Working Is To Capitalism As Retirement Is To Socialism

Occupy ProtestersAs students, it is trendy and idealistic to be Socialists. It’s just not cool to be a Capitalist while in school. We believe in our leaders and want to help as many people as possible through programs we don’t have to pay for. When we only pay a little or no taxes at all, of course we are fine to vote for expensive government initiatives to help people in need. Then we grow up.

In 2008, California passed a ridiculous $10 billion dollar high speed train project from San Francisco to Los Angles that received overwhelming support from renters. Why? Because the project will be paid for by homeowners through our semi-annual property tax bills. Well surprise, surprise. The project is now estimated to cost $100 billion, or 10 TIMES the original estimate!

It’s important that we all share in the burden of our government corruption, hence the renter’s tax proposal. When you get a bill for something you derive no benefit from, you will naturally vote the other way. Since nobody likes paying taxes (see the comments in the renter’s tax post), we can see how broadening the tax base can help reduce government waste, and lower taxes in the long term!

THE BEGINNING OF CHANGE

After graduation, we start working full-time for a living and witness all the corruption and waste by the government.  Many of the idealists turn into Capitalists who want smaller government, or at least, less harmful government. With all the time spent slaving away at work only to give the government more in taxes than we can save for retirement, it’s no wonder the rich and poor start changing their outlook.

Some of us keep our ideals because that is who we are. It’s just interesting to see so many friends from college go from Liberal left to center to staunch Conservatives after they start working. I myself have gone from a protester of corporate malfeasance as a student to a protester of government malfeasance as an employee. I certainly can’t protest my own company or industry since they allowed me to earn a living. Perhaps I just like to protest perceived injustices no matter what stage I am in life?

Now that I’m retired and no longer pay as much taxes, I’m sensing my ideology change once again. I now better empathize with voters who are willing to vote to raise other people’s taxes without being willing to pay more themselves! Retirees depend more on the government and the working public to sustain our lifestyles compared to working individuals. We need multi-billionaire Larry Ellison of Oracle to stay in California and pay 11% of his income in taxes and not retire in Lanai, the island that he recently purchased!

If you are working, you obviously want to keep as much money for yourself. When you are retired, you’d love to receive as much money from the government and other people. I’m giving you the honest perspective here given I have experienced both. Now do you see why early retirement is selfish?

NEITHER IS BAD

Some of us are self-sustainable because we had the discipline to save and invest.  It is illogical for someone to work 30+ years after school and have nothing to show for. Meanwhile, some of us are lucky enough to collect Social Security and other benefits as part of our retirement. We’ve paid into the system and are just getting our money back.

I’ve always joked to my diehard Liberal friends that I wouldn’t mind being a Socialist when I’m retired, just not when I’m working. Socialism spreads the wealth around equally without equal work. That said, I STRONGLY believe we should level the playing field because the spread between the haves and have nots have widened to mutiny-like levels.

As a poorer man now with no W2 income, I wouldn’t mind having some of those riches transferred my way. I still pay tens of thousands a year in Federal taxes mind you. I just don’t pay six figures in Federal taxes anymore thank goodness.

Always watch what people DO with their money, and not what they say.

Is the analogy: Working is to Capitalism as Retirement is to Socialism correct?  Do we all tend to be idealists when we are young, and idealists once again once we are old and/or retired?

Note: This post is not an argument for which ideology is better.  This post is to understand both viewpoints and argue that our ideologies CHANGE at different stages in our lives.

Recommended Reading:

To The 99% Protesters: You Do Not Represent All Of Us

Socialism As A Means To A Brighter Future

Going John Galt And Protesting Government Waste

Winners And Losers Of Obamacare Hooray!

Photo: Occupy San Francisco. Tax the rich! 9/2011, SD.

Regards,

Brother 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

    I’m a bit worried about the flexibility of your ideology.

    Certainly, people seem to change their philosophies as their life changes, but maybe it wasn’t much of a philosophy as it was just convenient.

    • says

      What is my ideology?

      I don’t think it’s bad to show flexibility in my acceptance of how other people’s ideologies change.

      I’m optimistic that people do what’s best for themselves, hence I cannot blame my friends on the left who go right once they start working. Nor can I blame my friends who were way right to go left once they stop.

      Follow the money!

      • says

        It’s hard to tell what your ideology is given it’s situational change.

        But that’s what I’m trying to say, if your stances are based on your employment situation at the time you are indeed ONLY following the money.

        While it’s understandable, it don’t think that money should be the driving force in someone’s ideology.

        You support an idea or a program because of it’s merits, not because you’re a student or a millionaire. Anything else is dishonest.

        An idea

        • says

          Why do you think there are millions people out there who are willing to vote for Obama to raise other people’s taxes while not willing to pay more taxes themselves?

          Are you saying that all Liberals/Democrats are dishonest?

        • says

          I was just trying to keep the conversation general- I think honest and fair evaluation of facts is an ideology. As part of that, I will accept criticism openly, so that I can further evaluate the facts and form an opinion.

