the government were to tax the shit out of something like Bacon (god forbid) here in Canada people would buy substitutes (or buy less bacon) and the pork industry would pay a lot of the tax without being able to pass it on as easily . I am not saying Fraser Ins. is right but there is a lot of subtlety involved.

    Reply
  • defcon June 16, 2014, 10:53 pm

    How much are you taxed post retirement? Any calculations? I would think 40% makes a huge setback to FI.

    Reply
    • Mr. Money Mustache June 17, 2014, 10:32 pm

      At Mustachian-retirement levels of income/spending, taxes are very close to zero: http://www.mrmoneymustache.com/2012/06/04/the-lovely-low-taxes-of-early-retirement/

      Although as noted in that article, if you accidentally earn more money than you need, you will pay more taxes. Which will not be painful at all.

      Reply
      • bob werner June 18, 2014, 8:51 am

        Please, why doesn’t anyone acknowledge the inflation tax? A person with 1 million invested in stocks averaging 8% (very hard to do) would net 20,000 after the 6% inflation tax. (see shawdowstats.com for the real inflation numbers).

        Reply
        • Mr. Money Mustache June 19, 2014, 8:22 am

          Aha.. but some of us consider Shadowstats to be absolute bullshit. I actually find that “real” inflation is considerably lower than even what the government CPI states.

          Instead of thinking of inflation as a tax, I think of it as an amusing byproduct of our shockingly effective money system that tricks us naturally lazy humans into doing a lot of innovation and hard work instead of killing each other as much as we used to. So you simply look at your investment returns, subtract inflation, and the net is your profit.

          Note that owning assets (stocks, houses, etc) automatically protects you from inflation because they inflate too. Only cash-holders are “taxed” by inflation. Borrowers are actually rewarded, although I don’t go so far as to borrow money myself to get that reward.

          Reply
        • Mike M June 20, 2014, 6:14 am

          Here’s a handy judge for inflation – for anything with compound interest, really. It’s called “The Rule of 72.” Take 72, and divide it by your interest/inflation rate. That’s how many years it takes for something to double in prinicpal/price. So at 6%, it would take 12 years for prices to double.

          Is food twice as expensive as it was in 2002? Gasoline? Housing? Diapers? Cars? Electricity? Water?

          My anecdotal evidence says “no.” Therefore I’m also going to call “bullshit” on 6% inflation until someone can show me otherwise.

          Reply
          • Kyle June 20, 2014, 7:17 am

            Inflation is the expansion of the money supply. Prices tend to rise as a result of inflation, but not necessarily. In a free market absent of manipulation of the money supply, as productivity increases, prices tend to fall and people’s money tends to increase in purchasing power. If the economy is growing and prices would’ve fallen by say 10% but because of inflation they only fell by 5%, or just remained the same, that is still value the government is taking from its citizens. This is why it is so hard to judge what is being taken per person on average through taxation. There are many other ways besides taxation that government takes to spend. A much better judge of what the government is truely taking out of the private economy is how much they are spending.

            Reply
  • RapMasterD June 17, 2014, 12:40 am

    Pay more. Get less. That’s what taxes represent to me in the U.S.

    Live in California. Drive the bumpy streets and highways. Witness the decline in police and fire services, and the awful public school system. Go to San Francisco and see hordes of homeless people who deserve better care. These are facts, not complainy-pantsing. Travel to Europe. Witness higher quality services in action. Just look around, observe closely, and see a much stronger social safety net in action — in the UK, in France, in Germany. I would gladly pay more if living in Europe, but I would never ever leave the States because of the unequaled freedom its citizens enjoy. The price of this cannot be estimated.

    Oh, we do get more of one thing: defense spending, which in 2011 totaled 20% of overall spending. Meanwhile, I think I saw that in Canada, annual defense spending recently totaled $20 billion — or about the cost of one year’s worth of Rob Ford ragers.

    Reply
    • Realistically June 17, 2014, 2:31 pm

      I’m not from California, so I won’t comment on the higher taxes there, but the defense spending is probably the largest thing that I would say is an issue.

      I do want to point out that we aren’t, as you say, “unequalled” in the freedom we citizens enjoy. There are a number of countries that enjoy the same, if not more freedom. Some of those countries are in Europe. So if freedom is the only thing keeping you here, I would suggest talking to some friends that live in different European countries to get a taste for the freedom they have.

      Reply
  • LennStar June 17, 2014, 2:13 am

    The Fraser Inst. is surely a free-market extremist institution. I have seen several BS things from them.

    Actually they arent wrong – in the meaning that 43,5% of production goes to “the state”. EVERY of the top “industrialised” states has a number in this area or even higher. Here are what % the “the state” is paying (which is mostly a bit higher then taxes because countries make dept normally. http://de.wikipedia.org/wiki/Staatsquote#Staatsquote_in_ausgew.C3.A4hlten_L.C3.A4ndern – german, but you should get the names of the countries ;)

    But of course a lot is made from this money. Just imagine a company having to pay for its own stretch of 10 miles of road. Or the patent system., crooked as it is

    Reply
  • Momster June 17, 2014, 9:49 am

    Bueler! Bueler!! my mind rewrites the script where they crash out of the glass enclosure on bicycles instead of the red car and sail off into the sky like in E.T.

    Reply
  • tct June 17, 2014, 10:26 am

    Mr. Frugal Toque should be thanking those that keep taxes low and have allowed him to pay a reasonable 25% tax, rather than criticizing them and calling them complainypants. I’m grateful to those who sacrifice their time and energy to limit taxes and an ever expanding government.

    Reply
  • LeBarbu June 17, 2014, 11:35 am

    I just calculate my family tax rate to be 32%. We live in Québec (Canada) and our family gross revenue is 120K (75%/25% split). Not so bad ! People around us with the same income usually pay 45% because they spend much more and don’t use their RRSP and TFSA room. Shame on them, they’re at least as inefficient as they claim the governments to be !

