Where do you draw the line on morality regarding government programs & taxes?

[DadJokes]

The topic came up on Reddit, and I'm curious as to what folks in the MMM community view as moral. I'll preface by saying that legal and moral are two different things. Just because something is legal does not make it moral (same for illegal/immoral).

1. Do you consider it moral/immoral to keep income low enough to get ACA subsidies while you have a significant amount accessible in retirement accounts? What about FAFSA? Food stamps? Free student lunches?

2. At what income would you consider it immoral to legally pay nothing in taxes? Or would you always consider it moral?

What criteria would you use to draw the line on these items?

I'm not trying to make a political post, but rather one discussing how early retirees wrestle with whether or not to use programs that may not have been intended for those in our unique situation.

[meadow lark]

1- Depends on your politics.  I vote for social programs and I would have no problem using any social programs I legitimately qualify for.  (A lot of them means test and would be hard to qualify for.). When people vote against social programs and yet still use them, or are against programs to help the poor and vulnerable but fight for their own entitlements - I think that is bizarre.  And gross.

2- At the level where you are campaigning or spending money to lobby politicians to reduce your taxes.    The immorality comes in when you are working to uphold or change the rules in your favor at the expense of others.  If you can buy a politician, pay some damn taxes.

[Jenny Wren]

To the first -- if taking advantage of a social program will prevent someone with actual need from benefiting from the program, then it is immoral to use it if you have other means to cover the expense. If there is no limit on the funding for the program (such as the ACA) then have at it!

As for the second -- trickier. I suppose if one has an income above their state or region's poverty line, then it's immoral to try and finagle one's way out of taxes via legal loopholes. Generally, those that can afford the creative accountants to legally get out of paying their fair share of taxes in a substantial way are WELL above the poverty line and are definitely behaving immorally in my opinion.

[Mr. Green]

For the ACA and tax issues, I expect most folks have moved on to reason by way of comparison, since morality is already lost. Everyone knows that healthcare in the US shouldn't cost what it does. Most probably believe everyone should have it as well. Everyone also knows the tax system is broken. Wealth shouldnt come with larger tax shelters and  smaller tax bills than lower classes of citizenry. Yet our government allows these issues to persist, demonstrating that the notion of right and wrong doesnt currently matter for those things. Once that is lost, people resort to comparison. If billionaires are allowed to take advantage of the laws as they are, why shouldn't I? It's a natural fall back when the moral lines have become blurry to the point that they can no longer be discerned. What is the next guy doing? Am I better or worse than them? And so it goes.

[afox]

Huh, legal = moral.

WWTD (What Would Trump Do)

[vand]

Is there a difference between taxation and printing money in terms of funding these government programs?

Governments have been much more clever about how they fund themselves in recent times. Taxation is easy for people to see and relate to. Monetary expansion is more insidious and the effects can be delayed and obfuscated.

[Fishindude]

1. Do you consider it moral/immoral to keep income low enough to get ACA subsidies while you have a significant amount accessible in retirement accounts? What about FAFSA? Food stamps? Free student lunches?
I would consider all of the above immoral.

2. At what income would you consider it immoral to legally pay nothing in taxes? Or would you always consider it moral?
If you make ANY income, you should pay SOME tax on that income.   We all use and need the big picture things that taxes pay for; utilities, roads and infrastructure, military, social security, Medicare, etc.

All this recent "free Covid money" has further degraded the morals of Americans regarding these issues, making the expectations of free stuff greater than ever.

[MudPuppy]

1) no, I don’t believe it would be

2) I don’t equate legality with morality, and I believe in eating taxing the rich in a way that our current tax code does not

[DadJokes]

To the first -- if taking advantage of a social program will prevent someone with actual need from benefiting from the program, then it is immoral to use it if you have other means to cover the expense. If there is no limit on the funding for the program (such as the ACA) then have at it!

What if there is a less obvious limit? By taking subsidies, we are feeding into the national debt, which potentially reduces benefits of all kinds to future generations.

I'm certainly not judging. I plan to take advantage of several of these things, including ACA subsidies, while also paying well under my "fair share" of taxes.

[maizefolk]

1) I don't have a moral problem with people taking benefits they are legally entitled to*, but I also wouldn't have a moral problem with reforming the law to remove the eligibility of groups (like us FIREees) who don't need those benefits.

2) Even at my own level of income, I think I could definitely be paying more in taxes. I would support an effort to raise income tax on me and people like me. But I don't feel a personal moral obligation to write out an extra donation to the treasury above and beyond my tax obligation until the tax code changes. I hold the super-rich to the same standard. I see nothing ethically wrong with them individually following the published tax code and not donating to the treasury above and beyond what the tax code calls for. But if they're trying to get new loopholes in the tax code or trying to prevent the current ones from being closed so that they can continue to pay so little, I have an ethical problem with that.