          Again, it’s hard to account for everyone, but do really think that people vote with their best interests at heart? My parents are baby boomers, living on medicare, social security and their investment income. They will vote conservative no matter their stance on “entitlements”. Entire campaigns are built to get people to vote for a candidate based on his “family values” despite the candidate’s public policy. They dangle abortion, guns and gays and often that’s enough for most voters to make a decision.

          If you want to talk taxes, working within the system of progressive taxation, taxes are are their lowest point in 50 years and letting the Bush Tax Cuts expire would be good for the nation.

          When the business owner’s secretary pays a higher tax rate than the business owner, something is amiss.

          And when you hear of conservative plans to cut taxes even further, it feels like crookery.

      • says

        As I said before, I think people SHOULD make decisions based on facts and merit and not how it affects them.

        Do people make decisions for selfish reasons? Certainly.
        I understand it, but think it’s disingenuous.

        Specifically, on the tax front, I can’t account for millions of people- Some hate rich people and want to see their taxes up, some instinctively approve it…
        But really, people should look at the situation and figure out if what the high marginal tax rates are, and if they are fair to the country and its citizens.
        I am not optimistic that people will do what best for themselves, especially in an election.

        If you believe that people should only make decisions based on what’s good for them in their particular situation, regardless of consequence on others, then we’ll have to agree to disagree.

        • says

          I didn’t say people should only make decisions based on what’s good for them. I’m saying that’s what people do.

          I realize that you don’t want to share your ideology and that’s fine b/c I’m sure it will be opened up to a lot of criticism. You don’t have to be afraid here.

    • Jerry Curl says

      What is your ideology?

      I’m going to guess you are leaning more towards Socialism. Raise taxes on the rich. True or false?

      • says

        One of the things in retirement is that I am really empathizing with Democrats who like big government and taxation of the rich. I used to think it was immoral to vote on a candidate who abuses funding, taxes one group but not another, and provides tax credits for only some.

        But now that I’m retired and can participate more, I see why people are willing to vote for INEQUALITY.

        That said, I am ALWAYS for equality. We need to tax everybody out the wazoo after a certain poverty level income, or nobody. Fight to equal the playing field equally.

  2. elai says

    Renter’s tax is just double taxation. The reason you don’t have renter’s tax is the same reason why corporations don’t pay sales tax on the goods of production. Renters already pay the full amount in property taxes in a property if it’s %100 rented out. The USA gives you the ability to change the rent as much as you want after lease expiry in many cases, so as a business, your just being stupid if you don’t charge your renters the full property tax cost. You could just give renters an itemized invoice instead if you want it to be visible. Or legislate that property tax is shown as a separate line item on a rent bill like sales tax is currently. Right now, it’s more like VAT in Europe. Or gasoline prices in the USA. Tax is included in the price.

    Your itemized rent bill is:
    – $XX Mortgage Interest
    – $XX Mortgage Principle
    – $XX Property Taxes
    – $XX Property Insurance
    – $XX Maintenance, Management, Bad-Renter ‘Insurance’
    – $XX Profit!

    Most don’t because then renters will squeal at the profit number that some landlords have and use it as a haggling item.

    • says

      Not at all. In San Francisco and much of the country, there is this thing called RENT CONTROL mandated by… the GOVERNMENT which doesn’t allow landlords to charge market rent many times.

      This is why I bought a condo (not multi unit apartment or building), so I could do what I want.

        • JR says

          Sam obviously beat me to the punch here. I am in Michigan and own rental properties. I do not know about SF, but here the market at least drives rental rates. There are rules and regulations mandating how one operates rental properties. From our local government to the state government.

          Again, even if there were no rules governing rentals, the market would self-regulate at some point.

          • says

            Looks like only NYC, Washington DC, SF, maybe Boston and various other dense urban population centers have rent control. The funny thing is, those are the only places I lived and worked since I was 14 so that’s all I’ve known! Rent control baby!

  3. says

    I like the SAT analogy, but I’m not sure it applies to just working. I do think, though that it could be stated, “high earning: capitalism, retirement: socialism” because not everyone in the workforce strives to make as much money as possible, and those in the public sector are less likely to be capitalists at all.

  4. says

    I am torn because neither candidate will do very much to change my quality of life. I feel that Obama is less of a threat than Romney. For the longest time, I tried to minimize the amount of taxes I paid to the government (Fed/State) as a protest to what they do with it. I was successful for 20 years. I try to focus on what I can control versus worrying or complaining about what I can’t!

    • Eric Shun says

      A president can do nothing to change your life, for the good or for the bad. It hardly matters who occupies the White House. On the other hand, the legislative branch – Congress – can really mess you up.

  5. says

    Sam, I have always been basically a Capitalist since the beginning of my working years…I sense that I will continue to be in my retirement years since I believe I will continue to “work” doing what I love (whatever that may be at that time). In addition, the idea of Socialism to me has always been a downer, though I think I understand what you are saying about the correlation to retirement.

    • says

      Thanks for understanding.

      You won’t know until you are retired. We retirees have a propensity to try and help younger folks and give back since we have more time and aren’t so much focused on making money anymore.

      I guess it also depends whether you have children or not and what you want for them.

