8 ms·

I don't think anyone contests the fact that money increases happiness _up to a point_. Once you have full financial security though, it becomes quite nonlinear

I don't think anyone contests the fact that money increases happiness _up to a point_. Once you have full financial security though, it becomes quite nonlinear. Outside of bonkers areas, 1 million NW gets you retirement. 10 million NW gets you that plus... toys. It's a major reason why taxation should focus on the rich (as opposed to the 'well off' e.g. high incomes). They really will not notice it aside from ideological opposition.

amai 8y ago
That is why I opt for a wealth dependent income tax. If your wealth is already very high you basically won’t notice a higher tax on your income :https://politics.stackexchange.com/questions/9421/why-not-have-a-wealth-dependent-income-tax https://politics.stackexchange.com/questions/9421/why-not-ha...
ryanmccullagh 8y ago
Why has taxes only significantly affect low to middle income people/families?
- esotericn 8y ago
  If you are not financially independent then taxation (on income and consumption) directly reduces your ability to get to such a state. If you are financially independent then it reduces the number, or type of activities/goods you can partake in or buy. I offer without proof the claim that being free in the economic sense is a far greater determinant of happiness.
- mtgx 8y ago
  Because 30% tax off a $1,500 a month salary is a lot worse for your chances of survival/living a decent life vs if you had a salary/income of $15,000+ a month.
Kaveren 8y ago
Taxes already do focus on the wealthy with progressive taxes (in many countries), though. From an American perspective, the top federal income tax bracket is 37%. The top state income tax rate can be anywhere from 0% to 12.3% (California), so in total you can pay up to 49.3% of a potion of your income in taxes. In America, the top 1% paid 45.7% of total income tax in 2015 [1] (earning 17% of "expanded cash income"), so you're already talking about a rate over proportionally double. [1] https://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-federal-income-taxes.html https://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-fed...
- coldtea 8y ago
  >Taxes already do focus on the wealthy with progressive taxes (in many countries), though. The tax system provides tons of ways the wealthy can skip taxes, progressive or not.
  - nightski 8y ago
    This is why I truly believe in a consumption/sales tax instead of income tax (aka FairTax). You can build as much wealth as you'd like, but it doesn't do you any good until you spend it. At that point there is no avoiding the tax and it's much easier for the IRS to track. Even if a black market developed, at some point that money flows back into the economy and is taxed whereas today it does not (aka tax havens and many other schemes). It's also very logical to be taxed for what you take from society vs. what you give to society. But that's just a minor point.
    - coldtea 8y ago
      >This is why I truly believe in a consumption/sales tax instead of income tax (aka FairTax). You can build as much wealth as you'd like, but it doesn't do you any good until you spend it. At that point there is no avoiding the tax and it's much easier for the IRS to track. That would be even less fair. For a rich person, spending (even with luxuries in) is a small percentage of their income. For a poor person rent for a small apartment, plus food, plus basic clothing for the kids basic healthcare, etc eats most of their income (or all in most cases). Rich people also don't need to spend as much. For most of their fortune, they can accumulate and wait. For the rest, they can arrange all kinds of schemes (e.g. their car is leased by their company, not them personally, and so on) to appear not to spend themselves. Plus, a lot of what they do is buying influence, which you can do with political donations, "charity", and other such things, that are low or not taxed (and in some cases, are even tax deductible).
    - stanleydrew 8y ago
      The idea is nice, and I'm sure I'm not introducing anything you haven't already considered, but a flat consumption tax is in fact regressive. The simplest way to think about it I guess is that regardless of wealth, everybody needs a certain number of calories to live. If you are poor and can only afford subsistence, you are paying a much larger portion of your overall wealth just to stay alive. That may be ok with you, but for a lot of people it's not. Something like a wealth- or income-based tax credit would possibly correct this, although poor people are also less likely to know how to take advantage of such tax breaks.
lhnz 8y ago
Are you speaking from personal experience or is this just what you've heard elsewhere? I've still not reached the point where more money hasn't increased my happiness, however I'm definitely making far more than an above-average wage in London. I think a great number of people could be happier with more money assuming they have good ideas on how they can spend their money to improve their lives.
- esotericn 8y ago
  From personal experience. The step change for me was financial independence. It's not about income, but wealth. A basic example - the difference between a 50K a year job and a 200K a year job is enormous if you have no wealth. If you are FI, then other factors like the nature of the work, the hours, the location and so on are far more important. Because once you're there, it becomes clear that money has far less value than time - you only need enough of it to do the things you want to do (of course, if the things you want to do require a lot of money, that's a possible case...)
  - buboard 8y ago
    Money is a tool to buy time. More money makes that time more fun, but I agree, the best use of money is to buy time.