    Reply
  • Donm June 17, 2014, 6:10 pm

    The whole premise of this article is nonsense.

    The tax system in the US amounts to little more than comfortable slavery. I can’t think of any value I get for my taxes except maybe gasoline taxes. Even Texas has toll roads despite a gasoline tax. I should not have to pay a school property tax since I don’t use that service because I do not have children.

    The assumption that people who complain about taxes because they are bad with money is totally asinine.

    The progressive income tax leaves little incentive to work harder. Working half the year to support local, state, and federal government is slavery. Police don’t protect but there after the fact.

    Take some time to calculate federal income tax and social security on incomes of $40k, $50k, $60k, and $70k. No real incentive to do better.

    Reply
    • Mr. Frugal Toque June 18, 2014, 5:55 am

      I’m going to leave this post here, though I’d normally just wipe out such shameless complaining, because I want it to serve as an example of the sort of mindless whining about taxes that inspired me to write this article – and the sort of whining I see in a lot of these comments.
      Really? You get nothing for your tax dollars? Living in a society where poor children are educated isn’t a benefit? Living in a place where there’s a limited social safety net for the unemployed doesn’t, somehow benefit you when those people would have to turn to crime? The police and fire dept’s don’t benefit you? You’re the one, true, completely self-made independent hero of the universe?
      I find this unlikely and I find this attitude bewildering, selfish and short-sighted.

      Second, I want to accept your ridiculous challenge regarding the actual, technical nature of taxation, with Canadian numbers, one non-working spouse and no RRSP deduction:
      $40000: $3595 income taxes + $2547 payroll taxes
      $50000: $6483 income taxes + $3247 payroll taxes
      $60000: $9587 income taxes + $3247 payroll taxes
      $70000: $12702 income taxes + $3247 payroll taxes
      I’m sure, in the face of these numbers, you’ll immediately amend your view that taxes are slavery and progressive taxation completely disincentivizes work.

      Reply
      • Christopher June 18, 2014, 8:05 am

        Perhaps it is a complainy-pants comment, but yours might be also. Is government really the only option to provide education, a social safety net, and fire department? Just as spending ridiculous amount of money living paycheck and complaining about retirement is narrow-minded, so is the view that government has to provide everything for us. Private organizations can provide a plethora of services for the people while still maintaining freedom for the people to choose where to spend their money. I would challenge both Mr. Money Mustache and yourself to think of taxes and government with just as an open mind as frugality and really question the system that is in place. The idea the United States government spends our taxes honorable and efficiently is preposterous.

        Reply
        • Mr. Frugal Toque June 18, 2014, 9:01 am

          Actually, Mr. Money Mustache and I have spent a great deal of time throughout our long lives examining the very things you suggest.
          Some things are best done collectively. Others are not. The test bed for this is the entire world, where a wide array of governments are available for study.
          Where fire safety is done privately, poor people’s houses catch on fire and, untended to, burn down entire cities.
          Where health care is done privately, it comes out more expensive and with worse overall health outcomes (infant mortality, longevity etc.)
          Where there is no public education, there is a great deal more crime and a poorer economy.
          The aim of this article was not to say that governments are perfect, or that government run services are flawless. It was to point out that governments are pretty good at certain things, that we should enjoy those things and that the fear-mongering “tax rates” you usually see in the news are highly misleading – especially for people like us.

          Reply
        • Mike M June 18, 2014, 9:30 am

          Agreed, the United States government is neither honorable nor efficient. But in many cases, government is still the best option. Free markets & capitalism are powerful forces that can yield awesome results. But they’re not the right answer for every situation, including some of those you mentioned:

          Private education will leave disadvantaged people behind. And then they will become a burden on society. Educating everyone is much more preferable for me.

          I do not want privatized firefighting companies. If my neighbors house is burning down, I want the firefighters to have the greater good in mind and make sure *my* house doesn’t burn down, too.

          Private healthcare? The US spends more on healthcare than any other nation without the outcomes to show for it. It ain’t working. And government is also the solution for environmental protection – you need a group with the big picture & the entire population in mind, not a smaller company focused on a couple people or profits. Look up “Tragedy of the Commons.”

          Now, social security/retirement? Anyone who invests realizes how inefficient US Social Security is. You pay roughly 12% into it, and get back very little at age 65. It’s a horrible return. Here I’ll admit – we could do better than the government’s plan.

          Each problem has its individual quirks. Sometimes government is the answer, sometimes it’s not.

          Reply
  • Kyle June 17, 2014, 9:29 pm

    I’m sorry, but how in the world can you justify not counting your country’s corporate tax in your calculation? Even if you don’t just distribute it evenly on to the general public, you have to at least distribute it evenly to shareholders, which are individual people. And since this is an exercise in averages, it will have the same effect. It seems like Mr. Toque is acting as though some inanimate corporate entity is paying this tax and no one is actually affected.

    And I’m not entirely sure I understand the argument about the payroll tax, but if the argument is that the employer-paid portion should not be included in the calculation of the average tax burden on a country’s citizen, then I would ask who Mr. Toque thinks employs people. It’s either an individual, or an entity that individuals own.

    Reply
    • Mr. Frugal Toque June 18, 2014, 5:43 am

      Because, Kyle, when you look at your salary offer and you look at the amount of money in your bank account, there’s no need to account for the corporate taxes paid by any corporations involved.
      You had $100k. Now you have $72k. You don’t end up with only $69k.
      The only accurate and fair way to represent this to people is to say, “Actually, you were making $112k, but the first $12k was already taken by the gov’t in the form of

      Reply
      • Kyle June 18, 2014, 6:25 am

        Well, first of all, when employers are forced to pay tax on employing someone, it lowers the market price of labor, because the cost of employing someone has increased. Wages certainly would increase if other costs of employment went down. To believe it wouldn’t, you would have to believe that even larger increases in taxes on labor would have no effect on wages. Take this to it’s logical extreme, you will see that this is nonsense. Think of it this way: when you buy a good, you pay a market price for that good. If the government created a tax you had to pay to buy that good, demand would go down and the price of that good before the tax would drop. It wouldn’t fall by the exact amount of that tax, but it certainly would fall.

