Tax Rates Based On Work Ethic Shall Fix The World

Light Bulb FluroescentI want to fix America and make things better for our children.  We cannot fix anything through complaining.  Instead, solutions must be made and implemented.  Of course no solution will be perfect, as there will always be a group of people who feel unduly hurt by new proposals.  That said, during tough times, tough choices must be made!

One of the best ideas proposed to help improve our country’s fiscal health and our personal finances is limiting what consumers can buy based on their high school grades.  Since high school is mandatory, we use high school as a barometer.

Let’s use the car as an example of how we can use grades as a way of controlling consumption to protect our fiscal health.  The car is one of the great personal finance killers of our generation and our attitude towards what our car spending habits needs to change!

The assumptions in this article are namely: 1) Big government is good, otherwise, we would not allow such massive federal government spending and ballooning budget deficit, 2) We are all patriots and want to help America, and 3) Despite allowing big government, we are still a meritocracy.

Please keep an open mind while reading as we look towards controlling our overconsumption habits and healing our nation!

THE “GRADES AND CONSUMPTION PLAN”

1) If you have a C-average or worse (~2.5/4.0 GPA), you are not allowed to buy a car, period.  Given most people can roll out of bed and get a C-average, this shouldn’t be a problem for most people.  Hence, one can conclude that if you only have a C-average or worse, then you aren’t good at rolling out of bed!  You might have a difficult time focusing and doing your homework.  Work ethic and maturity might be lacking.  Perhaps you have un-nurturing parents and are in an environment not conducive to education.  If this is the case, then let’s give a probationary period of 3 years to allow one to develop the maturity to be able to purchase a car.

As a C-student or worse, it’s probably not the best idea driving a weapon that could kill people and your personal finances.  Only the bus, biking, or walking for C-average or worse students.  These are great options that are environmentally friendly and good for your finances and physical health.

2) If you have a B-average (~3.0/4.0 GPA), then you are allowed to buy a Toyota Corolla, Honda Civic, Chevy Volt, or Ford Fiesta, and the value of the car cannot be worth more than 10% of your income (Financial Samurai 1/10th rule for car buying).  As a pedestrian or fellow driver, you can immediately identify people in the above four cars as B-average citizens who are spending wisely.

The B-student is the majority of us.  There are some subjects we are good at, and some that are completely impossible.  Things average out to be “good” but not “great”.  Fair enough.  No matter how much I studied for Religion class, I could not memorize all the Gods in Greek mythology, and therefore got a B!

3) If you are an A-average student (3.75+/4.0), then the rules become a little more relaxed.  Given it’s very difficult to get an A in every single subject, one can conclude that A-average students are harder working, and more intelligent than the C-average student.  A-average students have logically concluded that if they can be in the Top 1% of their class, they will have a better selection of colleges to choose from, more scholarship opportunities, less burden on their finances, and better careers upon graduation.  Of course not every A-student is like this, but for the most part, they are.

The A-average student gets to buy whatever car they want, basically the system we have now.  There’s no guarantee that the A-student will make more money than the C-student.  However, given college graduates (30% of people ages 25+) have higher incomes than high school graduates, and the majority of A-students go to college, one can conclude that A-students will have higher incomes.

Of course, higher income people can easily blow themselves up financially as well.  Hence, let us put one constraint on the A-average student: Spend no more than 20% of your annual income on a car.  If you make $150,000 a year, a $30,000 dollar car is the most the A-student should spend.  I’m trying to be a little flexible for you anti 1/10th car buying rule folks!

The car is just one example.  We can scale this model towards anything such as clothing, jewelry, watches, and other extraneous desires that have no bearing on whether you live or die.  The government can create an awesome 100,000 page spending guidebook to help regulate what consumers can spend their money on to protect our finances, and save the environment.

Bacstop: After the age of 30, you are free to spend on whatever you want, provided you check in with the government registry once your birthday hits.  From 18-30, we have big brother watching and controlling your spending so that you lead a better life.   The idea is after 12 years of government control, you will be brainwashed accustomed to spending more responsibly, and more inline with your intelligence.  Note, parents are not allowed to buy cars for their kids with C-averages or worse.

