From time to time I have guest bloggers on my blog. Here is one story about how the tax codes induce people not to produce. America is spending a lot of time talking about extension of the Bush tax cuts. Well, don’t forget about AMT. It was instituted in the 1970’s to get rich people. Here is a true story. No one here is greedy. Just trying to do the best that they can:
“Just got off a call from our accountant. My industry has had its ups and downs over the past couple of years. My pay has fluctuated.
My husband and I are “typical middle class Americans”. We both have master’s degrees and are relatively successful in our careers. We are both salaried employees and work long hours, averaging 55‐60 hr/wk in a good week. We have 2 kids, a dog, 2 cars and a white picket fence. We live within our means, save in our 401K, donate to our favorite charities and go on vacation once a year. Nothing exciting, nothing fancy, we are just a “living the American Dream”. To be clear, we are by no means, what Obama would refer to as “the rich”. Though, we would certainly like to be one day!
So back to the call from the accountant. Along with everyone else, 2009 was a very rough year and I took a substantial pay cut. But, what are you going to do? My choice was to lose my job or take a paycut. We live within our means, so we just tightened our belt a little bit, took a deep breath and moved on. This situation is not unique, many other Americans made the same choice.
This year, 2010, my industry appeared to be doing better. The company reinstated our salaries and, it looked like I may even get a bonus. Plus, I received a promotion. My base salary increased 33% from last year, including the reinstatement of our pay cuts. Sounds great, right? Well, the accountant called to inform us that we crossed some sort of threshold and due to AMT, the additional taxes we have to pay this year will take 40‐50% of the 33% increase! Additionally, if I get my bonus, we will cross another dreaded line and the percentage they take is even greater!
So, here I sit, at age 41, very seriously considering whether working is really worth it? I could continue to work and I would continue to get promoted. But, with each promotion, I work more hours and travel more. In my industry, as with most, the higher up you move on the corporate ladder, the more you work. The salary increases along way justify the loss in “family/personal time”.
The American Dream is to be successful. The old saying goes, “You can never be too rich or too thin”! But, with each extra dollar I earn, the government is going to take 50% (or more) of it. Is it really worth it? Come on, I’m never going to be a millionaire. For me, having more money means being able to go on a “flying” vacation as opposed to driving to Florida to visit my folks. It means going out to eat at someplace nicer than Chili’s once a week, buying slightly nicer clothes and maybe a new car every 5 years or so. We aren’t buying a second home in the Hampton’s.
Realistically, I could choose not to pay my mortgage and live in my house for at least a year (more if I can get creative about it). I live in a state where I can actually quit my job AND collect unemployment for 2 full years. Here is the math. If I collect unemployment and my husband stays employed, we can continue to live “fine”. We’ll be paycheck to paycheck and won’t have any disposable income but I would have oodles of time. I could volunteer at the kid’s school, scrapbook, exercise every day and watch Oprah.
When people like me seriously question whether or not to work, there is something very very wrong with our tax system.”
No doubt. There is something very seriously wrong with our tax system. Democrats don’t want to extend the tax cuts in a time of economic stress. They also have had two years to fix the Alternative Minimum Tax which is snaring more and more regular middle class people.
These taxes are devastating to someone trying to honestly build wealth and provide for their children. The mucky mucks in power don’t see it that way. “Spread the wealth around”, they say. “Shouldn’t you stop working once you’ve made enough?”, they ask.
Value judgements are being made by the mucky mucks in DC. Well how about this value judgement. Two people earned their masters degrees, are gainfully employed, haven’t defaulted on their house, and are questioning whether they want to work or not?!!
Luck didn’t get them there. Hard work did.
It’s really easy for bureaucrats and politicians. They are guaranteed a lifestyle.
Tip of the hat to Instapundit.com, welcome to his readers.
Welcome Charleston Tea Party Readers.
Thanks for the link Classical Values!
Greg Mankiw had an article laying this same situation out with real numbers, his own income, in the NY Times today(10/11/10).