Taxes as disincentive to working harder?

[KC0KEK]

"The medium chill involves what economists call satisficing: abandoning the quest for the ideal in favor of the good-enough. It means stepping off the aspirational treadmill, foregoing some material opportunities and accepting some material constraints in exchange for more time to spend on relationships and experiences."

For professionals in this generation, there's another factor at work: taxes, which are a disincentive to put in more hours and effort. Might as well work less in order to have "more time to spend on relationships and experiences" AND keep a bigger percentage of what you've worked for.

[grovester]

"The medium chill involves what economists call satisficing: abandoning the quest for the ideal in favor of the good-enough. It means stepping off the aspirational treadmill, foregoing some material opportunities and accepting some material constraints in exchange for more time to spend on relationships and experiences."

For professionals in this generation, there's another factor at work: taxes, which are a disincentive to put in more hours and effort. Might as well work less in order to have "more time to spend on relationships and experiences" AND keep a bigger percentage of what you've worked for.

tax burden is as low as its ever been. generationally speaking, your argument doesn't make sense.

[KC0KEK]

tax burden is as low as its ever been. generationally speaking, your argument doesn't make sense.

I'm self-employed. When I'm deciding how much to work, I don't focus on how my taxes compare to previous generations. Such comparisons are meaningless when it's time to write the checks to the state and feds.

Instead, I look at how much of my income I get to keep in one bracket as opposed to another and then adjust my workload accordingly. It's like avoiding overtime because instead of being paid time and half, you get 90% or 80%.

[grovester]

I think the gist of the thread was that prior gens were all about the work (despite the unbearable tax burden) and how this one is about other priorities (despite the low tax burden).  I think as a businessman you need to learn how to "work" the tax code and quit obsessing about writing a check.

[KC0KEK]

I think as a businessman you need to learn how to "work" the tax code and quit obsessing about writing a check.

I have an accountant a major firm advising me. But there's only so much that can be done within the laws. I still have to write a check for $5,000+ to the feds every quarter and other grand or so to the state. Call it obsessing if you want, but I prefer to write smaller checks and enjoy the extra free time.

[grovester]

maybe you just need to get over some kind of tax "hump".  I don't mean to be a dick, I work for a small business owner (<20 employees) and I know how hard he has to work to decide how much he gets "paid", even thought it's all his money.  I can't say we've ever pondered not selling more because of the tax burden.  Maybe we haven't hit some sort of tax "wall".  There is a certain price we have to pay to live in a civilization.  I'm certainly willing to discuss how much we should pay, but not the fact that we have to pay it.

[KC0KEK]

One way some business owners and sole proprietors get over the hump is by buying a lot of deductible equipment, such as a new ______ every year. The catch is that although doing so increases your deductions, the benefit is not 1:1 in the sense that every $1 spent doesn't reduce your tax liability by $1. So you're still working a lot of hours and still have to ask the question of whether the law of diminishing returns has kicked in. And for some small-business owners and sole proprietors, the AMT is another gotcha.

[grovester]

Well if it makes you feel any better, those of us who are employees have quite a spread between our gross and our net.  That's life.

[chrizow]

"The medium chill involves what economists call satisficing: abandoning the quest for the ideal in favor of the good-enough. It means stepping off the aspirational treadmill, foregoing some material opportunities and accepting some material constraints in exchange for more time to spend on relationships and experiences."

For professionals in this generation, there's another factor at work: taxes, which are a disincentive to put in more hours and effort. Might as well work less in order to have "more time to spend on relationships and experiences" AND keep a bigger percentage of what you've worked for.

i'm not a small business owner, but taxes does not even enter the equation when i consider how hard to work or which job to take.  i'll defer to your experience, but i find it hard to believe that moving "up" in the tax bracket is really a "disincentive" to work harder.  maybe you should just get up into the upper 1% of incomes so, as Warren Buffett recently stated about himself, you can "have a lower tax rate than your secretary!"  

besides, people in america have worked their asses off for decades, when tax rates were far, far higher than they are now.  in my opinion this fixation on taxes is just a selfish copout.  govt can always be more efficient and we should be striving for that, but you, me, and everyone else directly benefit from the taxes that we pay.  the taxes on so-called "job creators" are as low as they have ever been, yet i do not see any new jobs being created - indeed, low taxes and corporate deregulation have very directly tracked the LOSS of good jobs in this country and the disappearance of the middle class, not to mention the hijacking of the financial markets in the recent wall steret implosion.  so why should govt continue to bend over backwards for these people again, on the backs of the working people and poor in this country?

(this should really be a different thread - i am going to split it).

[NDTeve]

50% do not pay taxes. This is the problem.

[lock+load]

I have an accountant a major firm advising me. But there's only so much that can be done within the laws. I still have to write a check for $5,000+ to the feds every quarter and other grand or so to the state. Call it obsessing if you want, but I prefer to write smaller checks and enjoy the extra free time.

You must be one of the very few who decides to stop working because the next dollar is going to net you five cents less than the previous dollar.  It's not as if there is some cliff where the marginal rate suddenly doubles or triples.

No one likes paying taxes but that is life.  You wouldn't have what you have today if not for taxes.

[NDTeve]

Its a little more complicated for business owners than "stopping working." Anyone who has a decent accountant will coach them on what to do...this hurts tax revenues and growing business.

[KCMax]

50% do not pay taxes. This is the problem.

Income taxes, that is. Half of those are the elderly that do not work anymore. 10% are the super rich that exploit tax loopholes. The remaining 40% of that 50% are those that make under $20,000 (more if you have kids).

And those people still pay other taxes.

[lock+load]

Its a little more complicated for business owners than "stopping working." Anyone who has a decent accountant will coach them on what to do...this hurts tax revenues and growing business.