THE “WORK ETHIC TAXATION PLAN”

Given that you agree with the “Grades And Consumption” proposal to improve our country’s fiscal health and strengthen our personal finances, let’s take it a step further and propose taxation rates based on how long you work.  The “Work Ethic Taxation Plan” is proposed to improve economic output, generate more tax revenue for our country, and empower the people to control their own destinies.

High intelligence is overrated.  You do not need to be a genius to stay in shape, make lots of money, get promoted, get a lot of boys or girls and so forth.  All you need is basic intelligence and a strong understanding of the system and work towards building your skills.  In other words, you need a strong work ethic.

We all agree that more reward should go to those who work harder, unless you are a Socialist For A Brighter Tomorrow.  The only fair way we can measure work ethic is through the number of hours worked.  Hence, the government devises a website where one can log on and click a button how many hours they work a day.  The data gets tabulated and spits out a weekly, monthly, and yearly bar chart of the number of hours worked.  Here is the proposal for those in the working ages of 18-55.

THE THREE TAX RATE TIERS

* Federal tax rate for those working 40 hours a week or less: 40%. That’s right baby, let’s tax those who work 40 hours a week or less the same amount the government is proposing to tax the highest income earners in America.  The logic is that if you are not working, you are not producing economic output for our country and are taking in more than you are providing.  Stay at home parents are excluded, since parenthood is a great output, however even if they were included, they wouldn’t pay any taxes anyway since they are working 24/7.  You might only be 23 years old and underemployed, then what?  Not to worry, the government’s super computer has a box where you can check to say your employer is unable to provide you the “standard” 40 hours a week.

I don’t know anybody who works just 40 hours a week or less, and wants to get ahead, do you?  As a result, hopefully not that many people will have to pay a 40% tax rate!

* Federal tax rate for those working 50 hours a week or more: 30%.  Those who work 50 hours a week on average see a 10% reduction in their Federal tax rate to 30%.  The assumption again is that by working 10 more hours than the average, you are contributing more to the output of the economy and taking less.  There could be a 20% swing here as you provide 10% more output, and are 10% less of a drag.

* Federal tax rate for those working 60 hours a week or more: 15%.  Again, no surprise here as those working 60 hours a week are doing their best and producing the most in whatever respective field they are in.  They could be the best egg McMuffin maker at McDonald’s, or the President of the United States who is on call 24/7.  The system rewards those who work the most, irrespective of income, with the lowest Federal tax rate.

Exemptions for those who want to be exempt: Disabled, physically laborious and hazardous occupations, non-profit workers, and government officials who plan on writing a 500,000 page handbook on the “Work Ethic Taxation” plan.

THINK ABOUT ALL THE BENEFITS

A lot of people grumble why a CEO working 12 hours a day should command 100X the salary of his or her employee who also works 12 hours a day.  I hear you loud and clear!  The free markets have determined what each individual makes.  If you make $100,000,000 a year like Tiger Woods once did, it’s because you are generating more than $100 million in revenue for clients, otherwise you won’t be making that for very long!  This is exactly what has happened to Tiger as all his endorsements got stripped away.

With my “Work Ethic Taxation Plan” proposal, we do away with what we have less control over (free markets), and focus on what we can control, our work ethic and hours spent working.  A 15% taxation rate should motivate people to work harder and smarter, for if they don’t, they’ve got to pay more than double in Federal Taxes!  No longer will people complain about taxes, since the tax rate they pay is all up to them!

Sure, some might take advantage of the system and just sit in their offices all day playing online poker, however, it is up to the manager to keep tabs and make sure good effort is made for the hours worked.  Many of you come to this site for solutions, and here I have presented two great solutions for over consumption and declining GDP growth.

Recommendation: I’ve been using H&R Block’s Premium Tax Software to do my own taxes for the past 11 years. It’s inexpensive and very easy to use for novice to advanced tax filers. The software always updates with the latest tax rules so you’re never behind. They also have audit protection service as well.

Regards,

Uncle Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    Dear Uncle Sam,
    You lost me at your first assumption, namely “Big government is good…” Big government is only good for government. I have not contributed to the explosion of government, nor do I agree with the idea that you need to watch over, manipulate and control our every move. It is strange to me that in what is supposedly the most free country in the world we are watched more closely than those in former Eastern Bloc countries.