*One exception is programs with fixed budgets or resources where you taking the benefit means someone else who is entitled to it cannot. For example if someone who was financially independent found a legal way to qualify for section 8 housing I would still have a moral problem with that, as them taking the benefit means one other person or family who likely has a much greater need of the benefit DOESN'T get it. Similarly, although it's not a government program, showing up and a food bank is taking food that would otherwise go to someone who needs it a lot more. Also morally wrong. (Reading through the thread after writing this but before posting, it sounds like Botany Bae has the same ethical line in the sand.)

[DadJokes]

For the ACA and tax issues, I expect most folks have moved on to reason by way of comparison, since morality is already lost. Everyone knows that healthcare in the US shouldn't cost what it does. Most probably believe everyone should have it as well. Everyone also knows the tax system is broken. Wealth shouldnt come with larger tax shelters and  smaller tax bills than lower classes of citizenry. Yet our government allows these issues to persist, demonstrating that the notion of right and wrong doesnt currently matter for those things. Once that is lost, people resort to comparison. If billionaires are allowed to take advantage of the laws as they are, why shouldn't I? It's a natural fall back when the moral lines have become blurry to the point that they can no longer be discerned. What is the next guy doing? Am I better or worse than them? And so it goes.

In that case, do we judge morality by the median? If my household makes $100k but pays little to nothing in income taxes (thanks in large part to retirement contributions), is that moral as long as more than half of the population is doing more tax avoidance than me?

Or is the dividing line individuals worth >$1 billion? Or some other number?

Is it moral to take advantage of legal loopholes as long as you vote for better income/wealth equality?

[maizefolk]

Is it moral to take advantage of legal loopholes as long as you vote for better income/wealth equality?

Where and how do you ethically draw the line between what constitutes obeying the law and what constitutes taking advantage of a legal loophole?

[Michael in ABQ]

My family pays little or no federal income tax as we have a lot of children. All those tax credits add up, especially now that it's gone from $1,000 per child to $2,000 and now to $3,000/$3,600. We've qualified for the Earned Income Tax Credit in the past when I made far less, and even last year when I made $100k+ (most tax free from serving overseas in a combat zone).

I don't feel any moral compunction to pay more in taxes. The government has decided that it wants to encourage people to have children and it's putting it's money where it's mouth is. It's also decided that serving in the military in certain areas exempts you from income taxes. I'll pay my tax burden and use whatever legal means are available to reduce it.


I do draw a line at trying to get additional programs that are meant for those truly struggling such as housing vouchers, food stamps, WIC, etc. Over the years of going shopping with multiple young kids in tow and a cart (mostly two carts these days) with hundreds of dollars of groceries my wife would commonly get asked by the cashier if we were on WIC. Some of those programs do have budgets and you could literally be taking from someone who needs it more. Claiming a tax credit or deduction doesn't have the same effect.

[GodlessCommie]

I, for one, see no problem in using ACA subsidies. If and when I'm in position to do so, I plan to take advantage of them.

I will not enroll in Medicaid or use Food Stamps, even if eligible. It feels wrong. I'm not claiming that it is an objectively correct, or even logical and consistent position; and don't think ill of those who use these programs.

[Jenny Wren]

To the first -- if taking advantage of a social program will prevent someone with actual need from benefiting from the program, then it is immoral to use it if you have other means to cover the expense. If there is no limit on the funding for the program (such as the ACA) then have at it!

What if there is a less obvious limit? By taking subsidies, we are feeding into the national debt, which potentially reduces benefits of all kinds to future generations.

I'm certainly not judging. I plan to take advantage of several of these things, including ACA subsidies, while also paying well under my "fair share" of taxes.

Hmm, I would argue if we taxed appropriately (as touched upon in number 2), along with cutting corporate subsidies and government pork programs that only feed corporations, then the issue solves itself.

[Greystache]

I will confess that I had some misgivings about accepting ACA subsidies as a high net worth household. We could certainly afford to pay more, but they decided to base subsidies on income, not net worth, so that is environment in which we operate. We don't do any financial gymnastics to lower our AGI, we just don't require much income to live a happy, healthy life.  We did use a high deductable plan with an HSA and our contributions to the HSA are deducted from our AGI.
I guess I am hard wired to maximize the efficiency of any system in which I work. I was an engineer in my working life and that is just what we do.

[2Birds1Stone]

As someone who has paid a shit ton of taxes over the past 20 years......I have no qualms using things like ACA, PFL, EITC, Roth ladder, etc to minimize taxes and expenses in retirement.

Moral? What the fuck is moral? How long is a piece of string? This is just going to turn into one giant argument like any political/polarized thread.

Us vs. them......woohoooo

[American GenX]

This is the same shit that has been beat to death in countless previous threads.

