Tax Day has arrived in the U.S. The closer it got, the greater the gloom you could feel descending over people. You see, many were struggling with the fact that they were going to have to write down and acknowledge how much they made last year, how much they took home … and how much they had to pay in taxes. No more room for denial.
We face lots of resistance when it comes to being honest with our money. Most of us prefer the woolly estimates we have in our heads based on the story we tell ourselves about our financial situation. But that’s a discussion for another day.
Today we’re going to celebrate the fact that we need to pay taxes at all. While we’re at it, let’s celebrate the fact that we have to pay a lot, if that’s the case … because the more we have to pay, the more we’ve earned. (I’m assuming you used every legal means to minimize what you paid; there’s nothing patriotic about paying more than required.)
What makes me such a contrarian? First of all, we live in a country that, despite its current contortions, is bountiful and ripe with opportunity compared with many others. (Granted, several countries today are nipping at our heels …) The underpinnings of such a place need to be paid for somehow. Hence, we pay taxes. But beyond that, think of the alternative:
If you did not have to pay anything to the tax man, it would mean you earned so little from all the various sources (earned income, interest, dividends, etc.) that—after deductions—you were virtually at zero. That is not a place anyone would choose to be.
Does More Money Mean More Happiness?
Here’s an interesting fact, though: if you earned that little, it would mean that with every additional dollar you earn, your happiness would increase. However, that doesn’t hold true for all income levels. How’s that? Well, a 2010 study by Kahneman and Deaton shows that until you reach a level of around $75,000 in annual household income, your happiness increases with your income because you are able to cover more and more of your basic needs.
Why does that only hold to $75,000? One theory is that once all our basic needs are met, somewhere in that $75,000 range, our spending patterns change. We don’t freeze our lifestyle costs and bask in the peace of mind that comes from having excess income.
Instead, we start escalating the cost of where we live by changing neighborhoods and “moving up.” We change how we dress and maybe where we buy our clothes. We change how we eat, straying from our cautious buying patterns and filling our grocery carts with “wants” rather than needs.
What happens after that? Here’s the slippery part: unless we have a very healthy relationship with our money, we will increase our expenditures to match or exceed our income.
Our secret purpose is to keep ourselves in a comfortable psychological place. If what is familiar is being under tremendous financial duress, we’ll keep ourselves there. If we don’t feel we deserve the joy of financial security, we’ll be sure we don’t have it.
My Tax Day Wish For You
So here’s what I wish for you. As Tax Day comes and goes, I wish for you that you’ve blown past that $75,000 threshold with the priceless clarity of what money means to you and what it does for you.
I wish that every extra dollar you had to pay the tax man reflected even more dollars set aside someplace safe. I wish you the drive and the discipline to save enough to ensure many, many years of the financial security and peace of mind you deserve!
Happy Tax Day!
Let me know in the Comments section below if you think I have a real Pollyanna outlook on how and why we pay taxes!
Bio: Sharon O’Day combines a long, successful career in international trade development, an MBA from the Wharton School and a lifetime of personal peaks and valleys to be an effective tell-it-like-it-is money mentor to women who are willing to do what it takes to be financially secure for the rest of their lives!