    I have a better recommendation. Get rid of big government. Stop regulating every tiny aspect of our lives and stop passing legislation meant to protect us from ourselves. Yes this will be painful initially as those who haven’t got the means or intelligence to watch out for themselves fall by the wayside, but in the long run we will be a stronger country by not enabling the slackers and leeches.

    Please do away with agencies who are able to create laws simply by creating guidelines and regulations. What ever happened to the due process of law? Your agencies have passed roughly 6,000 new regulations over the past 90-days, don’t you find this excessive?

    Terrorism is no worse now than it has ever been in the history of the world. Please rid us of TSA officials fondling our children, FinCEN tracking our money in every corner of the world and new laws like the FATCA act.

    How about this for a proposal:
    No person with a net worth greater than $500,000 may be allowed to run for public office. Maybe then we can do away with all the laws and regulations being passed for the benefit of corporate America?

    On the other hand, with a 100,000 page spending guidebook we would need a new agency to oversee all the regulations that would come about regarding spending and the exemptions to the spending regulations (are you sure 100,000 pages would be enough?). This agency could theoretically employ as many as 200,000 people thus putting Americans back to work.

    Please carry on.

    • says

      Steve, if big government is bad, then why do we have big government in office now? I am VERY confident that Obama will get re-elected, and we will have massive government spending.

      We must not fight reality. Big government and regulation is what we want, given we live in a free world!

      • says

        That’s flawed logic Sam. The fact that our government is currently big doesn’t make it good. That’s like saying the government in Cuba under Castro has been good simply because it exists. Same goes for Obama getting re-elected and massive spending continuing. Just because it happens doesn’t make it good.

        We don’t live in a free world, we live in a free country, however the larger government becomes the less freedom that we have. I’m sure our founding fathers would agree when I say that big government has historically been shown not to favor the common man. They went as far as to write the Constitution in such a way as to restrict the powers of the federal government because they were worried about the increasing power of a central government that became too big.

        It’s not too surprising that the citizens are going along with a government that continues to spend like there’s no tomorrow. Isn’t that how we were raised, to be a nation of consumers…of spenders?

      • says

        Sam we have big government in office now because people vote for their own self-interest which is to keep the pork barrel spending on social welfare programs going. That doesn’t make it good; it just makes it popular. Big government might be the reality we’re dealing with, but I won’t be voting for any measure that gives the government more power over my life than they already have.

    • says

      @ Money Infant, since I am from behind the Iron Curtain, let me put in my two cents. When you say that “It is strange to me that in what is supposedly the most free country in the world we are watched more closely than those in former Eastern Bloc countries,” you don’t realize that you are can say it and not look over your shoulder and be afraid (even for a second) that the government might not like your words, and shut down your site. Some bloggers in the former Eastern Bloc countries cannot say what they really think on their blogs because their blogs are closely monitored. So, really, I don’t buy complaints like “we are watched more closely than those in former Eastern Bloc countries.” It says to me you never experienced and don’t quite understand what it really means to be closely watched.

      • says

        In this age of digital surveillance and closed circuit cameras I have no qualms saying that we are being watched more closely than we believe. Just because our government hasn’t taken action (on most of us) based on that surveillance doesn’t mean it isn’t happening. No, we have not seen the actual action based on surveillance as in the former Eastern Bloc, but that doesn’t mean we aren’t being watched, else why the need for so many “security” agencies? And where I live now the internet is closely watched for cases of both libel and breaches of the lese majeste laws, so I am experiencing it. Probably not to the degree of your birth country, but the government is definitely watching and they make no secret of it.

  2. David M says

    The biggest problem with implimenting the number of hours worked tax rate is that it only deals with hours not with amount of work done.

    Even when people are working as hard as they can – its possible for one person to produce much more and much better work. So if on person produces work valued at 4 times another person but – the higher producer works 50 hours a week and the lower producer works 60 hours a week – the higher producer will still pay 30% taxes while the lower producer pays 15% taxes?