1. Do you consider it moral/immoral to keep income low enough to get ACA subsidies while you have a significant amount accessible in retirement accounts? What about FAFSA? Food stamps? Free student lunches?

The alternative seems to be that someone would intentionally increase their income enough just so that they don't get any ACA subsidies.  Neither is going to happen by accident.  It doesn't make sense to make a point of increasing your taxes.  How many people do that?

When looking at household incomes, as a single person with no kids, I feel unfairly taxed as it is.  I can't imagine feeling that I was immoral not to make a point in the future of paying even higher taxes than I normally would!  And my high tax dollars are going to fund retired government workers' generous healthcare benefits and pensions paid for at taxpayer expense, so no, I wouldn't consider it even the slightest bit immoral to use the ACA if I was legally entitled to in the future.  It still wouldn't be as good of a deal as those retired government workers are getting.

2. At what income would you consider it immoral to legally pay nothing in taxes? Or would you always consider it moral?

I think it should be based on household income, not whether you're married or have kids.  I'm paying many times more taxes than a married couple with two kids pays with the same household income.  Once that is squared away, I would say the tax brackets currently in place for single people should apply to households - no special breaks for anyone, no child tax credits.

[Alf91]

Can you link or pm me where this is on reddit? I'd like to read the responses there too.

[ixtap]

1- Depends on your politics.  I vote for social programs and I would have no problem using any social programs I legitimately qualify for.  (A lot of them means test and would be hard to qualify for.). When people vote against social programs and yet still use them, or are against programs to help the poor and vulnerable but fight for their own entitlements - I think that is bizarre.  And gross.

I have in laws like this. One in particular who, in addition to voting will rant about how these programs ruin people and take away all their motivations, and on another day say how no one ever gave them anything. But the family gets food stamps, the kids are on CHIP, in addition to a decade of significant Economic Outpatient Care from our mutual in laws.


The ACA is a very weird example. It is a uniquely American problem because this is what we compromised with rather than an actual solution. Our current plan means that we will be creating income (ie Roth conversions) to qualify for ACA, rather than falling into Medicaid. Since the doctors who take Medicaid are limited, even beyond money you are taking space in the program away from someone else who probably doesn't have options.

[DadJokes]

Can you link or pm me where this is on reddit? I'd like to read the responses there too.

https://www.reddit.com/r/financialindependence/comments/pcox1l/is_it_morally_wrong_to_take_advantage_of/

[DadJokes]

Is it moral to take advantage of legal loopholes as long as you vote for better income/wealth equality?

Where and how do you ethically draw the line between what constitutes obeying the law and what constitutes taking advantage of a legal loophole?

I think it requires trying to determine the intent of a law, which is up to interpretation. Do we think that a particular program was intended for low income individuals?

With regard to tax loopholes (I prefer avoidance in this case), I think it goes a little beyond intent. For example, pre-tax contributions may be there to encourage saving, but possibly not to the extent that a household making six figures is paying less into the system than it is getting out of that system.

Maybe the question I'm asking is at what point is it no longer acceptable to be a net taker from the government?

[YttriumNitrate]

So this year my kid is getting free school lunches (and breakfast) and I have no problem accepting that. If I qualified* for food stamps, I would use them, but I draw the line at using food banks even if they do receive some government funding.

***Indiana is one of the handful of states that still has asset limits for SNAP eligibility.

[clarkfan1979]

So this year my kid is getting free school lunches (and breakfast) and I have no problem accepting that. If I qualified* for food stamps, I would use them, but I draw the line at using food banks even if they do receive some government funding.

***Indiana is one of the handful of states that still has asset limits for SNAP eligibility.

I know someone who sells weed for a living and also collects food stamps. I don't think he is against paying the taxes. He is afraid to claim the income. Because he doesn't claim any income he qualifies for food stamps.

I am not morally against selling the weed. However, he should be paying taxes on his income and he should not be collecting food stamps.

[Wolfpack Mustachian]

The topic came up on Reddit, and I'm curious as to what folks in the MMM community view as moral. I'll preface by saying that legal and moral are two different things. Just because something is legal does not make it moral (same for illegal/immoral).

1. Do you consider it moral/immoral to keep income low enough to get ACA subsidies while you have a significant amount accessible in retirement accounts? What about FAFSA? Food stamps? Free student lunches?

2. At what income would you consider it immoral to legally pay nothing in taxes? Or would you always consider it moral?

What criteria would you use to draw the line on these items?

I'm not trying to make a political post, but rather one discussing how early retirees wrestle with whether or not to use programs that may not have been intended for those in our unique situation.

Great questions.