- vvanders 8y ago
  DHH hits this pretty well, I don't have the exact link off hand but the difference for him from tons of net worth was not nearly what he was expecting. Once your basic needs are met community + fufilling work are generally what has an outsized impact.
- coldtea 8y ago
  >I've still not reached the point where more money hasn't increased my happiness Depends on the persons age and maturity level too. At some point shiny new cars and other trinkets are not really what makes you happy... Besides, if you're making a wage (whether way above average or not) you might not still be quite that independent that more money makes no difference (or draw your happiness from competing in the race)...
hnmonkey 8y ago
What's your definition of 'bonkers areas?' Can you show how 1 million net worth gets someone retirement? It seems to me that if you're retiring on 1 million dollars you're going to run out of money pretty easily unless you're living off rice and beans. And in many places with just $40k a year (assuming a 4% withdrawal of the 1 million) you might not be able to even cover your mortgage/rent/property taxes/bills not even factoring in food/healthcare/entertainment. These days people who retire can potentially live another 20 years or so and 1 million in the bank won't cover it at all.
- esotericn 8y ago
  1 million is obviously intended to convey an order of magnitude, but I'll bite, because it works anyway, I live something like it. I'll use GBP to begin with and convert back to USD at the end, because I'm in the UK. 10K GBP a year is more than I currently spend on life. This excludes rent. I'll get to that. 300K at a 3.33% withdrawal gets you that. Another 300K to buy a home outright. Sod the mortgage, you have 1M net worth, do that if you think you can beat HPI with investments. This is doable in most of the UK. In many areas you'd get something really rather nice for that. That's 600K GBP or 768K USD, in total. That actually gets you a better standard of living than my current one, forever (I don't own a home). A bit left over. So we'll spend another 5 grand a year 'cos we can. 166K GBP required at 3.33% withdrawal, 766K in total. Still not 1M USD. In London (I live here) you'd probably want 750K for the house (you can do cheaper but if you have this money to begin with you probably wouldn't). That would bring it to very roughly 1.5-2M total. I think it's fair to consider London a "bonkers area". When I say retirement I mean early retirement, sorry, I'm lazy. It's kind of odd to me to explain this over and over because it seems like most people just don't do the math. If you have annual minimum wage x 25 in the bank then you are in a position to work fairly infrequently. If you have annual minimum wage x 50 you can probably sustain a basic existence indefinitely. Above that you're looking at More Toys.
  - hnmonkey 8y ago
    I would have to argue that your situation is a complete outlier and extremely unusual, especially in London which is one of the most expensive places on earth. You're also saying that you've excluded rent to get to your 10K a year number in London but that's a huge part of what you pay I'd imagine so why would you exclude that? Do you not need to pay taxes on anything, including on the house you've purchased? Do you not need to pay for utilities? What if you are talking about a couple? What if you're talking about a family with kids? Do you not have a cell phone or internet service? I think you have to explain this over and over because your numbers don't make sense for an actual person and maybe only make sense in a very unusual situation (yours). Blaming it on people not doing the math is pretty hand-wavy. And, more than likely I would say if these numbers do work for anyone they're probably on the youngish side and haven't built up a large amount of things they have to pay for yet. Let's say you're in the US in an average-ish city and not even one of the most expensive ones. And, let's give you the benefit of the doubt that you've paid off your $300k house. Congrats, you now have to pay homeowners insurance at let's say $600 (on the cheap side) a year. You have to pay taxes on your house as well at let's say $8,000 a year. You've retired early so you don't get medicare or medicaid yet so you need health insurance at let's say on the cheap side $400 a month for $4800 a year. You need food too but let's say you don't eat a ton and only spend $50 a week (That's $7 a day which would be impressive). That's another $2600 a year. I imagine you like having electricity in your house and running water. Probably another $200 a month for that and $30 for gas. That's another $2760 a year. Let's say you've got a cheap phone and cheap internet and combined that's only $100 a month. That's another $1200 a year. This doesn't factor in any form of entertainment/leisure, gas for your car, car insurance, car maintenance, home maintenance, or anything frivolous and I've certainly forgotten many things. Grand total of $19,960 a year assuming you've paid off the house, which most people haven't if they haven't gotten close to retirement age. And that's just for 1 person. If you're talking a couple then the number grows a lot. If you have kids you support then the number grows massively. And if you've invested your 1 million and get interest on that you're paying tax on that as well, which would cut into your savings. I'm not saying it's not possible of course, but your claim that 1 million net worth gets you retirement is not really super credible for most people. And at the end you say that if you have annual minimum wage x 25 in the bank you can work fairly infrequently but your original argument was that you could retire. Retiring means you don't have to work for the rest of your life, not that you have a nice buffer and cushion.

