Interesting analysis on the Permanent Portfolio board. For a second, I forgot what website I was looking at:
http://gyroscopicinvesting.com/forum/in ... ;topicseen
Optimal salary for government handouts
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jennypenny
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I've seen discussions like this on websites for single and divorced moms. The pragmatic part of me feels like if you qualify for a program then there is no reason not to work the system. Deep down though, I think (for me) it depends on the program. I have no problem with people minimizing their tax burden as much as possible, but I feel differently about ERE types applying for food stamps. Maybe that's hypocritical?
I think my DH's head would explode if he read that thread. (I guess I'll know when I see FFJeff's opinion)
I think my DH's head would explode if he read that thread. (I guess I'll know when I see FFJeff's opinion)
Im a former head exploder. You know, the one who could not stand people who "gamed the system." These lines are really starting to get blurry to me. If you start to look at things from the one big pot perspective you may begin to ask yourself where the cheese line is. Dried Milk is not all that bad is it? ( I am taking a look at the forum during a break from turbo taxing. Are some of my business deductions etc etc any different from what is mentioned in Dcar's link?)
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Spartan_Warrior
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What's good for the goose is good for the gander. If "people" like Mitt Romney and General Electric can exploit the arcane and often nonsensical tax codes, why shouldn't we?
"Personally, I gain enjoyment from gaming systems and I would be more than happy to do seasonal work over Christmas holidays as a cashier for one month at minimum wage to earn $2k, knowing that I am getting every cent I can out of the system that I personally find to be very corrupt..."
I can't argue with that.
"Personally, I gain enjoyment from gaming systems and I would be more than happy to do seasonal work over Christmas holidays as a cashier for one month at minimum wage to earn $2k, knowing that I am getting every cent I can out of the system that I personally find to be very corrupt..."
I can't argue with that.
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dot_com_vet
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- Joined: Mon Jan 31, 2011 2:07 am
Everyone is always talking about the "tools" the rich have to get their tax rate really low. But nobody's really been able to explain it. Is there any more to this besides the fact that their income is primarily not "earned" income?
dot_com_vet: What effort? 10 min in turbotax? The "effort" is really being able to live on such a low income, which is pretty much what we talk about here at ERE.
dot_com_vet: What effort? 10 min in turbotax? The "effort" is really being able to live on such a low income, which is pretty much what we talk about here at ERE.
Dragoncar yes I think so. One example is by owning corporations and claiming much of your spending is business expense - which I believe you don't have to pay taxes on.
I just saw this summary earlier this evening in a Robert Kiyosaki book I'm reading:
The rich, with corporations:
1 - Earn
2 - Spend
3 - Pay taxes [only on the difference]
People who work for corporations:
1 - Earn
2 - Pay taxes
3 - Spend
I just saw this summary earlier this evening in a Robert Kiyosaki book I'm reading:
The rich, with corporations:
1 - Earn
2 - Spend
3 - Pay taxes [only on the difference]
People who work for corporations:
1 - Earn
2 - Pay taxes
3 - Spend
I think it's funny that you mention this. I was just about to create a new post on my tax planning success for 2011. I only read the original post from this forum, so I may be missing something later that you are referring to, but I fully support her tax planning. She is misguided on how some of these credits work, but there is definitely an "optimum" income, which differs depending on your family size. For a single person, it is somewhere around 10k. For a family with two kids, it is about 19k. There is nothing wrong with purposely earning this amount to reduce your tax burden. This is called tax planning and rich people do it regularly. Low income folks should too. It's only wrong if you are misrepresenting your income.
Programs such as welfare and food stamps have strict limits on your assets. (Typically less than 5k with some exclusions such as a low value car used for work). It is not possible for a retired person living off of assets to claim these government programs without grossly misrepresenting yourself.
This year I successfully reduced my taxable income to one of the sweet spots for a married couple with one child by contributing just the right amount (about 7.5k) to our HSA and 401k. By doing this we will be receiving a tax refund of about 2.5k more than we paid in. This increases our take home pay by about 8% for the year. If the government wants to support moderate income folks with children who save, that's great for me. If you don't like it, campaign for a change in the tax laws.
Scheming. Exploitation. Working the system. Gaming the system. Really? Is that what you think when a low income person plans ahead?
Programs such as welfare and food stamps have strict limits on your assets. (Typically less than 5k with some exclusions such as a low value car used for work). It is not possible for a retired person living off of assets to claim these government programs without grossly misrepresenting yourself.
This year I successfully reduced my taxable income to one of the sweet spots for a married couple with one child by contributing just the right amount (about 7.5k) to our HSA and 401k. By doing this we will be receiving a tax refund of about 2.5k more than we paid in. This increases our take home pay by about 8% for the year. If the government wants to support moderate income folks with children who save, that's great for me. If you don't like it, campaign for a change in the tax laws.
Scheming. Exploitation. Working the system. Gaming the system. Really? Is that what you think when a low income person plans ahead?
Some other potential benefits:
1.
Some states do not have asset tests for food stamps.
For example, in NY, a single with income below $14,160 can get up to 200 a month in food stamps and there is no asset test.
http://otda.ny.gov/programs/food-stamps/#eligibility
I also believe food stamps is just a debit card, so much of the stigma is removed.