I only have thoughts on number two for now. I think for your number two question, wouldn't the morality of paying less than you "should" - whatever that morally is, be just as bad as hitting the 0 taxes number at some income that's too high for it? I personally don't know of an easy way to answer either one, though. If you have a low enough income that you're paying 0 taxes, you're definitely getting more from the government than you're putting in. This would be true if it was 20k, 40k, 60k, etc. If it's immoral to pull more out at some point than you put in, how would we define that point - a perfect balance of getting out what you put in in taxes? It also wouldn't just be at the net 0 tax situation. I have a feeling that I have paid more in taxes than I have been given direct financial benefits - at least direct services as opposed to the general benefits of a functioning society which is hard to quantify, but I definitely can't say for sure that I have.

Overall, I view government contributions - at a certain point - as a charity. When I'm giving money to charities, I evaluate them as to how efficient they are, how I like their mission, etc. When it comes to the government, I find it very inefficient. I don't like a lot of the ways it spends its money. Therefore, I feel I am under absolutely zero moral obligation to give them anything. I, of course, pay my taxes, but I feel zero moral qualms with taking as many tax breaks as I legally can. I realize that this is a totally philosophical standpoint and not practical - because, again, we need the government to govern society. However, if I'm going to voluntarily give more money than the government legally mandates I give or not take advantage of any tax incentive I can, then I am treating them like a charity - it becomes my choice to give more, and as a charity, they fail hard in my eyes. Therefore, I will look to donate money to charities that I believe in and not a charity that I would categorize as poorly performing at best.

[Jenny Wren]

If you have a low enough income that you're paying 0 taxes, you're definitely getting more from the government than you're putting in. This would be true if it was 20k, 40k, 60k, etc. If it's immoral to pull more out at some point than you put in, how would we define that point - a perfect balance of getting out what you put in in taxes?

I don't like this black and white way of looking at it as it by default defines a person's value by the dollar sign next to their name. So, so many people put more good into the world than they will ever get back, but what they put in isn't measured in dollars. I've been privileged to know many an idealistic person that practiced what they preached when it came to dedicating their life to helping others or the world at large, but it wouldn't have been possible for them to do all the good they have done if they hadn't been able to take advantage of some healthcare or food programs. Dictating that one can only take out what they put in seems crass somehow. We are a communal species at heart, regardless of what modern day individualism tries to convince us to otherwise. Some have more than they will ever need, others will never have enough. Some will take advantage, others will answer a higher calling. We must allow for some of the former if we want to encourage the absolute necessity of having the latter in the world.

[lhamo]

The ACA is a very weird example. It is a uniquely American problem because this is what we compromised with rather than an actual solution. Our current plan means that we will be creating income (ie Roth conversions) to qualify for ACA, rather than falling into Medicaid. Since the doctors who take Medicaid are limited, even beyond money you are taking space in the program away from someone else who probably doesn't have options.

This may vary greatly depending on region.

Here in the greater Seattle area, all the major hospital and clinic networks take Apple Health (our version of Medicaid).  Including highly ranked specialist clinics.  The wait for appointments is the same regardless of what your insurance coverage happens to be.

If you are relatively healthy and a low-level consumer of healthcare resources you probably will end up costing less in taxpayer dollars if you take advantage of expanded Medicaid eligibility than you would if you were taking ACA subsidies. 

https://www.modernhealthcare.com/article/20180808/NEWS/180809915/aca-subsidies-cost-more-per-person-than-medicaid-is-that-sustainable

[MoseyingAlong]

......
2. At what income would you consider it immoral to legally pay nothing in taxes? Or would you always consider it moral?
....

This topic is interesting and thought-provoking.
One area that I wish more people would explicitly include is that there is more to taxation than regular income taxes. I doubt that any independently living adult in the US pays nothing in taxes.
For income-based taxes, there are Social Security and Medicare taxes even if in a low tax bracket.
For consumption-based taxes, there are gas, property, phone and utility as well as sales taxes.

This is also a pet peeve with all those article about X, Y and Z companies pay no taxes despite huge number of profit/income. I bet most would be shocked by how much tax is actually paid by those companies even if you only consider the employer half of social security and medicare taxes. Hint, it's not zero.

[terran]

I have no line. If it's legal and it works best for me then I'll do it. If enough people think it shouldn't work that way then they can convince the lawmakers to change the laws.

Edit: Although, reading through the responses, I didn't think of things like food banks. Since those aren't legally defined benefits, but rely more on people expressing a need I wouldn't use them, so I guess I do have a line. If I could walk into a food bank and tell them I have this much money, but I keep my taxable income low by doing this and they would still happily give me food I want to eat and it wouldn't reduce the amount of food someone else could get then I guess I'd take it though.

[Runrooster]

 there is more to taxation than regular income taxes. I doubt that any independently living adult in the US pays nothing in taxes.
For income-based taxes, there are Social Security and Medicare taxes even if in a low tax bracket.