        And my point about the corporate tax is that one of the first principles you learn in economics is that only individuals pay taxes. You cannot always see exactly where a tax on an inanimate entity ultimately falls, but it does get paid by individuals. It may be customers, employees, shareholders, or someone else. But since the point of this study was to find what the average citizen pays in taxes, it really doesn’t matter what individuals ultimately pay this tax because it will affect the average the same. It doesn’t matter if people don’t even realize it hit them before they knew their starting point. It still hit them.

        Reply
        • Mr. Frugal Toque June 18, 2014, 6:51 am

          My point is that this is extremely misleading to the sort of people the study is directed at.
          If you make $100k, you will *not* have $56500 left over. That’s a category error.
          If you want to say that your salary is smaller because of hidden taxation, then you should plainly state that you are inflating the “real salary” to some much larger number and that the percentage is based on that much larger number.
          But if you’re going to go after “hidden taxes”, you must also go after hidden services – like protection from banditry. Try opening a business in Somalia, for instance. No taxes, but my goodness the amount of money you’ll be spending “not getting shot on the way to work” will go up considerably. I’m betting you wouldn’t come out ahead, but I don’t have any reliable math on that.

          Reply
          • Mark June 18, 2014, 7:10 am

            I still haven’t read the Frazier study, but similar ones in the US are just based on “government receipts” divided by GDP. That gives an average for the country as a whole. In the US that’s about 42%.

            Reply
            • Jeff August 28, 2014, 6:56 am

              A perfect illustration of why the median figure is so often a superior indicator of the typical experience, as compared to the mean. To put such an average forth as a meaningful indicator requires such willful disregard for sensible methodology that the only *possible* explanation would be ideological bias, most likely partisan.

              Reply
  • Mike G June 18, 2014, 12:04 am

    Holy snikies, lots of comments. One thing to keep in mind is Canadians are not taxed on overseas income. I work with a number of Canadians who have internet businesses registered and owned as Panamanian and Costs Rican corporations in which tax rates are much lower.

    Reply
    • Money Saving June 18, 2014, 2:46 pm

      I had an old boss that was Canadian. He worked up there for ~25 years, and he now works in the US. He should be able to get his Canadian pension, plus 401(k) distributions that he’s built up since working in the US – the best of both worlds!

      Reply
  • Mark June 18, 2014, 7:12 am

    Here’s a clean example of why I don’t like taxes – Government Waste!
    https://www.stlouis-mo.gov/government/departments/budget/transparency/loader.cfm?csModule=security/getfile&pageid=399249

    Ford F450 estimated at $125,000. MSRP is $50,560.
    Ford F550 estimated at $75,000. MSRP is $55,000.
    Ford E350 estimated at 46,438. MSRP is $35,369.

    Also, the proposal is to spend $10M demolishing 2600 buildings. That’s roughly .7 square miles of the city. Many of these buildings are still inhabitable and many more are salvageable. Why would I want my tax dollars going to that.

    Reply
  • Christopher June 18, 2014, 7:35 am

    I believe there is complaining about taxes, but there is also a justified disapproval of taxes. Complaining about taxes because of one’s lack of frugality is obviously unjustified and can rightfully be judged as a “complainy-pants.” However, there are those of us who believe that some taxes themselves are fundamentally unjust as free people. Many things we pay taxes for can be solved by independent organizations rather than a government entity. Helping people in need is good while done with free will, rather than forcing individuals to pay a tax to help a people. The freedom of choice is the foundation of a free society. Personally, I would much rather trust my fellow free man than a corrupt government which has unlawfully spied on all of its own citizens through the NSA, is funded by corporations for their decisions, and has a military spread throughout the world. It is true that our country is prosperous, but the road we are walking down certainly will not be. This is not pessimism but merely a concerned individual for change.

    Reply
    • Donm June 18, 2014, 9:52 am

      Well put! No one ever considers how much of the welfare is eaten up in administrative costs.

      And yes, freedom is an alien concept to the majority of the population. I guess publik skools have been a success after all (for someone).

      Reply
  • crewmom June 18, 2014, 8:14 am

    Dear MMM, Not only in there a lot of complainypants going on here, but lots of meanypants as well. This is one of the reasons we LEFT Colorad0 (CS area)-we couldn’t stand the meanness of people not being willing to pay for schools, roads, parks–etc. Back here on the East Coast, and so so grateful to be enjoying the wonderful riches of a high tax area, like stellar parks libraries schools. The humidity, not so much.

    Reply
    • Mr. Money Mustache June 19, 2014, 8:35 am

      Hey Crewmom – that is an interesting philosopy and I admire the spirit of generosity. I have never lived in Colorado Springs, but here in the Boulder area we have insanely awesome parks, libraries, open space, and schools.. AND fairly low taxes with low government debt. Our roads are unnecessarily good (I wish we could spend LESS on those), but at least a good amount goes to bike paths as well.

      So somehow we are receiving excellent services for a reasonable price. I haven’t studied regional governments enough to know why this is, so far all I know is that I like it.

      Colorado Springs is a highly “conservative” area in the political/social sense. I’m not sure how that reflects on how they handle public services, because I have never compared their budget to that of my own area.

      Reply
  • Hannah June 18, 2014, 11:43 am

    The thing that I hate about taxes is the arrogance with which they are spent. Specifically, I hate the huge administrative overhead associated with every law, every tax, and every organization.

    I understand that the goal of nearly every government organization is designed to reduce negative externalities (getting blown up by terrorist, crime, pollution, etc.) or to increase positive externalities (educated population, healthy people, etc.) that we, as a society, have deemed that the market is over/under providing.