amai 8y ago

That is why I opt for a wealth dependent income tax. If your wealth is already very high you basically won’t notice a higher tax on your income :https://politics.stackexchange.com/questions/9421/why-not-have-a-wealth-dependent-income-tax https://politics.stackexchange.com/questions/9421/why-not-ha...

ryanmccullagh 8y ago

Why has taxes only significantly affect low to middle income people/families?

esotericn 8y ago
If you are not financially independent then taxation (on income and consumption) directly reduces your ability to get to such a state. If you are financially independent then it reduces the number, or type of activities/goods you can partake in or buy. I offer without proof the claim that being free in the economic sense is a far greater determinant of happiness.
mtgx 8y ago
Because 30% tax off a $1,500 a month salary is a lot worse for your chances of survival/living a decent life vs if you had a salary/income of $15,000+ a month.

Kaveren 8y ago

Taxes already do focus on the wealthy with progressive taxes (in many countries), though. From an American perspective, the top federal income tax bracket is 37%. The top state income tax rate can be anywhere from 0% to 12.3% (California), so in total you can pay up to 49.3% of a potion of your income in taxes. In America, the top 1% paid 45.7% of total income tax in 2015 [1] (earning 17% of "expanded cash income"), so you're already talking about a rate over proportionally double. [1] https://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-federal-income-taxes.html https://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-fed...

coldtea 8y ago
>Taxes already do focus on the wealthy with progressive taxes (in many countries), though. The tax system provides tons of ways the wealthy can skip taxes, progressive or not.
- nightski 8y ago
  This is why I truly believe in a consumption/sales tax instead of income tax (aka FairTax). You can build as much wealth as you'd like, but it doesn't do you any good until you spend it. At that point there is no avoiding the tax and it's much easier for the IRS to track. Even if a black market developed, at some point that money flows back into the economy and is taxed whereas today it does not (aka tax havens and many other schemes). It's also very logical to be taxed for what you take from society vs. what you give to society. But that's just a minor point.
  - coldtea 8y ago
    >This is why I truly believe in a consumption/sales tax instead of income tax (aka FairTax). You can build as much wealth as you'd like, but it doesn't do you any good until you spend it. At that point there is no avoiding the tax and it's much easier for the IRS to track. That would be even less fair. For a rich person, spending (even with luxuries in) is a small percentage of their income. For a poor person rent for a small apartment, plus food, plus basic clothing for the kids basic healthcare, etc eats most of their income (or all in most cases). Rich people also don't need to spend as much. For most of their fortune, they can accumulate and wait. For the rest, they can arrange all kinds of schemes (e.g. their car is leased by their company, not them personally, and so on) to appear not to spend themselves. Plus, a lot of what they do is buying influence, which you can do with political donations, "charity", and other such things, that are low or not taxed (and in some cases, are even tax deductible).
  - stanleydrew 8y ago
    The idea is nice, and I'm sure I'm not introducing anything you haven't already considered, but a flat consumption tax is in fact regressive. The simplest way to think about it I guess is that regardless of wealth, everybody needs a certain number of calories to live. If you are poor and can only afford subsistence, you are paying a much larger portion of your overall wealth just to stay alive. That may be ok with you, but for a lot of people it's not. Something like a wealth- or income-based tax credit would possibly correct this, although poor people are also less likely to know how to take advantage of such tax breaks.

lhnz 8y ago

Are you speaking from personal experience or is this just what you've heard elsewhere? I've still not reached the point where more money hasn't increased my happiness, however I'm definitely making far more than an above-average wage in London. I think a great number of people could be happier with more money assuming they have good ideas on how they can spend their money to improve their lives.

esotericn 8y ago
From personal experience. The step change for me was financial independence. It's not about income, but wealth. A basic example - the difference between a 50K a year job and a 200K a year job is enormous if you have no wealth. If you are FI, then other factors like the nature of the work, the hours, the location and so on are far more important. Because once you're there, it becomes clear that money has far less value than time - you only need enough of it to do the things you want to do (of course, if the things you want to do require a lot of money, that's a possible case...)
- buboard 8y ago
  Money is a tool to buy time. More money makes that time more fun, but I agree, the best use of money is to buy time.
vvanders 8y ago
DHH hits this pretty well, I don't have the exact link off hand but the difference for him from tons of net worth was not nearly what he was expecting. Once your basic needs are met community + fufilling work are generally what has an outsized impact.
coldtea 8y ago
>I've still not reached the point where more money hasn't increased my happiness Depends on the persons age and maturity level too. At some point shiny new cars and other trinkets are not really what makes you happy... Besides, if you're making a wage (whether way above average or not) you might not still be quite that independent that more money makes no difference (or draw your happiness from competing in the race)...