I do taxes in the tax season and I see plenty of people who pay less than nothing in income taxes due to refundable credits like EIC and additional child tax credit and american opportunity tax credit. They do live independently or support children in addition.  In any case, they're not filing as dependents.  I doubt any of them are paying property taxes and sales tax is less than their income tax refund, so yes they are paying nothing in taxes. 

Older retirees are often paying nothing in income taxes as well, getting a healthy SS benefit, and paying some minimal sales tax if they buy something other than food. Are they not independent because they take medicare or medicaid, you decide.

[Ron Scott]

At what income would you consider it immoral to legally pay nothing in taxes? Or would you always consider it moral?

Note that about 60% of American households paid no federal taxes last year. That’s high and related to the pandemic. In recent years however the number is closer to 40%.

The top 10% of earners pay more than 2/3rds of federal taxes.

I am not defending or criticizing anyone. But we’re in a strange environment now. Certainly a lot of the reason has to do with low wages in general, particularly among the undereducated. In a strange dichotomy, political campaigns are paid for by a small minority of wealthy people while a large majority of non-tax payers determine the vote.

“Morality” is a tough thing to judge…

[bmjohnson35]

1.  Our elected officials have failed to address the many issues with our healthcare industry in the US.  The ACA is the only alternative we have to afford to retire early and have affordable health insurance.  I have no problem legally utilizing the ACA subsidies. 

2.  I doubt anyone pays zero taxes.  If you own property, own vehicles, pay utilities or buy goods, you pay taxes.  We worked multiple jobs and a lot of overtime during our younger years. We did this to make ends meet, pay off debt sooner and save more toward retirement.  We have paid more than our share of income taxes over the years.  Now that we are in a position to pay zero or little taxes legally, I have no problem doing so.

I have been fortunate enough to have never needed unemployment benefits or other forms of government assistance during my lifetime. We did use a first time home buyer credit once, environmental tax credits and received the recent "pandemic checks" doled out to the general population over the past year.  The ACA is the only government assistance program that I have actively researched.  On the other hand, I wouldn't feel comfortable accepting food stamps, even if we are legally eligible.  Furthermore, if I was a renter, I would have paid my rent, regardless of the eviction moratorium program available due to the pandemic. 

[DireWolf]

Here’s something to muddy the waters for the ACA discussion. If you are someone who thinks it is wrong to use subsidies in FIRE, then do you think people who still work, but have large retirement savings, should have to dip into those savings for non-subsidized premiums? How would that work with a 401k? Would someone need to withdraw and pay taxes and early withdrawal penalties? What if much of your net worth is tied up in your primary home? Do you need to sell it? Or do you somehow exempt people still working? Or treat some piles of assets different?

[Wolfpack Mustachian]

If you have a low enough income that you're paying 0 taxes, you're definitely getting more from the government than you're putting in. This would be true if it was 20k, 40k, 60k, etc. If it's immoral to pull more out at some point than you put in, how would we define that point - a perfect balance of getting out what you put in in taxes?

I don't like this black and white way of looking at it as it by default defines a person's value by the dollar sign next to their name. So, so many people put more good into the world than they will ever get back, but what they put in isn't measured in dollars. I've been privileged to know many an idealistic person that practiced what they preached when it came to dedicating their life to helping others or the world at large, but it wouldn't have been possible for them to do all the good they have done if they hadn't been able to take advantage of some healthcare or food programs. Dictating that one can only take out what they put in seems crass somehow. We are a communal species at heart, regardless of what modern day individualism tries to convince us to otherwise. Some have more than they will ever need, others will never have enough. Some will take advantage, others will answer a higher calling. We must allow for some of the former if we want to encourage the absolute necessity of having the latter in the world.

I think we are on relatively the same page. I poorly communicated my point. I do actually not see it as a morality issue at all. I was simply meaning that if we're looking at a moral obligation to pay taxes of any kind, then it just makes sense that what we pay would be tied to what we get out of the government. If we're paying more than we get out, we're "cheating the system." This is not limited to lower income people, of course. Higher income people who reduce their tax burden extremely low do the same thing.

However, I do not see it as a moral issue at all. Taxes are us paying our ticket to live in a society of laws with structure. Beyond paying our ticket, which is whatever the government says we have to pay, anything else is charity. If it's charity, I get to decide where I want my money to go. People on both sides of the aisle don't like where billions and billions of dollars of government money goes - military spending, tax cuts for the rich if you're on the left, welfare, ACA, whatever else on the right. If I'm donating my money by giving more to the government than they require, then I'm giving to a charity, and I think the government sucks as a charity. I don't know if this clarifies anything or not.

For what it's worth, I agree with your points. I don't see it an issue of taking out more from the government than you're putting in. I don't really care what I put in versus take out. I just want to put in the minimum legally required. I don't want to deprive people of help the government is giving, at least in many of the circumstances. I'm not saying to cut money for food stamps or any of the other standard talking points or areas that benefit people like you're referring to. I don't think what people give can be measured by how much they pay in taxes. I would hope that all of us on the early retirement train are using some of our free time after retirement to give back, even if that giving back is just to our family, to learning in order to help others, or whatnot.