    That being said, I see so few examples where government organizations and even taxes work. I see the government driving market inefficiencies, inefficiently transferring wealth (sometimes to very wealthy people through ridiculous laws), and rarely creating value.

    When I think about taxes, these are the questions that come to mind:

    Why did we prop up financial institutions when the market in the 08 mortgage crisis, when the market would have dealt with it much more efficiently?

    Why did we prop up GM, when they turned around and produced faulty and polluting cars that we are now trying to tax?

    Why should I support free education for middle and upper income children, when their parents can afford it and actually will provide it in the absence of public education?

    Why should I be obligated to subsidize leisure for elderly people in the form of social security? And why should my son be obligated to subsidize my leisure when he begins to work?

    Why is the affordable care act designed in a way that promotes the interests of drug and insurance companies while undermining the interests of other medical professionals, and ignoring the importance of holistic health?

    Is our expensive ongoing military support for countries that are consistently on the brink of civil war or cout de tat actually helping to fight terrorists (or help refugees)?

    I actually don’t hate taxes, I like feeling safe from terrorists and having clean drinking water and safe streets, and I don’t mind transferring wealth to lower income individuals (in fact last year, I gave to charitable causes at a greater value than my total tax bill), but I wish that the citizenship in our country would hold politicians to a higher standard with the money that we have earned and entrusted to them, and I wish that we would stop asking for things from politicians that we have to pay to provide.

    Reply
  • EricL June 18, 2014, 12:30 pm

    Totally agree with this article. I got an email from the Tea Party a few years ago trying to enlist me into their anti tax stupidity. The irony is I’m in the military and they knew it because they sent it to my work email address. I replied that even if I agreed I couldn’t use that address to correspond with them or offer any meaningful support. Also, while I am with all Americans in that I wish we reprioritized our spending, taxes were good. Not only because that’s where my pay was coming from but because they paid for sewers, roads, regulation, law enforcement, scientific research, etc. And as much as corporations bitch about them they still derive benefits when they get robbed or don’t have to pay for extra gas or maintenance transporting their products on crummy roads.

    The only time I spent obsessing over taxes is 1) When I had to file them (US tax paperwork is very complicated and 2) Worrying how much of my pension I’d lose. Either the government or I will fix #1. And in researching #2 I found that the % tax brackets were misleading. When I read I would be in the 25% tax bracket I was concerned, though after living in Europe not unduly so. I thought I would only keep $75 out of every $100. But after researching the facts and recalculating I found they way the methodology works I’d only be taxed 15% of my income. Wait, what? So although my home state taxes bumped it up to almost 25% again this put the kebosh on that worry. For all those Libertarians there, yes, it’s horrible the government demands ANY money (even if they accidently do good with it). And in principle I wish it was otherwise. But that wish gets stacked on the shelf with the wish to study at Hogwarts, date Scarlett Johansson, and peace in the Middle East.

    Reply
  • MoneyWom June 18, 2014, 2:54 pm

    Like a bolt of lightning, I have been awakened to the fact that the Fair Tax IS the tax system for the Mustachian Movement.

    It eliminates tax on income and shifts government revenue to a tax on consumption.

    So, smart earners can save more, decide to consume/spend less and retire in record time.

    For the first time in recent history, American workers will get to keep every dime they earn. By eliminating federal income taxes and payroll taxes, your salary or hourly wage is exactly what you’ll deposit in the bank.

    Be in control of your financial destiny. You alone can control your tax burden. If you’re thrifty, you’ll pay lower taxes than somebody who is not. Most importantly, you’ll be taxed fairly

    http://www.fairtax.org/

    Reply
    • Mike M June 19, 2014, 10:13 am

      FairTax would help me a lot personally, and sounds great in general. So I can totally understand why you would support it.

      However, sales/consumption taxes are the most regressive of taxes out there. The poor spend a much larger % of their income. Wealth growth is exponential, and we already have widening chasms in wealth equality in the United States – I simply can’t support a system that would widen the gap even further.

      Reply
  • dandelion June 19, 2014, 12:27 am

    The big fallacy is believing that taxes fund government. In the US that’s true at the state and local level, but not the federal, not since we left the gold standard. The US government is sovereign in its own currency and can spend what it likes. It spends money into existence via the Fed and then extracts money from the economy via taxes. We could have Social Security without having a dedicated tax to support it, since that’s a ridiculous construct anyway — money is fungible.

    The basic questions are: what do we want the government to provide and from what sort of income and activities should money be extracted. The reason some activities and income are taxed are to create incentives and disincentives and to smooth distortions. The problem with our current tax system is that it doesn’t do that very well for most people. Capital gains are taxed at a lower rate than earned income. Progressive taxation levels out at a very low level. Because of cronyism and corruption. larger corporations get tax benefits smaller businesses don’t get.

    Once you wrap your mind around where money comes from and how it operates in a world of floating currencies, you move away from deficit hysteria and understand that in fact the government is not a household, federal defects are a good thing because the government’s deficit = the private sector’s savings, and that the decisions about what services the government provides might be constrained by resource but not cost, and that they are decided politically in favor of those with power rather than from the standpoint of what best serves a nation of citizens.

    Taxes in the US are low relative to other countries, but it is true that we get less for what we do pay, proportionally, than other citizens do, and this is because of cronyism and corruption rather than inefficiency. For instance, it’s unconscionable that the company that oversaw some of the worst loan servicing/document frauds in the real estate collapse has now been awarded the contract to manage student loans. Or that the US government became the largest stakeholder in AIG and forced no changes whatsoever in the management of the company whose credit default swaps nearly brought down the entire economy. None of that is due to inefficiency — its cronyism and corruption from top to bottom.

    Reply
  • Mark June 19, 2014, 1:24 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?”