hnmonkey 8y ago

What's your definition of 'bonkers areas?' Can you show how 1 million net worth gets someone retirement? It seems to me that if you're retiring on 1 million dollars you're going to run out of money pretty easily unless you're living off rice and beans. And in many places with just $40k a year (assuming a 4% withdrawal of the 1 million) you might not be able to even cover your mortgage/rent/property taxes/bills not even factoring in food/healthcare/entertainment. These days people who retire can potentially live another 20 years or so and 1 million in the bank won't cover it at all.

esotericn 8y ago
1 million is obviously intended to convey an order of magnitude, but I'll bite, because it works anyway, I live something like it. I'll use GBP to begin with and convert back to USD at the end, because I'm in the UK. 10K GBP a year is more than I currently spend on life. This excludes rent. I'll get to that. 300K at a 3.33% withdrawal gets you that. Another 300K to buy a home outright. Sod the mortgage, you have 1M net worth, do that if you think you can beat HPI with investments. This is doable in most of the UK. In many areas you'd get something really rather nice for that. That's 600K GBP or 768K USD, in total. That actually gets you a better standard of living than my current one, forever (I don't own a home). A bit left over. So we'll spend another 5 grand a year 'cos we can. 166K GBP required at 3.33% withdrawal, 766K in total. Still not 1M USD. In London (I live here) you'd probably want 750K for the house (you can do cheaper but if you have this money to begin with you probably wouldn't). That would bring it to very roughly 1.5-2M total. I think it's fair to consider London a "bonkers area". When I say retirement I mean early retirement, sorry, I'm lazy. It's kind of odd to me to explain this over and over because it seems like most people just don't do the math. If you have annual minimum wage x 25 in the bank then you are in a position to work fairly infrequently. If you have annual minimum wage x 50 you can probably sustain a basic existence indefinitely. Above that you're looking at More Toys.
- hnmonkey 8y ago
  I would have to argue that your situation is a complete outlier and extremely unusual, especially in London which is one of the most expensive places on earth. You're also saying that you've excluded rent to get to your 10K a year number in London but that's a huge part of what you pay I'd imagine so why would you exclude that? Do you not need to pay taxes on anything, including on the house you've purchased? Do you not need to pay for utilities? What if you are talking about a couple? What if you're talking about a family with kids? Do you not have a cell phone or internet service? I think you have to explain this over and over because your numbers don't make sense for an actual person and maybe only make sense in a very unusual situation (yours). Blaming it on people not doing the math is pretty hand-wavy. And, more than likely I would say if these numbers do work for anyone they're probably on the youngish side and haven't built up a large amount of things they have to pay for yet. Let's say you're in the US in an average-ish city and not even one of the most expensive ones. And, let's give you the benefit of the doubt that you've paid off your $300k house. Congrats, you now have to pay homeowners insurance at let's say $600 (on the cheap side) a year. You have to pay taxes on your house as well at let's say $8,000 a year. You've retired early so you don't get medicare or medicaid yet so you need health insurance at let's say on the cheap side $400 a month for $4800 a year. You need food too but let's say you don't eat a ton and only spend $50 a week (That's $7 a day which would be impressive). That's another $2600 a year. I imagine you like having electricity in your house and running water. Probably another $200 a month for that and $30 for gas. That's another $2760 a year. Let's say you've got a cheap phone and cheap internet and combined that's only $100 a month. That's another $1200 a year. This doesn't factor in any form of entertainment/leisure, gas for your car, car insurance, car maintenance, home maintenance, or anything frivolous and I've certainly forgotten many things. Grand total of $19,960 a year assuming you've paid off the house, which most people haven't if they haven't gotten close to retirement age. And that's just for 1 person. If you're talking a couple then the number grows a lot. If you have kids you support then the number grows massively. And if you've invested your 1 million and get interest on that you're paying tax on that as well, which would cut into your savings. I'm not saying it's not possible of course, but your claim that 1 million net worth gets you retirement is not really super credible for most people. And at the end you say that if you have annual minimum wage x 25 in the bank you can work fairly infrequently but your original argument was that you could retire. Retiring means you don't have to work for the rest of your life, not that you have a nice buffer and cushion.