That's not to say it's not a good question. It's one I do think about, but this is just the conclusion I have come to.

[maizefolk]

Note that about 60% of American households paid no federal taxes last year. That’s high and related to the pandemic. In recent years however the number is closer to 40%.

The top 10% of earners pay more than 2/3rds of federal taxes.

Assuming your source is either the Urban-Brookings Tax Policy Center study or a new article that cited that study, the actual statistic is that 61% of households paid no federal income tax in 2020 and in an average year that'd be 40%.

A much greater percentage of households pay federal taxes because the income tax isn't the only tax the federal government collects from households. Most of the households which don't end up owing net federal income tax are still paying are payroll taxes, which contribute more than 1/3 of total federal government revenue.

[fuzzy math]

Here’s something to muddy the waters for the ACA discussion. If you are someone who thinks it is wrong to use subsidies in FIRE, then do you think people who still work, but have large retirement savings, should have to dip into those savings for non-subsidized premiums? How would that work with a 401k? Would someone need to withdraw and pay taxes and early withdrawal penalties? What if much of your net worth is tied up in your primary home? Do you need to sell it? Or do you somehow exempt people still working? Or treat some piles of assets different?

Retirement plans are exempt because the very old cannot support themselves in a traditional job past a certain age. Force people to access them, pay a penalty etc and that money is gone and you have to have social programs to support them in their old age. Remove the penalty for accessing money and people will go spend it on vacations and vehicles. It makes sense to make that stuff exempt. The truly wealthy will want a lifestyle that's above the ACA limit, they'll pay taxes on their higher income and pay more for health insurance too. That's why its so important as a retired person or couple to see if you can keep your annual income low enough that you don't get hit with fees, penalties, higher taxes and higher prices for things like this. Those wanting a $40k household spend only have to withdraw about $40k. Those wanting a $100k household spend will have to withdraw ~ $120k or so. (the math here is fuzzy for this example ppl, please don't brow beat the point of the post solely over the numbers)

[bmjohnson35]

I tried to take advantage of an early retirement layoff program from my employer months prior to my exit.  I did not qualify since my position had to be backfilled.  I tried to justify that my exit would provide a position for another person who was going to be involuntary laid off elsewhere in the business, but was told they couldn't justify it.  If I had been successful, I probably could have also collected unemployment since the employer had a general policy of not disputing unemployment benefits.  This is another example of a program I wouldn't have feel comfortable utilizing.  Would it have been legal? I'm not sure.  Even if it was legal, would applying for it be immoral?  I can see how it could be perceived that way.  All I know for sure it that it wouldn't have been in-line with my personal values. 

People often poo-poo on people who utilize a government benefit when they're politically opposed to the program.  I voted against the lottery when it came up in our state.  I still bought tickets after it was passed and became available.  If I had won, I certainly would have collected the winnings.  If I could vote again, I would still vote against it.  Am I a hypocrite?  Maybe.  I also didn't agree with the most recent pandemic relief check, but I didn't send it back to the Fed. 

[Mr. Green]

For the ACA and tax issues, I expect most folks have moved on to reason by way of comparison, since morality is already lost. Everyone knows that healthcare in the US shouldn't cost what it does. Most probably believe everyone should have it as well. Everyone also knows the tax system is broken. Wealth shouldnt come with larger tax shelters and  smaller tax bills than lower classes of citizenry. Yet our government allows these issues to persist, demonstrating that the notion of right and wrong doesnt currently matter for those things. Once that is lost, people resort to comparison. If billionaires are allowed to take advantage of the laws as they are, why shouldn't I? It's a natural fall back when the moral lines have become blurry to the point that they can no longer be discerned. What is the next guy doing? Am I better or worse than them? And so it goes.

In that case, do we judge morality by the median? If my household makes $100k but pays little to nothing in income taxes (thanks in large part to retirement contributions), is that moral as long as more than half of the population is doing more tax avoidance than me?

Or is the dividing line individuals worth >$1 billion? Or some other number?

Is it moral to take advantage of legal loopholes as long as you vote for better income/wealth equality?

I think my point for some of these bigger issues is that there seems to be a disconnect between what most of the populace believes to be the moral position to take and what our laws currently are. For example, healthcare should not be the problem that it is here. We're the only developed country in the world that can't get our act together there. If I personally felt that it was immoral of me to take ACA subsidies when I could afford the full premium, choosing to do so won't actually change anything because I'm one person. I could take all the moral "high roads" I wanted as a single person and it would do nothing more than make me poorer. How do we assign the failure of our representatives to make better laws as a moral failure of ourselves individually? I think this breaks down because it's clear for the moment that representation is not an accurate reflection of what the population really wants.