2.
In addition, in 2014, I believe Medicaid eligibility is no longer allowed to have an asset test, only to be income based. Income for a single would be 15,300 to be eligible - there would then be no health care costs.
http://healthreform.kff.org/SubsidyCalculator.aspx
So in 2014, someone living in NY with an income below 14,160 would get food stamps + Medicaid irrespective of assets. If you own your residence instead of rent (and therefore need less income) and sell stocks to minimize gains you could probably spend considerably more (especially if you count the rental equivalent as spending) and qualify for benefits.
1.
Some states do not have asset tests for food stamps.
For example, in NY, a single with income below $14,160 can get up to 200 a month in food stamps and there is no asset test.
http://otda.ny.gov/programs/food-stamps/#eligibility
I also believe food stamps is just a debit card, so much of the stigma is removed.
2.
In addition, in 2014, I believe Medicaid eligibility is no longer allowed to have an asset test, only to be income based. Income for a single would be 15,300 to be eligible - there would then be no health care costs.
http://healthreform.kff.org/SubsidyCalculator.aspx
So in 2014, someone living in NY with an income below 14,160 would get food stamps + Medicaid irrespective of assets. If you own your residence instead of rent (and therefore need less income) and sell stocks to minimize gains you could probably spend considerably more (especially if you count the rental equivalent as spending) and qualify for benefits.
I'm pretty sure food stamps asset test ignores a biggie: primary home. If you buy a big home with your retirement assets, you could take a reverse mortgage and get food stamps/assistance (maybe... I haven't really researched)
As for corporations, I only think this is true if you cheat. You can't live in a house owned by your Corp, or get free meals, or drive a company car without reporting it as imputed income. At least that's how I understand it. That doesn't mean people don't do this.. Just that it isn't completely legal.
Then for any real distributions you take... You get double taxed.
As for corporations, I only think this is true if you cheat. You can't live in a house owned by your Corp, or get free meals, or drive a company car without reporting it as imputed income. At least that's how I understand it. That doesn't mean people don't do this.. Just that it isn't completely legal.
Then for any real distributions you take... You get double taxed.
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jennypenny
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- Joined: Sun Jul 03, 2011 2:20 pm
C40--it's the libertartarian in me that thinks it's ok for everyone to get their tax bill as close to $0 as possible. Fewer taxes = less government.
I'm just uncomfortable with relying on government programs. The ERE in me wants to be independent so structuring my welfare around government programs (that could evaporate) would make me nervous. I feel the same way about freeganism. I totally support the ideals behind it, but I would personally be uncomfortable relying on others for my food supply. I'd rather strive for self-sufficiency.
Edit: as I reread my post it sounds almost naive. If we're headed towards a bigger welfare state in the US maybe it's smart to grab all you can. I certainly don't judge others for it. It just doesn't seem sustainable to me (couldn't resist dragoncar).
I'm just uncomfortable with relying on government programs. The ERE in me wants to be independent so structuring my welfare around government programs (that could evaporate) would make me nervous. I feel the same way about freeganism. I totally support the ideals behind it, but I would personally be uncomfortable relying on others for my food supply. I'd rather strive for self-sufficiency.
Edit: as I reread my post it sounds almost naive. If we're headed towards a bigger welfare state in the US maybe it's smart to grab all you can. I certainly don't judge others for it. It just doesn't seem sustainable to me (couldn't resist dragoncar).
Jenny - Maybe I was a bit wrong -- I didn't read through the thread in detail so I wasn't sure if it was more about paying little tax (which Harry did himself and gave advice on) or about RECEIVING money that was taxed from others. The first post looked like the former, the thread title sounded like the latter, as did the last couple posts about getting food stamps.
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jennypenny
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Spartan_Warrior
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- Joined: Fri Dec 02, 2011 1:24 am
@FFJ: As long as you feel the same way about the wealthy and corporate parasites doing it as you feel about this would-be low-income parasite, fair enough. When the wealthy pay disproportionate amounts of their income compared to what they take from the infrastructure in order to make that income, they are "taking" from the system just as much as a low-income person is with a literal hand-out. Personally, my ethical code is rational egoism, and I believe that is the ethical code built into the laws and the system of capitalism itself: benefit yourself as much as possible and as much as legally permitted literally at someone else's expense. Given that tax-avoidance is legally permitted, if anyone is morally at fault, it is those who legally permit it and made it law in the first place.
This all gets back to what is a "fair share" of taxes? To the wealthy it is "the minimum amount you can legally pay". Why should anyone else be suckered into think or behave differently? If the minimum amount turns out to be a negative number and you're getting money back... so?
To me, this is a person who has learned a game-type system (taxation) well enough to perform at the maximum efficiency level possible within the rules. Hate the game, not the playa. Kant's golden rule for moral permissibility was to generalize an action across the population--what if everyone did this? In this case, the tax system would no longer be able to function and then and only then would there be incentive among lawmakers to correct it.