  3. says

    One of the problems, it seems to me, with basing the tax rate on solely the number of hours worked is that it encourages laziness. If someone could finish all of their work at their job in 40 hours or take their time in doing it in 50 or 60 and get a fat bonus from the tax breaks, I think they would choose to be lazy. Better yet, I am sure some executives would “work extra hours” by having a meeting playing golf or something and get a huge tax break. It may be that there is no better way to determine work-ethic, but I think that just says that work ethic is not a good criterion for tax rates.

    • says

      Then it is up to each manager to whip people into being productive.

      Work ethic is a MUCH better criteria for tax rates than simply taxing people based on their different levels of income when so much of the country has different cost of living levels!

  4. Nathan says

    It’s a good theory, but it goes against my theory of “if it takes more than 8 hrs/ day to do your job, you’re doing something wrong.”

    • says

      I’m sure Mark Zuckerberg and President Obama work way more than 8 hours a day. In fact, I don’t know anybody offline who works less than 8 hours a day. Single hour work days are a relic of the past!

  5. Untemplater says

    I work 60+ hours between all my jobs and would love to have a 15% tax rate! Lots of creative ideas in this post. It sure would be funny if people had car buying limitations based on their grades and age. I’d want to get a bonus tax break or something else for having good grades and no car! :)

  6. says

    “If you make $100,000,000 a year like Tiger Woods once did, it’s because you are generating more than $100 million in revenue for clients, otherwise you won’t be making that for very long! This is exactly what has happened to Tiger as all his endorsements got stripped away.”

    So true. It’s the “athletes make too much” argument that drives me crazy. Yes, they make “too much,” in my opinion, and teachers do more (direct) good. But what’s the alternative? Put all the money in a big pile and then give it out based on perceived “benefit” to moral or other issues?

    More direct to the post, I work way over 60 hours per week (especially if you count Step Away from the Mall) and would love a lower tax rate based on hard work. Of course it’s not “perfect” because some people might not be able to work, but I know that’s not the point of the post. My son is 2 and a half years old and knows “the best place to go if you want money” is “to work.” If only most 40-year-olds knew that…

    • says

      I’m sure your son will grow up to be an upright and hard working man!

      I don’t understand why people don’t believe working 20 hours more than the 40 hours a week would generate more output and less of a drag on the economy.

      Friends in other countries make 1/4th our median incomes an work 25% longer!! How can we compete for a great Americah?!

  7. says

    Sam,

    I love you man, but this is one step away from socialism. The government should never have the right to tell you how much you have to work in order to keep the money you earn.

    What we need is to cut the size of the federal government by about 70% and eliminate the income tax.

    • says

      Isn’t this the ANTI Socialism post to encourage people to work harder and get better grades for a better world?

      Right now, some say the government encourages you to work LESS to make less money to pay LESS taxes!

  8. says

    Studies of hunter gatherer societies revealed that they spend an average of about 3 hours a day to meet their basic needs. The rest of the time is spent socializing or otherwise enjoying life.

    Personally, I think this is the ideal we should be working towards for maximum health and happiness of the population, not encouraging more economic output at the expense of workers. Maybe that’s idealistic of me but 60 hours of work a week is way too much.

  9. says

    On a positive note, with your planned changes at least I would get the 15% tax rate. Wait…how would the government know you weren’t cheating if you are self reporting your hours worked on their website? Especially for the self employed? I’m seeing some cracks in the plan Sam. Maybe we could commission a task force to look deeper into the actual workings of this plan.

    • says

      It’s all about the honor system Stevo! We must believe in the integrity of man, otherwise, we are all doomed.

      A massive task force government agency to policy inputted hours worked is actually a great idea. More jobs for some!

  10. tom says

    I have a better tax plan:

    I say tax all fat people and smokers at 40%, 60% if you are fat and smoke:

    98% of fat people are fat because they are lazy, and 2% are caused by medical conditions (produce a dr. note and be excluded). This laziness with your health can be translated into your job. Since you are lazy and a huge burden on society (medical costs and all), they should have to pay more, a lot more. There are exceptions to the work laziness translation (fat CEOs), but you are still too lazy to workout, so pay up.

    Since about 70% of America is fat, the US will produce revenue beyond all of our wildest dreams.

