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Tuesday, March 18, 2008

The "pain threshold" of taxes...

OK, I'll admit it. I'm "greedy" and am driven, at least to an extent, by a desire to lower my family's taxes. My "pain threshold" on taxes is definitely exceeded and I'm actively interested in political approaches that lower my taxes and not positively disposed to those that would raise them.

My wife and I are professionals in our late 30s and early 40s, with a household income that would put us well out of most definitions of "middle class". We are probably "middle class millionaires" in that we drive old cars, live in a small house, and aren't visibly "rich" if you saw us walking on the street.

Since we have a high income and live frugally, our tax bill for Federal, State, Social Security, and Medicare taxes is nearly double our total living expenses. (I'm not counting sales taxes, gas taxes, or other taxes here - just the obvious ones.)

Also, our "perceived pain" on taxes is high because while I'm well-paid for what I do, my field - software - isn't noted for job security. I'm very good at what I do, and take the view that job security is best in small companies where a good developer can visibly "shine", but I doubt that I'd ever work anywhere for more than a few years. I fully expect that I'll have to execute a major career change at some point in the next five to ten years, and that career change will result - at least temporarily - in a significant drop in income.

Another part of the "pain" is the notion that higher taxes would delay our retirement. Since there's no pension in my future, and SS will certainly have to be reduced (I'm greedy, but not greedy enough to want the country bankrupted to provide me with a comfy retirement on the public dime), I'll have to retire nearly completely on our savings. Given that taxes versus savings is a zero-sum game at the micro level, higher taxes equals lower savings equals later retirement.

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