    The responses went on too long so reply was not an option.
    That sounds accurate, but I think what a lot of us are saying is that your salary isn’y 100K, its 127K, and taxes are 55K.
    Or, for someone who makes 100K, their employer is paying 100K. In that case on a 100K “salary,” you take home 56K. It doesn’t really matter which number you use as the starting point.. Either way, 43-44% is going to taxes. Furthermore, I would say we shouldn’t look at any individual’s tax. We should look at average tax rate for the nation because to me, it doesn’t matter how much I am specifically getting hit by taxes. Rather it matters how much the country is getting hit. For the US, that is between 40 and 45%.

    Reply
  • Crass Cash June 20, 2014, 10:27 am

    I’ve never completely agreed with these studies either, they’re obviously biased. And I also agree that the individual American has much bigger personal spending problems than they do have a tax problem. However, having to work for over 3 months out of every year still seems absurd to me. I fully recognize the importance of govt and I’m not an anarchist. So what I think most upsets people about our govt isn’t the taxes, but rather the waste. I’m a big fan of schools, roads, fire/police depts, our judicial system, and our military. But when billions of dollars goes missing, billions goes to pet projects for politicians, and we spend trillions on wars that ended in complete folly, it pisses me off!! I’m a very high saver like most of you so I look at how much of my money was wasted, not how much of the govt’s.

    Reply
  • Embok June 21, 2014, 10:47 am

    While I don’t love paying taxes, and as a self employed business owner in California have had to pay a lot more than average during good years, if you compare what we pay to our collective benefits to what other arrangements have been used throughout history, the current system, while not by any means perfect or efficient, is also no too bad.

    A lot of government spending provides goods that individuals could not: sewage treatment (quite expensive, but prevents cholera and many other illnesses), clean air, environmental protection. A system of laws that (again, while not perfect) generally allows people to do business with each other even if they don’t know each other — a rarity over history, infrastructure of all sorted (roads, airports, electricity and gas delivered to your house, bridges, trains.

    Social security and similar social welfare programs both help old people and those who are unlucky enough to be injured, mentally ill or handicapped to live with some modicum of dignity. And such programs protect all of us from having to be the sole support of family members or others who we might otherwise have to shoulder the entire burden for, if they (or we) had some bad luck or bad planning.

    Basically, we pay for a baseline of civilization. Not perfect, but better than having to kowtow to a medieval lord or all powerful warlord or all powerful local company to obtain some of the same services. The US government spends a lot of money on war, which is money that in my option could be radically reduced, and wastes more than it should, and spends on many other things I don’t like, but the way to solve that is to get involved at any level and participate in our democratic process.

    Reply
  • totoro June 21, 2014, 3:49 pm

    Well you’ve hit on a pet peeve I’ve had since I was about twelve and started working.

    I listened to people all around me complain about taxes and the government and then I applied for student loans funded by taxes. I used hospitals and roads funded by taxes. I had clean water running out the tap. I got the child tax credit when I had kids. People in dire straights had access to publicly funded services and housing. I travelled and saw what it was like in countries without a functioning government/taxation system. I have no problem paying taxes in Canada.

    If you are on a mission to see that taxes are used more efficiently, go for it, but do something rather than complain. I don’t want to hear it unless you can show me some action. In my view it is not “theft” it is the way our society pays for public services and maintains a social net. You have tax planning tools available – spend your time learning this stuff if you want to reduce your taxes and change your “tax freedom day”.

    And yes, tax freedom day is total hyperbole in my opinion. A concept set out there for people who don’t want to put the time into figuring stuff out for themselves to latch onto and feel hard done by.

    Reply
  • chad June 21, 2014, 8:54 pm

    If you look at the ten large (defined as >30 million) countries with the highest per capita GDP, you get a list of places that look pretty attractive: USA, Canada, Australia, Germany, UK, Japan, France, South Korea, Spain, Italy. Surely that’s no accident. A higher per-capita GDP strongly predicts a high quality of life. Given this, I suggest the following argument:

    1. Tax policy should aim to maximize GDP.
    2. US taxes are higher than they should be if our aim is to maximize GDP.
    3. So US taxes are higher than they should be.

    Objection: but you get a library and a fire department and general protection from crime and chaos for your taxes! Stop Complaining!

    Reply: I’m not complaining. But this is an absurd reply, since libraries and police departments and such are covered by a tiny fraction of overall taxes.

    Objection: There’s nothing you can do about it. Sphere of influence and so on.

    Reply: Many extraordinary people, including MMM, have shown that individuals can make a difference. I gather that he himself has big plans to save the world from climate change. Good for him! Dream big! You should not allow your crazy missions to make you miserable–we live in a wonderful country where milk and honey flows freely in the street, and let’s not foolishly forget it. But the plan to agitate for tax policies that maximize GDP is both noble and good. Despite the fact that we have it so great–so much better than so many–I believe that it could be *far* better still here in the US and Canada. MMM and FT are ok with dreaming big with the dream is not a specifically conservative one. I think they should own up to that.

    Objection: the main point of this post was to argue that the math of the Fraser Institute was absurd. The present argument does nothing to undermine that point.

    Reply: Bullshit. The deeper point of the post was to tell conservatives who want to agitate for lower taxes that they should stop wasting their time and effort. My argument above directly contradicts that deeper purpose.

