Taxes Oh Man, Boring! Why Should I Care?

Photo Credit: Sharon Mccutcheon

The average American spends about $859,208 dollars on taxes in their lifetime. But there are ways to keep most of that for yourself. Wait, go back, just shy of 860k?! That is far too much, be realistic Mr. Refined! OK, let’s defer to something more infallible than taking my word for it.… let’s call this infallible thing math and use it to our advantage so we finish much richer.

The Median American Earns $2,454,880 in a Lifetime

Let’s assume Regular Rob makes $61,372 (which happens to be the US median household income in 2017, according to the U.S. Census Bureau.) now for the beginning of his career he makes less and at the end of his career he makes a good bit more but for the sake of easily-to-follow math let’s simplify and say Regular Rob makes $61,372 every year from the year he graduates until the year he retires. Let’s also assume he works from the age of 23 to 63, that’s 40 years 😉

$61,372 x 40 year is $2,454,880 per lifetime of earned income for work.


Cool, not bad I bet you have $2,454,880. Wait, what you don’t? Oh, you only have been working for 7 years so you have $429,604, right? Still no?! OK, I will stop patronizing you now. There are there meticulously design force working against you that you need to learn to make work for you. These forces are carefully and thoughtfully crafted to ensure that the poor stay poor and the rich get richer. Can you guess what they are? That’s right taxes (35%), interest (34%), and inflation (4%/yr to be conservative [Inflation Actually Near 10% Using Older Measure]). You are way smarter that Regular Rob. Now let’s learn how to finish much richer that Regular Rob.

What is the Average American’s Overall Tax Rate?

“If you add up the four income-based categories of taxation (Federal, state/local, Social Security, and Medicare), the average American’s effective tax rate is 29.8%. This is in addition to any consumption-based taxes paid, such as sales tax, property tax, or other taxes on specific items.”

USA Today

Including consumption-based tax, the average Americans total over-all tax liability is 35% of your lifetime income. Interestingly, you can contact your local social security office for your lifetime income number…. that is assuming you have reported all your income on your tax returns. I trust you have 🙂

35% x $2,454,880 lifetime earned income = $859,208 of life time tax liability.


Imagine if you got to keep most of that. Imagine if you had that much in a stock market investment! Life would be good, very good. So let’s make life good.

“But that is not possible don’t we have to pay taxes?”

said Regular Rob

“35% of Americans don’t have to pay federal income taxes” – The Motley Fool

Isn’t that illegal?

Said Regular Rob

Robbie Boy, this is why you are so regular. No! I ONLY recommend you follow the legitimate tax laws that you are afforded to exercise by right of law. Everything that I recommend is 100% legal. Of course, you will have to verify that the ideas talked about here apply to your individual situation and I strongly recommend that you consult a licensed tax professional.

If you want ordinary results, do what the sheep do. If you want extraordinary results, do what the wealthy do.  Mitt Romney paid a 14.1% tax rate in 2011. 

“But Mitt Romney is rich.”

Said Regular Rob

Well done Robbie. Even a blind squirrel stumbles on an acorn every now and then.
Romney and his wife had a net worth of between $190 and $250 million, according to Wikipedia

In reality, the wealthy pay much lower tax rates than the middle class. That is the way it has always been and that is the way it will always be because they are the ones that write the laws. Why do you think we have 73,954 pages of tax code? Which as far as I can tell, the MadFientist and I are the only non-CPAs who have actually read it. I know reading about taxes is so boring that you are probably conjuring up and excuse to go eat vegetables right now so you don’t have to even finish reading this article on taxes. Just remember that $859,208 is worth reclaiming on your side of the ledger. A temporary pain for many years of gain.

Think critically, if you have a net worth of $200million and it is your job to write the tax code. All of your buddies know it. Do you think they might ask you to write it so it gives them an advantage? …Hmmm, you could obfuscate the tax code with thousands of pages of dry empty rhetoric that bury powerful loopholes for you and your oligarchies buddies in a daunting mountain of monotony and arduous financial terms that conflate in your mind until no one can mollify you. ….or you could make it simple, easily understood and fair for everyone with is simple one-page flat tax rate percentage of income. ¯\_(ツ)_/¯ Guess which one those good ol‘ boys chose?

Next time I will unpack a bit about how I took the federal tax rate from 25% down to 9%, then down to -1% or a tax credit of 1% (2017) to 1% in (2018) as an inroad to my FIRE walk. Then we can finally get off this lame topic of taxes to some more fun aspects of FI.



Until then, keep the FIRE burning my friends.


Related Articles: Pillar I: Tax Optimization

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2 Responses

  1. 5am Joel says:

    Dude, I’ve been delaying my tax filing this year due to “no good reason at all”.

    I love your line: A temporary pain for many years of gain. This is how I will start looking at my taxes for sure.

    Thank you!

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