It's almost impossible to discuss this without examining how it's influenced by politics and laws.

[Wolfpack Mustachian]

I think this thread and the general consensus is that morality plays no role in paying taxes. The only people I hear that use morality to pay for taxes are people who talk about how immoral it is for billionaires to pay so little in taxes. I would argue that that is a poor way of talking about the problem. In pretty much every way I know of, the world immoral means it's immoral to do something regardless of what others do. I would bet money that people that so frivolously throw around the word immoral for billionaires use whatever tax loop holes or means to reduce their taxes that they can. They would use excuses like, "I'm not making that much" or "I deserve it" or "I'm doing other things to help out the world that those billionaires are not."

The point is, everyone, if they think of it as a moral issue at all, thinks they're doing good stuff that merits them take tax breaks and the like. Billionaires likely think the same. In the case of the Gates and some others, if they truly give away their entire fortunes (or 99.9% of them or whatever), they might actually be right.

If paying less taxes than you "should" was a moral issue, people that don't pay more in taxes are almost certainly hypocrites. However, it is a completely legitimate position that overall, the system can be reformed, and I'll vote for people that will make me pay more in taxes and everyone else, as well. If you address it as a moral issue, however, then what's wrong is wrong, and you almost certainly should be paying more in taxes yourself.

[Chris Pascale]

When I was actually low income in the military qualifying for welfare, WIC and food stamps, I was a total dumbass and felt it was wrong to take any of this stuff, because "I have a job and should be able to take care of my family."

Try as he might, my dad couldn't convince me that since my income was dictated by the gov't and the poverty levels were also set by the gov't, I was among the most arguably deserving people, especially since it was just a way to boost up the Ag budget with Defense spending.

But you really can't logically convince someone of facts when they emotionally know other things.

Now I humbly accept all the programs that apply to me***, grateful to be a recipient from such a great and wealthy nation.


***a current exception is that I'm paying my daughter's college tuition so that she doesn't have to pledge to stay in NY after graduation.

[Sanitary Stache]

The topic came up on Reddit, and I'm curious as to what folks in the MMM community view as moral. I'll preface by saying that legal and moral are two different things. Just because something is legal does not make it moral (same for illegal/immoral).

1. Do you consider it moral/immoral to keep income low enough to get ACA subsidies while you have a significant amount accessible in retirement accounts? What about FAFSA? Food stamps? Free student lunches?

2. At what income would you consider it immoral to legally pay nothing in taxes? Or would you always consider it moral?

What criteria would you use to draw the line on these items?

I'm not trying to make a political post, but rather one discussing how early retirees wrestle with whether or not to use programs that may not have been intended for those in our unique situation.

I always struggle with what immoral and moral really mean. Is it right or is it wrong?  I also haven't done the work to understand or develop a well supported sense of morality.  What I have to contribute is more of a "the way it should be" argument.  The way I think it should be, is that everyone should be able to access a basic safety net and there should be a limit on how wealthy someone can be.

1. I do not consider it immoral to access public assistance for any reason.  I think it is immoral to restrict access to public assistance based on income or job status. whether high or low, employed or unemployed.  Health Care, Food, Education, and Shelter are the forms of public assistance that should be available to all members of a society/region/civilization/planet/space ship/town/grouping of people regardless of their economic station.  Those with high incomes should be able to access the same programs as those with no income.  Access to these programs does not change my belief that there should be a limit of how high of an income someone should be allowed to earn or hoard. Every human has value and, therefore, deserves access to Health Care, Food, Education, and Shelter. When someone doesn't have access to these 4 benefits, everyone is failing each other.

2.  Paying or avoiding taxes is neither moral or immoral, just legal and illegal. Wealth accumulation becomes immoral within a range. I don't know exactly what that range is, but it is a combination of income and saved wealth.   Currently I think this range is somewhere in the vicinity of 10 million dollars, though there are other provisions  or "loop-holes" I would allow based on organizational structure (of a charity or corporation for instance) and mission (like a large farm or extensive estate that provids housing and purpose/work to people).

[seattlecyclone]

My moral line is truth. If I have to lie about my income or assets it's a no-go for me. If I truthfully report my circumstances and the government offers me money, I'll take it. It's not for me to second-guess the purpose of a program that I may or may not qualify for; it's up to the lawmakers to express their intent in the requirements they impose.

[DadJokes]

My moral line is truth. If I have to lie about my income or assets it's a no-go for me. If I truthfully report my circumstances and the government offers me money, I'll take it. It's not for me to second-guess the purpose of a program that I may or may not qualify for; it's up to the lawmakers to express their intent in the requirements they impose.