    Reply
  • Woodrat June 22, 2014, 2:21 pm

    Thanks for the post and the interesting discussion it generated.
    I agree with some part of almost every comment written here (but definitely not some). Clearly there is waste and corruption in government. It needs to be identified and corrected. Clearly the same is true of private companies and individuals as well. It’s true of anything done by groups of humans and always will be. And clearly a great deal of good, truly awesome things are done by government and private groups. Government in a democracy is what we humans do collectively, subject to all the strengths and foibles we collectively possess. And taxes are obviously how we pay for these activities.
    Some commenters have indicated they are not against taxes per se, but object to how their tax dollars are spent – useless wars or fill-in-the-blank-program-you-don’t-like. I have a long list of such things. But here’s the problem. I don’t get to decide whether I should spend x dollars on a war, or contraception for the poor, or national parks, etc. (Others in previous comments have explained how such a system would not be workable. I would add that many people would simply not contribute at all, and the burden to maintain any services would shift entirely to the people with a conscience.) There is no all-wise and totally just mustachian to make the decisions on spending, nor thankfully in democratic societies, a supreme leader to make the decisions on a whim. Instead, we vote on our priorities as a society, sometimes via direct initiatives on a local level, sometimes via representatives we elect.
    So I end up paying for programs I don’t like, or even find morally wrong. I don’t like it. I hate it. Sometimes I am thoroughly despondent about how my tax money is spent. But what can I do – I live in a democratic society not run by me. The alternative is what exactly?
    As for waste, well that’s hard to pin down. Some would say all the money spent on the Iraq war(s) was a waste. Others would say it was necessary, or at least had some benefit. Some would say any appropriations at all for the National Endowment for the Arts is a waste. Others agree with the slogan “a great nation deserves great art” and think more should be appropriated. If we went through the entire federal (or state, or local) budget line item by line item, I wonder how much of it would be judged wasteful by two-thirds of citizens. Or even one-half of citizens. I predict there would be a relatively small percentage of spending that would generally be agreed on as wasted spending – like the proverbial $500 toilet seat. But what proportion of the total spending do those kinds of expenditures amount to? Perhaps an MMM reader knows of a study that addresses this question and can provide a link.
    My point is that in a civilized society, most everyone gets a say in how we spend money, either directly or indirectly. (I acknowledge that some have greater influence than others). And the result is that it’s not always the way I think is best because not everyone sees the world as I do. So my complaining that we shouldn’t be wasting money on x is countered by someone else complaining we shouldn’t be spending money on MY favorite program. There really is no other workable alternative.
    This is not to say that in both public and private endeavors, true waste ($500 toilet seats) should be ignored or given a pass.
    Overall I would like to pay lower taxes and get better services, just as I would like to pay lower prices for everything and get better quality. But then I watch the news, or travel abroad, and look at how most people in the world live, and what they have, and mostly what they don’t have, both material and political, and wonder how I ever became such a whiny baby.

    Reply
  • Mike Orchard July 1, 2014, 4:57 pm

    I pay a very high USA tax rate and do not have a lot of personal tax deductions because I make a graet income, and had had not debt for almost 20 yrs. That said, I also have three colleg degrees, two of them in fields that are very competitive and very interesting to work in. I was educated in public schools, and know very well that my tuition did not come close to covering the true costs of my education. What i did pay in tuition was paid in large part by taking jobs that many others did not want, and I was glad to have those jobs. Every job I had allowed me to lean something that I had not knwn or appreciated alraedy, and evry person I worked with had something to teach me that improved my life and my appreciation of the world around me.Because I make more money than most, I expect to pay more taxes, and because I live modestly, I am able to pay taxes with no real burden. We enjoy the our civilization and its great comforts, and opportunities cause of the work of those who came before us, and it is our job to maintain that, and pass it on intact to our children. Pay your taxes, and live well. Thanks for a great blog.

    Reply
  • Jack Belittle July 11, 2014, 10:36 am

    Sorry Mr. Frugal Toque,
    Most income taxes in the US do not go to building roads and libraries. See this calculator: http://www.whitehouse.gov/files/taxreceipt .
    The “Roads” falls under transportation which is handily beaten by “Interest payment on national debt” .
    If you paid $15,000 in income tax

    Income TaxExpand All Sub-Categories% of Total Income
    Tax Payment
    $15,000.00
    National Defense26.3%
    $3,945.00
    Health Care24.3%
    $3,645.00
    Job and Family Security21.9%
    $3,285.00
    Education and Job Training4.8%
    $720.00
    Veterans Benefits4.1%
    $615.00
    Natural Resources, Energy and Environment2.1%
    $315.00
    International Affairs1.7%
    $255.00
    Science, Space, and Technology Programs1.2%
    $180.00
    Immigration, Law Enforcement and Administration of Justice2.0%
    $300.00
    Agriculture0.8%
    $120.00
    Community, Area, and Regional Development0.5%
    $75.00
    Response to Natural Disasters0.4%
    $60.00
    Additional Government Programs2.4%
    $360.00
    Net Interest7.4%
    $1,110.00

    Reply
    • Orange July 23, 2014, 2:31 pm

      Isn’t the majority of the national debt held by Americans?

      Also, the national debt has had negative real interest rates since 2010. I don’t know about you but if I had the opportunity to borrow billions at negative real interest rates I would jump on that in a heartbeat.

      http://en.wikipedia.org/wiki/National_debt_of_the_United_States#Negative_real_interest_rates

      Anyway, imagine how much it would suck if the United States completely stopped issuing debt. “Gee I’m a wealthy domestic/foreign/ investor or corporation that needs a few billion put into a safe investment vehicle and the United States isn’t issuing debt at negative real interest rates anymore. I guess I better buy some Chinese debt at negative real interest rates I wonder what they will do with all that investment?

      Reply
  • Orange July 23, 2014, 2:22 pm

    Yeah, it took me awhile to realize some things about taxes, namely that a large chunk of the taxes we pay are a choice and secondly the people that complain the most about taxes tend to be bad with money.

    Complaints:
    Income taxes are too high. Ok why not put more into your 401k or open an Individual Retirement Account? You can also donate to charity or a number of other things to bring this down.

    My state income taxes are too high. OK, you can bring this down by doing a lot of the things I suggested in the former or you could move to another state. Although I’m willing to bet you’ll be giving up a lot (including a higher income, better schools, infrastructure, etc) by doing so so maybe those extra taxes are worth it?

    My property taxes are too high: Move into a smaller home or move outside the city limits. My guess is that you’ll be giving up a lot by doing this like living closer to work, better public/private schools (maybe), access to public transporation, bicycle paths, living in a wealthier neighborhood, etc.

    My sales taxes are too high: Buy stuff online if it really bothers you or spend less.

