There Are Only So Many Pieces of the Pie

I’m sure we all hate paying taxes, but to me, income taxes bother me the most.

With property taxes, you can choose to live somewhere more modest to lower your tax burden. With sales taxes, you can choose to buy a cheaper option, or not to make a purchase at all.

While it may not sound exciting to live in a smaller place or not buy something, with an income tax the only way of lowering what you pay in taxes is to make less money, and to me, that seems worse.

Let’s look at our income as a pie divided into 100 pieces (or 100%). Right off the top, more than 6 pieces of pie goes to Social Security. More slices go to pay your state and federal income tax. You may also have a city or school district income tax taking some slices of the pie.

Those pieces of the pie are gone and you can’t get them back. So when a new income tax appears on the ballot or is proposed, even as small is at may seem, I look at it as a slice of pie that can’t be used to feed something else like retirement, college savings, or replacing a vehicle.

The bad thing is that even if the pie gets bigger (like you make more money), the number of slices doesn’t increase. You can’t get a slice back after it’s gone.

So, if you go out and make more money you’ll never get a full pie back. No matter how hard you try, all you’ll be able to do it increase the size of the pie that you’ve got left. As more pieces of the pie are taken away, the increase in the remaining pieces seems like less and less.

This is just my interpretation of income taxes and one way of viewing them. How do you view them? What comes to mind when a new income tax is proposed?

Photo by 401(K) 2013