Are the Poor and Working-Class Human Shields for the FIRE Community?

Oct 16, 2020

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Are the poor and working-class human shields for the FIRE community?

That’s a seemingly idiotic question to be asking, but hear me out. I pay quarterly estimated taxes on our pension and dividend income. I also pay sales and property taxes. Just how much I’ll be paying for these various taxes in 2020 is as follows:

Federal income tax: $250
State income tax: $250
Sales tax: $1,500
Property tax: $1,832

All these taxes total $3,832. And since my retirement income is $30,000, this means my effective tax rate for all levels of government combined is a paltry 12.8 percent.

Now a question. How is a 12.8 percent tax rate for all levels of government justified when the federal government is $27 trillion in debt and our state and local governments are $3.3 trillion in debt?

The cold hard truth is that my 12.8 percent tax rate is totally unjustified. My taxes need to go way up, and so does every other taxpayer’s.

But here’s the rub. There’s no way our various levels of government can raise taxes on the poor and working-class. The poor and working-class are already struggling. The only people who can possibly handle the levels of taxation necessary to dent our colossal fiscal mess are the middle-class, the upper-class, and the rich.

And this is why I believe the poor and working-class are human shields for the FIRE community. You retire income poor but asset rich and you’ll likely never have to deal with onerous levels of taxation. Confiscatory taxes are going to hit the middle-class, the upper-class, and the rich long before they hit the poor and working-class.

Quick aside: For the purposes of this post, I’m defining any household with an income that’s less than half the median household income as being a poor or working-class household. The median household income in 2019 was $68,703.

Final Thoughts

Okay, groovy freedomists, that’s all I got. What say you? Are the poor and working-class human shields for the FIRE community? Or is it only a matter of time before our various levels of government start to go after assets in addition to income? Let me know what you think when you get a chance. Peace.

Comments

14 responses to “Are the Poor and Working-Class Human Shields for the FIRE Community?”

Mr. P2F
October 20, 2020
Interesting post although not sure I agree they are shields. These are two differing tax systems. When working, we paid a fair (maybe more than fair) share of our income to various government entities. We also had the fortune to be able to save a substantial amount and accumulate enough to sustain us going forward without the need to work. We’ll now be taxed on the growth of our wealth and social security (later when we are older). My taxes going forward aren’t based on our current productivity, but on the rewards of our past productivity. Changing/increasing taxes on the poor and working class won’t affect me. If changing the tax code on capital gains or instituting a wealth tax comes around, that will impact many of us in the FIRE community. Good post to get us thinking!
Reply
1. Mr. Groovy
  October 21, 2020
  Awesome comment, Mr. P2F. Couldn’t agree more. Being subjected to capital gains taxes is much more preferable to being subjected to income taxes. Right now, Mrs. Groovy and I can get up to $50,000 in capital gains tax-free (top 12 percent income tax threshold of $80,250 for a married couple filing jointly less our income of $30,000). But I don’t know how long this loophole will last. Our national debt should hit $30 trillion sometime next year. That’s scary as hell. Thanks for stopping by, my friend. Cheers.
  Reply
Tag
October 20, 2020
Depending upon how bad things get some kind of a wealth grab is 100% on the table.
The government needs to desperately reign in spending, we can’t continue on this path indefinitely.
Reply
1. Mr. Groovy
  October 21, 2020
  Agreed. It’s not going to be pretty.
  Reply
Josh
October 16, 2020
A couple of years ago when I switched careers and wasn’t making much (like $35,000 or $40,000 gross), we got money back. As we were self-employed, we didn’t pay anything in during the year and still got money back as we had two small children and qualified for the Earned Income Credit (EIC).
We don’t qualify for the EIC anymore as our income is higher. As you said, our effective federal tax rate is still low and we’re looking for ways to reduce our taxable income.
Owning rental property is work but lets you avoid the self-employment tax under the current tax code and you own a tangible asset in the process.
I hope the tax code doesn’t become more stringent but I don’t see how it can’t to plug the ever-growing annual deficit and the coming entitlement program insolvency crisis.
Needless to say, we live as frugal as possible and try to take care of our health as our safety net is essentially our liquid net worth.
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1. Mr. Groovy
  October 21, 2020
  “Needless to say, we live as frugal as possible and try to take care of our health as our safety net is essentially our liquid net worth.”
  Our philosophy as well. When the chickens of thirty trillion dollars in debt come home to roost, only those without debt and well-practiced in the art of frugality will manage well. I fear for most of my fellow countrymen.
  Reply
Shannon@RetiresGreat
October 16, 2020
This is an insightful perspective and I agree taxes need to increase. Having said that, politicians need to maintain fiscal responsibility! Let’s be candid, they’ve been spending like “drunken sailors” for years which has created this massive debt.
If you or I managed our personal finances like that, there would be major consequences. My argument is that increasing taxes would simply enable them to continue this behavior.
Reply
1. Mr. Groovy
  October 21, 2020
  “Let’s be candid, they’ve been spending like ‘drunken sailors’ for years which has created this massive debt…My argument is that increasing taxes would simply enable them to continue this behavior.”
  You’re very wise, my friend. Our politicians have been very poor stewards of our tax dollars, and a sane electorate would refuse to give them a bigger slice of its hard-earned money.
  Reply
Steveark
October 16, 2020
That’s a unique concept, and I’m not sure if I agree or not. I do think I paid more than my share of taxes. And I think everyone should pay some income tax, have some skin in the game. There aren’t enough high income people to tax to fix the budget. Even in retirement I’m paying considerable quarterly taxes due to hobby income.
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1. Mr. Groovy
  October 21, 2020
  Couldn’t agree more, Steveark. But our politicians tell us we have a taxation problem, not a spending problem. Why, everything will be solved once the millionaires and billionaires start paying their fair share. And most Americans fall for this bill of goods. Sigh.
  Reply
steve poling
October 16, 2020
If you aren’t paying enough taxes, please send the government YOUR money. I wish I had your tax bracket.
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1. Mr. Groovy
  October 16, 2020
  Haha! I hear what you’re saying, my friend. And believe me, I’m on your side. The taxpayers have done enough. It’s now time for the tax eaters and government lovers to take a hit. The only problem is that the tax eaters and government lovers far outnumber the freedom-loving taxpayers. The socialists won. They started weaponizing education and immigration in the 60s and the fruits of that strategy have now arrived. Americans want a big, swollen government teat to suckle on, and in the words of HL Mencken, Americans deserve to get what they want “good and hard.” Cheers.
  Reply
Pat
October 16, 2020
I think every adult earning a paycheck or other income in this country should have to pay something in federal taxes. Even if this was set at a low amount such as your $250 it would be better than today’s system where almost half don’t pay any federal income taxes. People need to take an ownership interest in their government and not just take from their government. Also, can we make tax rates higher for non-citizens and for any monies sent to another country? Non-citizens should pay a premium for the privilege of living in the U.S. and we should never reward people or companies who earn money here and send it outside the U.S. Invest in America!
Reply
1. Mr. Groovy
  October 16, 2020
  Amen, Pat! I love the cut of your jib.
  Reply

Are the Poor and Working-Class Human Shields for the FIRE Community?

Final Thoughts

Comments

14 responses to “Are the Poor and Working-Class Human Shields for the FIRE Community?”

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