    Anyway, I could go on and on but what I’ve noticed about the people (in my middle income bracket) that complain the most about taxes is that they’re really REALLy bad with money. Taxes is something I rarely think about but I have the impression that if I was bad at managing my money I probably would end up thinking “Gee I would actually have money to spend right now if it wasn’t for the government!” quite often.

    Anyway, as far as taxes go I have to say that Obummer has done more to lower my taxes than previous presidents. Those first four years he lowered payroll taxes was pretty sweet. Sadly, when Republicans repealed that in 2012 everyone was blaming Obama for raising taxes through the roof when they had really just gone back to normal.

    Also we live in America. Our taxes are historically lower than ever.

    Reply
  • SK Joy September 26, 2014, 1:41 am

    Reading many of these comments (especially the ones who think private enterprise could ‘do’ current government services better, and the ones who don’t see the value of their taxes) makes me very glad to be a Canadian. Most of us seem to know that the measure of a society is not just how much of their salaries they let people keep, but how much they value ALL of the citizens – including the sick, poor, young, old, and needy. It is disappointing to read these on here; I was so enjoying this blog, but now I have to wonder if many of the followers are actually selfish, self-centered, uncaring, and would throw grandma out into the snow because she couldn’t pull her own weight. How sad.

    Reply
    • Kyle September 26, 2014, 2:03 am

      Buy more government propaganda

      Reply
      • Mike M September 26, 2014, 5:57 am

        Sigh. I think there’s definitely a middle ground here.

        There are clearly things that government is not good at, or shouldn’t be doing. I don’t believe in much of a social safety net myself – I’ve personally seen too many incidences of handouts leading to dependency and removing work ethic from people. This crap does happen.

        However, I do generally approve of things like public schooling (or some children will absolutely get no shot in life), infrastructure, and environmental protection. And yes, even national healthcare. We in the US spend way more than any other country on healthcare – and for what? Apparently nothing, because we live shorter lives than most other first world countries.

        Each problem has unique solutions. Private isn’t the answer for everything, and neither is government.

        Reply
      • SK Joy September 26, 2014, 10:54 am

        Thank you Kyle for proving my point about there being some serious jerks on here, unlike thoughtful commenting people like Orange, Woodrat, Mike M., and chad above – whether a person agrees with them or not, they are giving thought-out and rational comments, as opposed to ‘buy more government propaganda’ – yeah, because I can’t think for myself and come up with a different opinion than yours. How arrogant.

        Reply
        • Kyle September 26, 2014, 12:21 pm

          Oh I see. So “throw grandma out in the snow” is a thought-out and rational comment? And depicting people who disagree with you as selfish, self-centered, and uncaring is not arrogant and is a reasonable way to depict their views? I love talking to people with different views than mine and hearing a wide variety of viewpoints. Those outside of the predictable mainstream interest me more than those you’d typically be taught in a gradeschool class. I understand that people who have different views from mine are well-intentioned people that care for others as I do. However, a few people that have left comments on this post, such as yourself, make absolutely no effort to understand how someone could believe that the alternate view to yours is actually much more humanitarian, and much more caring for the sick, poor, young, old, and needy.

          Reply
  • Druid September 28, 2014, 10:33 am

    I think there are some good points in the article, but I think the newer generations still are not doing enough to influence government spending and government waste. In the hopes of efficiency we should really try to maximize both our own spending and our governments spending to get the best bang for our buck. I know that if my country wasn’t spending billions of dollars on the military then I could potentially reap the benefits of cleaner energy, better social programs, better infrastructure, or a lower tax bill. I think complaining about taxes as a whole or percentage is silly, but discussing what our taxes is being spent on is probably the most important question that a society as a whole can ask.

    Reply
  • Mr CB March 11, 2015, 11:50 am

    I understand that the government provides services, but I honestly believe a lot of those services are not necessary. Do I want to pay taxes so there are roads, a military, police, firefighters, etc? Sure. I’m not so sure about things like Social Security though. I don’t mind helping out people that are disabled in some way and really can’t work, but Social Security has little to do with helping those people. The majority of SS goes to people who spent their whole lives spending every penny they made and now want to be retired. That just seems a little messed up to me. I’m saving so I can take care of myself, not rely on a check from the government. As far as other government agencies, the DEA for example- don’t we already pay police to enforce drug laws? Why do we need a separate government agency to do it?- the National Consumer Protection Agency- we already have laws on the books to protect consumers, so businesses can choose to follow the law or get taken to the courts (another government service we already pay for)- Department of Education – each state already has one, why do we need a federal agency? If necessary a very small agency could be formed to help states work together and set standards, but do we really need a huge federal agency to do that?- FEMA – states would probably manage this better than the government. Plus, there’s the added benefit of them already being in the state when an emergency happens so you don’t have to wait for the federal government to get moving. I could continue on, but I won’t. I guess it wouldn’t annoy me so much if the government was more efficient. Unfortunately, the government is like a 500lb man trying to run a marathon and keep up with the lean, elite runners and not understanding why they can’t keep up. Instead of trying to shed some weight it just packs on another 100lbs and tries it again next year.

    Reply
    • Mike M March 12, 2015, 11:15 am

      I mostly agree with you. The government is horribly inefficient in many things, yet is still the best way to solve certain problems. Roads, military, police, firefighters are all excellent examples. I’d add schools to that list – public schools benefit all of society.

      But Social Security is an interesting counter-example. It’s not fair to say people who have saved nothing want to retire. They paid 6% (really, 12% because of employer matching) in effectively an government-mandated retirement plan. That’s not a bad idea if you look at it that way. But the huge problem is the execution – it’s a pay-as-you-go system. So nobody is earning compound interest – it works assuming today’s workers can easily afford yesteryear’s retirees. Japan’s inverted population pyramid highlights the risks with a pay-as-you-go retirement system. And the return sucks, too. For me personally, I’ve calculated that I will make less than 1% annualized geometric return on my social security payments. That really sucks. Imagine if I could have invested that 12% of my income at 7%… retirement would be so much easier and sooner! So yeah, the big idea might be nice, but our Social Security sucks…

      So yes, I agree – sometimes Big Government is the answer (infrastructure, military), and sometimes it really isn’t. Despite what Democrats & Republicans would have us believe, I don’t think there’s a one-size-fits-all ideology that works for every situation.