I see early retirement itself as a similar case of learning the rules and mechanics of a system (earned income/spending/investing) well enough to "game" it. What's my "fair share" of work? If I can retire in 10 years, why should I wait 40? I don't have an obligation to perform down to the level of the average populace, especially when anyone else could do exactly what I'm doing. Same thing with this.
That said, while I may not agree with the ethical issue, I certainly understand the pragmatic aspect and would personally never want to rely on government programs for survival. That's just as risky as relying on an employer.
Importantly, all this is really discussing (at least the original post from TripleB) is an ideal income range to qualify for certain credits and deductions, not any special trick or loophole or even literal hand-outs like foodstamps--I think the term "hand-outs" was poorly chosen.
This all gets back to what is a "fair share" of taxes? To the wealthy it is "the minimum amount you can legally pay". Why should anyone else be suckered into think or behave differently? If the minimum amount turns out to be a negative number and you're getting money back... so?
To me, this is a person who has learned a game-type system (taxation) well enough to perform at the maximum efficiency level possible within the rules. Hate the game, not the playa. Kant's golden rule for moral permissibility was to generalize an action across the population--what if everyone did this? In this case, the tax system would no longer be able to function and then and only then would there be incentive among lawmakers to correct it.
I see early retirement itself as a similar case of learning the rules and mechanics of a system (earned income/spending/investing) well enough to "game" it. What's my "fair share" of work? If I can retire in 10 years, why should I wait 40? I don't have an obligation to perform down to the level of the average populace, especially when anyone else could do exactly what I'm doing. Same thing with this.
That said, while I may not agree with the ethical issue, I certainly understand the pragmatic aspect and would personally never want to rely on government programs for survival. That's just as risky as relying on an employer.
Importantly, all this is really discussing (at least the original post from TripleB) is an ideal income range to qualify for certain credits and deductions, not any special trick or loophole or even literal hand-outs like foodstamps--I think the term "hand-outs" was poorly chosen.
as usual my eloquence fails....what I meant to say above is that I previously believed this (insert FFjeff's comments) but I am currently leaning this way (insert the Warriors prose)
thanks fellas
humor aside(not really)..... having a small business is a huge tax advantage. My business deductions are not even in the gray area but give me a similar leverage point that many "rich" people enjoy. Some judge that these deductions are tax avoidance. I have recently second guessed my self on such tactics! I am well within the law and the tax codes. Oodles of people could use such tactics but choose not to because of ignorance, fear, or laziness.
I have learned the rules of the system and am best adapting to it to fit my ERE needs. I was joking about the food handouts above but in reality that is only a couple of progressions away if you take morality or "fair share" out of the algorithm.
thanks fellas
humor aside(not really)..... having a small business is a huge tax advantage. My business deductions are not even in the gray area but give me a similar leverage point that many "rich" people enjoy. Some judge that these deductions are tax avoidance. I have recently second guessed my self on such tactics! I am well within the law and the tax codes. Oodles of people could use such tactics but choose not to because of ignorance, fear, or laziness.
I have learned the rules of the system and am best adapting to it to fit my ERE needs. I was joking about the food handouts above but in reality that is only a couple of progressions away if you take morality or "fair share" out of the algorithm.
I'm really shocked and confused by the comments on this topic. I don't understand how people who strive for efficiency in everything you do and want to work as little as possible suddenly think that people should not pay the lowest tax on their earnings. Why is this somehow immoral? Since I (personally) don't work (much) and don't pay tax, should I feel guilty about getting EIC and child tax credit? Do I need to start working full time so that I can pay my fair share? How is this different from this lady working part time so that she can take advantage of retirement account tax shelters? How is this different from you working and using retirement accounts and retiring early and no longer paying taxes?
FYI, EIC is limited to people who earn less than $3,150 in investment earnings (taxable, tax exempt, dividends and capital gain distributions). So if this person has significant investments outside a retirement account, they will not qualify. Also, the saver's credit is a non-refundable credit, so very few people get significant benefit. (Low income folks generally don't save or have much tax liability). The people who wrote these laws knew what they were doing. They wrote them to encourage specific behavior, such as low income people working instead of relying on welfare. Why is it wrong to oblige them? How is managing your finances to qualify for tax credits morally wrong?
FYI, EIC is limited to people who earn less than $3,150 in investment earnings (taxable, tax exempt, dividends and capital gain distributions). So if this person has significant investments outside a retirement account, they will not qualify. Also, the saver's credit is a non-refundable credit, so very few people get significant benefit. (Low income folks generally don't save or have much tax liability). The people who wrote these laws knew what they were doing. They wrote them to encourage specific behavior, such as low income people working instead of relying on welfare. Why is it wrong to oblige them? How is managing your finances to qualify for tax credits morally wrong?
I'm 10000% with Mirwen on this one.
I will not pay to put some senator up in some 5 star hotel, with a separate suite and first class flight for his mistress.
So go ahead, all you people that are against optimizing your taxes. Line government and wealthy people's pockets. The rest of us are laughing all the way to the back.
I will not pay to put some senator up in some 5 star hotel, with a separate suite and first class flight for his mistress.
So go ahead, all you people that are against optimizing your taxes. Line government and wealthy people's pockets. The rest of us are laughing all the way to the back.