Hasn't the last decade been a pretty good test of whether lower marginal tax rates will lead to larger revenues?  It doesn't appear to be working.

[chrizow]

50% do not pay taxes. This is the problem.

Income taxes, that is. Half of those are the elderly that do not work anymore. 10% are the super rich that exploit tax loopholes. The remaining 40% of that 50% are those that make under $20,000 (more if you have kids).

And those people still pay other taxes.

exactly.  i really cannot weep for those poor souls making $250K or more (to say nothing of those making millions per year) having to pay an extra % or two in taxes a year.  their taxes are lower than they have ever been.  truly historic lows.  yeah, i'm sorry that the elderly, disabled, and working poor aren't chipping in more, boy that is really sad.  

man, the system is so "unfair" and rigged in favor of those lucky impovershed people who cannot even afford to feed their kids or purchase necessary medications!  those lucky "welfare queens" just squeezing out more kids so they can receive $500 a month to feed those kids!  how dare the govt funnel a smal percentage of my hard-earned tax dollars to the disabled and poor out there!  (insert jerking-off emoticon that Tosspot used so often)

the $250K+ crowd will really have to make some tough choices:  do we get a new Audi in 2012, or see if we can "stretch" our 2007 Audi another year?  will our child accept their scholarship to KU or will we pony up for Wash U?  boy, this 4-bed/3-bath home in south Overland Park is just really not cutting it - but if it weren't for that damned Obama trying to "raise" my taxes (i.e. restore to pre-Bush rates), I could afford to buy that 5-bed/4-bath home!  

[grovester]

Also, can someone clarify for me, if you pay x% for the first 250k of net taxable income and you make 255k, you only pay the higher rate on the 5k.  Is this correct?

[mean]

Correct.

[KC0KEK]

Also, can someone clarify for me, if you pay x% for the first 250k of net taxable income and you make 255k, you only pay the higher rate on the 5k.  Is this correct?

Correct. Hence my analogy that it's like working overtime for a lower rate. And keep in mind that depending on the bracket, not only is the rate higher, but some deductions and options (e.g., Roth IRA contributions) start to phase out.

Half of those are the elderly that do not work anymore. 10% are the super rich that exploit tax loopholes. The remaining 40% of that 50% are those that make under $20,000 (more if you have kids).

Where are you getting those percentages from? According to http://money.cnn.com/2011/05/09/pf/taxe ... income_tax, only 4.7% of those with no federal tax liability make $100,000 or more.

in my opinion this fixation on taxes is just a selfish copout.

People -- rich and poor -- routinely make decisions based on taxes. For example, property taxes are a major reason for the exodus out of New York State over the past couple of decades. Maybe they don't see extra value for the extra money. Maybe they don't want to put in so many hours just to pay taxes. Either way, they choose to reduce their tax liability by moving.

I'm not too worried that the country is going to fall apart because some of us choose to work less. I'm confident that there will always be plenty of other people who choose to work more because they're locked into a lifestyle they can't or don't want to get out of, or because they don't mind paying more taxes. But I am not confident that Warren Buffett will suddenly stop bellyaching about his taxes being too low and announce that he will stop sending money to the Gates Foundation and other charities and instead send it to the Treasury because he believes that the government can spend it more effectively and efficiently.

[chrizow]

I'm not too worried that the country is going to fall apart because some of us choose to work less. I'm confident that there will always be plenty of other people who choose to work more because they're locked into a lifestyle they can't or don't want to get out of, or because they don't mind paying more taxes. But I am not confident that Warren Buffett will suddenly stop bellyaching about his taxes being too low and announce that he will stop sending money to the Gates Foundation and other charities and instead send it to the Treasury because he believes that the government can spend it more effectively and efficiently.

this argument is a dodge from your original argument and the reason for this thread being created.  we're talking about income tax.  there is a rather ubiquitous debate in this country right now about raising the income tax to pre-Bush levels on the upper 1% in an attempt to alleviate some of the massive deficit that these tax cuts directly created.  rich folks and the tea party are acting as though any increase in taxes would just be a death blow to our weak economy, and i think that is bullshit.  i think the "taxes reward laziness" argument you made is completely false, and now it appears you are backing away from it.  

i genuinely want to know where this argument comes from.  is it that government is evil?  is it that we've officially turned a corner where americans are 100% individualistic and do not have a "we're all in it together" sort of mentality?  

what is the moral justification for the rich/empowered further squeezing the people who can least afford any more squeezing (the elderly, the poor, the disabled, etc.)?  i have personally neve heard any justification beyond "hey, I EARNED THAT MONEY!  ITS MINE DAMMIT!" which is not very compelling stuff.

[bobbyhawks]

Also, can someone clarify for me, if you pay x% for the first 250k of net taxable income and you make 255k, you only pay the higher rate on the 5k.  Is this correct?

Decisions shouldn't be made solely on taxes.  That is a cop-out.  Taxes should factor in, but the opportunity costs of performing the extra work are the real factors in question here.  If you work 40 hours a week and would need to add 10 hours a week to make that extra 5k, it is probaby not worth your time if that 5k is a +4% addition to your income.  If working that extra 10 hours will net you +25%, or 63k for someone already making 250k, the real decision comes from how much your time is worth, not from how much a dollar you earn is worth.  Taxes are certainly a part of the equation that help determine the trade-off between time and money, but if you are at all willing to work harder, I would think that the rate at which you earn more money (of which only a small fraction is affected by taxes), along with stress and leisure/community/family activities would be a much more important factor.  Jointly filed, crossing the $140k threshhold will cost you 3 cents on every dollar as I understand.  Crossing $213k will cost you 5 cents.  It really boils down to how much you hate the government or hate taxes.  If you could make +10k to send your kid to school for a semester, but cross a bracket threshhold, why would "losing" $300 deter you?