      Reply
  • Kevin May 15, 2017, 9:08 pm

    the corporate tax always seemed like a silly one to me. i’m not sure what the point of it is. everyone laments CEO compensation, but that’s a different thing from corporate profits, and those are already subject to personal income tax. if you want those to be higher, then that’s where your beef is, but if corporate profits are reinvested into the company (more and better products, services, employees) or into the larger economy as they generally are (in a competitive environment no company wants money sitting on the sidelines), why penalize them? it’s also the tax that most demonstrably (and quantifiably) hurts the economy. how many jobs and how much tax revenue are lost to foreign nations with low tax burdens? seems kind of silly that Ireland benefits from the profit tax revenue of an American-founded company like Apple. in my view it’s the definition of a public policy that sounds good and plays well among the masses (who doesn’t want to take a hatchet to their nearest corporation, amiright?), but actively shoots the country in the foot. i believe in taxes and enjoy many public services, but this seems to be an area we are particularly irrational in.

    Reply
  • Scandinavian Indoorsman March 4, 2018, 12:49 pm

    Good article and good point!

    Just as a reference for you readers in the US and Canada from a Scandinavian perspective, I got curious about how much I as a Swedish citizen actually pay in taxes so I did a quick calculation (this covers the year of 2016, when I worked full time half of the year and traveled North America doing poorly paid freelance work(architecture and graphic design, invoicing Swedish clients and paying tax in Sweden) the other half) :

    Translated from Swedish Crowns to US Dollars in the exchange rate of July 2016. (1 USD = 8,5 SEK)

    Payroll-tax: $9217 ( https://en.wikipedia.org/wiki/Payroll_tax#Sweden )
    Pre-tax income: $29294
    Income tax: $6094
    After tax income: $23200

    This means a income tax rate of 20,8% or 52,3% if you count in the payroll tax as well.

    If you do as some people and count the VAT as well, assuming you spend your entire income in a year at an average VAT rate of 12%*that tax ends up being an additional $2784 resulting in a total tax “burden” of $18095 , or 61,7 %.

    I hope this can help people in North America with their feeling of over-taxation. That said, we do get some benifits from all this**, and I am not in favor of lowering our tax rates, social democracy have worked well for us this far, and also not going to war since 1809 have been a good financial move.

    (*In Sweden VAT for consumer goods is 25%, restaurants and groceries 12% and cultural things 6%. Medicines and some other essential stuff are exempt from VAT.)

    (**Free education up to and including University. Government-run student loans (and a free grant of about $350 per month of full time studies, the loan has an interest rate in 2018 of 0,13% and runs over a 25 year period after finishing university. Free healthcare, no need for any private health insurance. Out of the 31% the payroll tax 2/3 goes into the government run retirement system.)

    Reply
    • Mr. Money Mustache March 4, 2018, 4:39 pm

      Thanks for that useful data, Indoorsman! Those are indeed high tax rates (although the public services delivered in exchange may well be worth it).

      If you think about the typical consumer in the US, they pay lower taxes but then impose a 100% tax ON THEMSELVES, to buy things like pickup trucks and cable TV service. You could argue that having a government spend this money for you on education and a healthy environment instead, forcing you to use a car or bike instead, would lead to a better life, even with lower disposable income.

      Either model can work, and for the record I personally prefer living in the libertarian system because it’s tuned for people like me. But it takes more education and self-knowledge to prosper in a system like this, which ironically is in shorter supply because we have lower educational standards (and higher consumer marketing standards).

      Reply
      • Scandinavian Indoorsman March 29, 2018, 3:30 pm

        Thanks for the comeback! Happy to contribute.

        I must say I’m not at all sure about the purely monetary side of this USA vs Sweden thing for me personally. I have used up a lot of free educational resources (A Master degree in architecture plus a Commercial Pilot Licence, both fully paid by the government). Also I have never paid any form of health insurance aside for rare occassions when travelling outside of the EU for more than 90 consecutive days. So this far, at 32 years of age, I believe I still is way “in debt” to the government if I would calculate what I put in and what I have taken out, but there are of course many years of taxation left for me (or so the government believes).

        There is also a nice side effect of the Swedish system that people tend to forget, that having our kind of social safety net combined with having a lutheran view of work is quite similar to all of us here having a rich parent that you really don’t want to ask for money but you know is there if the shit hits the fan.

        This creates opportunity for a lot of people to take chances on developing both businessess (you know useful stuff like Skype, Spotify and Dynamite) and themselves (not doing an extended backpacking trip in a tropical region after high school is almost considered strange and somewhat ignorant here, and it is within reach for a vast majority of the population). Nobody has to cling on to a soul crushing employment just because they can’t afford losing the healthcare plan, and if you are a smart kid wanting to attend university it doesn’t matter how much or little money your parents have, students are accepted exclusively on merit. To sum this up – I think going down the Berenie road would have been a good thing for the US, especially in hindsight…

        That said I do love the diversity of the US, the food, the nature (but if someone should get credit for that it is probably the Native Americans and not the new ones) and the openness. None of that would exist if it would have been an as ethnically homogenous and slow moving place as Sweden traditionally has been.

        (Sidenote – I just moved over to Copenhagen, here it is considered insane NOT to bike to work, and cars are taxed by total cylinder volume, it’s the future.)

        Reply
  • Ernie July 8, 2018, 9:46 am

    You can literally say the same thing about everything that ever gets said by the Fraser Institute.

    It’s a safe assumption to say that their every shocking press release is a blatant lie.

    Reply

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