  6. says

    I don’t think you have to go into retirement to change your ideology. I’ve seen some very, very conservative people go through income losses due to health problems or losing a job who couldn’t wait to get their unemployment, medicaid, or determination for disability. When we were hiring recently, I actually had a lady tell me that she wanted to apply but didn’t want to get hired so she could keep her unemployment. That makes me a fan of the capitalism argument, I guess, but I can see how your mind might change if you were on the receiving end. I hope I can retire with enough income to not have to worry about it.

    • says

      True, I agree. As a recent retiree, I’m just highlighting my viewpoint.

      It would be GREAT if everybody had the discipline to save and invest for their own future and not rely on others.

  7. says

    I love how our world view always changes based on our experience. Teachers value education, business owners value flexibility, rich guys want more Any Rand, poor guys want more social programs.

    • says

      Exactly. MATH doesn’t lie. The number of people who earn less than $200,000 per person way out number those who make more. Meanwhile the number of people who rely on government welfare continues to grow.

      Hence, I am super confidant President O will get re-elected, and I’ve bet lots of money on the outcome!

  8. says

    There are certain things that I would pay for. I would vote for universal healthcare and pay more tax for that. Now that I’m retired and now paying much tax, I would really love a tax to pay for universal healthcare.
    I was always left leaning and didn’t change my ideology much even when I was making more money.

    • says

      Well, unless you were making more than $200,000 a year when working, you probably would have less reason to go conservative. Nobody has ever attacked you for paying more taxes than the median household income by 3-4X.

  9. MacroCheese says

    Unfortunately, the Ryan VP pick will most likely make you correct in choosing Obama to win re-election.

    This means more taxation for all (dividends and capital gains). It also means there will be no real effort to reign in the government’s unfunded liability issue. Kick, kick, kick that can!

    Our economy is growing anemically, so, where will help come from?

    Oh yeah! Inflation without growth! Stagflation!

  10. Matt says

    Normally I enjoy the blog, but I got to point out a few errors on the High Speed Rail Plan as I live in California too. The bond is $9.95B of which $9B was for high speed rail. This was never supposed to pay for the entire project as federal and private sources were to cover the rest. The project estimate has gone up, but no where near 10 times.

    Your property taxes go to local entities almost exclusively. That is police, fire, local public hospitals, your county jail system, local schools, etc… Very little to none would go to the State. I think you are mixing this up with a local bond initiative like local school building which would be generally covered by an additional charge on your property tax bill.

    Finally, everyone takes sides on high speed rail because of all the press it gets, but even the $9.95B bond pales in comparison to the $15B bond the Republicans helped pushed through CA when they took the governor’s office in the recall. This bond built no infrastructure like high speed rail, but was used to cover that year’s deficit plus additional money necessary when they cut the car registration tax. In contrast to the high speed rail bond which has not even been sold yet, we are still paying that $15B with nothing tangible to show for it.

      • Matt says

        Sam,

        I own, and I also own a 4-plex rental property.

        Given my travels around the world, I think it is obvious that the US is falling behind on infrastructure and also not prepared to deal with a world of expensive oil even though we should be 40 years after the Oil Embargo. Also, the cost of not investing in infrastructure is not $0. Ideally, the US should be investing in this and not bridges to nowhere in Alaska and so forth. Our road system is not sustainable.

        So yes, I am for high speed rail in general. I vote against bonds that don’t have a lasting impact on the state like Stem Cell Research. Going forward, I don’t think there should be bonds unless they have a dedicated revenue stream to pay them off.

        Overall, CA doesn’t really have much debt. It more has a problem in balancing its budget every year, which must be balanced. In general, people overestimate things like High Speed Rail as a cause of the budget problems, because of all the press it gets. Yet, it hasn’t contributed anything to the problem at least yet. On the national scale, people probably think we have a budget deficit because of NPR and Planned Parenthood and Amtrak because of the press those programs get, when in fact they are barely a needle in a haystack.

  11. Darwin's Money says

    I’ll take more income at a higher effective tax rate than less income at a lower effective rate any day. Just have to get creative in shielding it with mortgage interest deductions, business expenses, and whatever else you can (legally) think up!

  12. says

    There are few issues with being selfish, Sam! For one, Socialism is a beast, and it needs money. If young generation has no incentive to work, who will pay for the broke social security? So, you and I may not get our fair share back.

    Also, have you noticed the same trend in the ultra rich? They love capitalism to build successful businesses, but they hate it once they are filthy rich. All of sudden, altruism takes over their mind. It’s an amazing transformation.

  13. Ryan says

    “As students, it is trendy and idealistic to be Socialists. It’s just not cool to be a Capitalist while in school. We believe in our leaders and want to help as many people as possible through programs we don’t have to pay for.”

    Socialism isn’t about “believing in our leaders.” The leaders are usually scum. Socialism is about holding our leaders responsible and forcing them to deliver on the social contract that we all agree to as members of a society; for example, making sure our tax money goes to improving the society via healthcare reform rather than starting wars to funnel the money into the coffers of corrupt corporations. Socialism promotes the improvement; capitalism promotes the war.

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