It's not that simple, is it? Let's take an extreme:

You have $20 million, all in retirement accounts, and you're retired. You withdraw only $20k per year, which qualifies you for food stamps in your state. You aren't lying about your income or assets when you qualify for that particular benefit.

Would that be appropriate?

[ender]

I ask myself if everyone how I would feel if everyone in my situation socioeconomically used the program/tax benefit, would it be a better or worse for society as a whole.

[seattlecyclone]

My moral line is truth. If I have to lie about my income or assets it's a no-go for me. If I truthfully report my circumstances and the government offers me money, I'll take it. It's not for me to second-guess the purpose of a program that I may or may not qualify for; it's up to the lawmakers to express their intent in the requirements they impose.

It's not that simple, is it? Let's take an extreme:

You have $20 million, all in retirement accounts, and you're retired. You withdraw only $20k per year, which qualifies you for food stamps in your state. You aren't lying about your income or assets when you qualify for that particular benefit.

Would that be appropriate?

If I was willing to participate in the work requirements that my state typically imposes for this program, sure, why not? I'm not interested in messing with that, so I won't apply.

Let me put it this way: I gladly accept the child tax credit. I believe this pays more than food stamps would. Do you believe it is moral for me to claim one and not the other? If so, what is the distinguishing factor in your mind?

[dandarc]

My moral line is truth. If I have to lie about my income or assets it's a no-go for me. If I truthfully report my circumstances and the government offers me money, I'll take it. It's not for me to second-guess the purpose of a program that I may or may not qualify for; it's up to the lawmakers to express their intent in the requirements they impose.

It's not that simple, is it? Let's take an extreme:

You have $20 million, all in retirement accounts, and you're retired. You withdraw only $20k per year, which qualifies you for food stamps in your state. You aren't lying about your income or assets when you qualify for that particular benefit.

Would that be appropriate?

It actually is that simple. And if I get to that point and could be bothered to figure out how to navigate whatever the system is (doubtful I could be bothered, but maybe by then it just happens automatically if you qualify or something), I'd take the food stamps as well. All the while advocating for higher taxes for the wealthy (myself included - remember I've got $20 million in this hypothetical situation) and more rational safety net programs.

You've identified a significant problem with our current system - the paternalistic nature of the programs. We will help you with some money, but only if you spend on food, and even then sometimes restricted to what kinds of food. Money solves so many varied problems for individuals and families. If we just cut the all the judgmental BS around welfare, decided we will trust people to allocate the money wisely and just gave money to everyone who says they need some help, or even just give a significant amount of money to everyone regularly, then I think we'd have a much improved safety net.

[Effervescent]

The ACA is the only government assistance program that I have actively researched.  On the other hand, I wouldn't feel comfortable accepting food stamps, even if we are legally eligible.

I wonder what the difference is between ACA subsidies/reduced health insurance costs, and food stamps.

They're both government programs based on income. Yet many seem comfortable receiving government assistance in the form of reduced health insurance costs, yet have an aversion to receiving government assistance in the form of free groceries.

Generally I've been surprised at the level of aversion on MMM to reducing taxes (legally) to achieve financial independence, qualifying for Medicaid, food stamps, etc. Then again, I generally have unpopular opinions. I don't see a problem with working less (coast FI) and going on food stamps, etc. while letting my investments grow. I say this as someone who has never taken unemployment/benefits before, even when I qualified. My goal is to work less as soon as it's financially feasible, living a simple, minimalist life - reading, keeping fit, working part-time - and reducing my use of the world's resources. As someone who has paid taxes into the system for many years, I don't see a problem with taking Medicaid and food stamps once I downshift to coast FI and part-time work.

[PDXTabs]

Legally not paying taxes is called tax avoidance. I do as much of that as possible (eg, maxed out 401k). If you don't like what your tax dollars go for then lowering your taxes might even be a moral obligation.

As for services, I don't consider it immoral to take advantage of them, but if it is some sort of block grant you will be taking away from someone else who probably has less. I probably wouldn't do that (personally). But I wouldn't shake my finger at someone who does.

[DadJokes]

You've identified a significant problem with our current system - the paternalistic nature of the programs. We will help you with some money, but only if you spend on food, and even then sometimes restricted to what kinds of food.

Maybe I'm a cynic, but I think that it's understandable to have restrictions on the use of programs. A large number of people seem incapable of doing what is in their own best interests. If a person is going to use food stamps to pay for cigarettes and lottery tickets, I'm going to view funding the program differently than I will if the items that can be purchased are limited to actual needs.

[PDXTabs]

You've identified a significant problem with our current system - the paternalistic nature of the programs. We will help you with some money, but only if you spend on food, and even then sometimes restricted to what kinds of food.

I think that's a feature, not a bug, personally. Children still get to have food even if their parents are bad with money. Young people still get to have food even if they are bad at budgeting. Landlords can't take your "foodstamps", etc.