    Smokers, on the other hand, don’t have will power and are actively trying to kill themselves. Since these people have no drive to do anything in life and are a burden on society (medical costs and all), they should have to pay more, a lot more.

    Since about 20% of America smokes, this will cover medical insurance for the entire nation.

    If you are fat and smoke, you are lazy and have no will power, which makes you completely worthless. As a penalty for your excessive burden on society, you should pay 60%.

    This 60% won’t amount to much in terms of revenue, because fat smokers don’t have jobs.

    If you are thin, sexy and healthy, you pay 10%.

  11. says

    One more suggestion for your plan… those who don’t understand your very clear sarcasm need to pay a 55% tax rate and drive a motorized tricycle (decorative flags or streamers are permissible). They deserve such punishment for missing the clearly obvious.

  12. says

    Smart people (A average) will know that cars are bad investments so they will forego their right to a nice car. Dumb people (C average) will not be allowed to buy nice cars.

    Sam, I can’t live in a world without nice cars. What will the guys from Entourage think? Who would fill Chrysler’s time slot during the Superbowl?

  13. Darwin's Money says

    We live in a free society, which while it’s the only way humans should live, also invites slackers. You can’t tell anyone they “can’t” do much of anything, especially if they are not harming someone else. Irresponsible Americans are free to procreate as much as they like (while our government offers increasing incentives the more you do so), take out loans they will never repay, game various systems ranging from unemployment to ADA and those doing the work will always carry these people. The Land of Opportunity!

  14. HMI says

    I disagree fully on both points

    Point numero uno – The grades and compensation plan – our education system is failing, miserably. It is so heavily focused on math and science (I’m an engineer, who is quite good at math and science) which has led to curriculum largely based on these subjects which stifles creativity on so many levels. I admire the art of the hustle, guys and gals who don’t do well in school because they aren’t good in the subjects that are deemed “important”, and end up monetizing whatever it is that they are good at. This system punishes them.

    The work ethic plan caters to the corporate mentality. I don’t care how many hours you work a week, I care how productive you are. I care what you do outside of work. Are you someone who is constantly growing and acquiring skills? Great, chances are at some point they will be useful in your career.

    Digging the post, it’s certainly an idea I’ve never come across, even if I can’t agree with it.

      • HMI says

        My first alternative to the first solution is implement legislation that doesn’t allow you to walk away from a mortgage with very little repercussions. Tighten up lending, realistically, once this recession passes I won’t be concerned with North Americans burying themselves in debt.

        I could get on board with a flat tax rate. I love Alberta’s provincial 10% flat tax rate. It encourages people to work harder AND smarter. Not every plan is flawless I think you could make arguments against any system.

  15. says

    Thanks for multiple morning laughs – to Sam AND commenters!

    Unfortunately, your basic premise that “We are all Patriots and Want to Help America” doesn’t fit with trimming DOWN economic consumption. If we REALLY want to help America, we will all spend wildly beyond our means. Oh….wait….most Americans already did that – and now we are in the morning after!!!!

  16. says

    Sam, there seems to me to be a logical fault with the taxation system. All health research shows that working over 45 hours a week is very bad for your health and get you dead (mainly from strokes and heart attacks). Which means that people working 60 hours a week and ‘contributing most’ can be expected to contribute for much less long – so overall the lower tax rate is not justifiable in terms of ‘total’ rpoductivity.

    • S says

      Going off Sam’s mindset, this would be perfectly logical! Think about it…If you work 60+ hours a week and end up dying because of it, in the long run that reduces the overall costs (medical and others) of all retiree’s because there aren’t as many of them! Using the logic mentioned above, if the retiree’s aren’t contributing to society then they are taking from society, thus having less of them is a benifit “for the greater good.” Society benefits from your hard work and when you stop contributing you are removed from said society, similar to the plotline to the movie Logan’s Run.

      (Nice post Sam. Sarcasm is an amazing tool)

  17. Cory says

    I love all the replies from people who don’t get Sam’s sense of humor re: big government, etc.

    Good stuff :-)

    Keep up the awesome posts Sam!!!

  18. says

    Sam, you’ve made several assumptions that are error prone. 1) Work ethics = working more hours 2) taxing workers who are working less can generate more revenue for the government. Think about those who are out of work or those who are forced to work part-time. 3) If our precious government can start taxing people based on one criteria, where is the end?

    Best way to prosperity is to get government out of our lives. More taxes can never translate into more prosperity for any nation.

    Just my humble 2 cents.

    • says

      Ahh, but you have missed an important section in the post:

      Exemptions for those who want to be exempt: Disabled, physically laborious and hazardous occupations, non-profit workers, stay at home parents and government officials who plan on writing a 500,000 page handbook on the “Work Ethic Taxation” plan.

      • says

        fair tax is the answer to prosperity my friend. It’s consumption based and fair for all. Current tax code needs major overhaul. I love President Reagan who believed that IRS has no business controlling our lives. :)

  19. The Genius says

    You actually make a ton of sense Sam! Your system will incentive slackers to stop whining and actually start working more. Even if the 60 hours isn’t the most productive work, it’s still more work than they were contributing before.

    Grades are such a no brainer. Don’t know why people do so poorly. Dumb maybe? No car for you!

  20. says

    Pot stirrer ;-)

    I have a few thoughts:

    1) Sam for President
    2) I’m going to take basket-weaving for 4 years in high school and get all A’s
    3) I’m going to work 60+ hours a week as the brew-master and chief doughnut maker.

    Low taxes, big car, drunk and happy (probably dead by 50, but it’s about “quality”, not “quantity.”

    • says

      Now that’s the spirit! I appreciate your vote Joe! Now if I can only get 50 million more. Oh yeah, popular vote doesn’t count. It’s all about the Electoral College votes.

  21. says

    Sam, I love the fact that you think outside of the box. Too long has the status quo in this country been observed. We no longer have Patriots that fight for what is right…we have politicians give selfish people what they want – regardless if that’s the best for our country or not.

    With that said, I’m going to bow out of the political discussion. I’ve learned that leads to unproductive discussion that we can do nothing about. The fact is that our political system is massively corrupt and until we have a real leader than is willing to break the status quo then this madness will continue.

    As far as taxation, I’m a HUGE fan of the Fair Tax (consumption tax). I like your idea of tax rates being based on work ethic, but I think I like the Fair Tax a little more. The more you buy, the more you get taxed. It’s a progressive system and would help our country in a lot of ways.

  22. says

    In this Utopian tax system, would the tax rates be marginal? So if I work 50 hours… the earnings from my first 40 hours are taxed at 40%, the next 10 at 32.5%, the next 10 at 25% and everything else at 15%? It seems if you didn’t make it a marginal rate you’d have a whole lot of people who worked ‘the minimum’ to get into the next bracket.

    However, if this was the system in place it would actually reverse the disincentive to work (although I know you’re being facetious). Currently, if you work more and earn more, you also are taxed more… so tax is giving you incentives you to work less. Under your system, you would have incentive to work more! Win-win!

    How do you deal with stay at home spouses? Tax half the working spouse at the 0 hour rate?

  23. Amy says

    This is sarcasm right?

    The 40-hour work week was one of the biggest achievements to come out of the labor unions – “8 hours for sleep, 8 hours for work, 8 hours for what we will.” This would only punish people who want to maintain a healthy work-life balance. And students who work part time. And people who can only find part-time work for their field.

    Good job at inciting a lot of controversy/discussion, if that was your aim.

  24. says

    I agree with some other comments that having a good work ethic does not equate with working more hours. Quite frankly, it’s really an American belief that the best workers are the ones who put in the most hours. As an American who lives overseas, I should point out that in countries like Australia and France, the standard work week is 35 hours. In addition, workers typically have more vacation time, longer parental leave, and greater flexibility in their work hours.

    If I can meet or exceed all of my workplace expectations by working 35-40 hours a week and receive substantial raises for doing so, why would I want to sacrifice the time that I could spend with my family by putting in more hours? Life is short, and it’s really not all about our job titles or bank accounts.

  25. says

    A regressive stupid tax. Briliant! If you’re too dumb to get more than a C average, you can’t drive. Same thing, if you’re too lazy to get more than a C average. You’re probably also fat because you’re lazy, so get out there and walk or ride a bike. Faster, you slug! Big Brother is watching, and he ain’t happy.

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