Cut Your Self-Imposed Taxes
Whether a tightwad or a spendthrift, everybody faces the same reality: we all have to pay tax. And nobody enjoys paying tax. Some complain loudly. Others try to dodge it. Most grumble but are reconciled to this fact of life.
Ever the optimist, I try to think about the good things my tax money is paying for in society and pretend none of mine is spent on another failed government computer project. All up, paying tax doesn’t exactly give you a warm glow.
However, taxes aren’t only imposed from outside. Through our actions and attitudes, many of us impose unnecessary additional taxes on ourselves. Let’s look at what these are, what causes them and how you can greatly reduce your self-imposed tax burden.
This idea is inspired by the following passage from Benjamin Franklin’s Way to Wealth. It suggests there are three types of personal tax: idleness, pride and my personal favourite, folly:
Friends, says he, and neighbors, the taxes are indeed very heavy, and if those laid on by the government were the only ones we had to pay, we might more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our idleness, three times as much by our pride, and four times as much by our folly, and from these taxes the commissioners cannot ease or deliver us by allowing an abatement.
Part of the problem is that we can easily complain about externally imposed taxes, but those we impose on ourselves are more easily rationalised. But as Franklin suggests, they may cost you more than your actual tax bill.
What I’ve got here is a new way of looking at tax in the context of all your other expenditure. The key is seeing all your wasted expenditure as a self-imposed tax. So while you might not be able to cut your government tax bill, you can cut your overall tax bill by making smarter spending decisions. You get to stick it to the man, except the man in question is the part of you that demands wasted spending through idleness, pride and folly.
Let’s look at a few examples of ways these three factors cost you money:
- Idleness: not being organised in booking trips early, meaning you pay more by booking last minute
- Pride: being too proud to drive an older car, wear last season’s clothes or even shop at a discount supermarket
- Folly: buying the latest and loudest gadget as soon as it’s released or spending more each month on clothes than you do on food
Now some of those are pretty extreme examples (especially when you eat as much as I do) but you get the point. And the ways to put these right are just standard money saving and frugality advice of the kind you can find on many frugal living, personal finance and lifehack blogs.
But it’s the new way of framing the issue that might give you an ‘Aha!’ moment. Recognising that your own personal ‘government’ is taxing you hundreds or thousands just by releasing new gadgets might cause your natural aversion to taxes to kick in and stop you making the purchase.
Even better, now your personal government is giving you a tax break on gadget purchases equal to the sum you would otherwise have spent. Kerching!
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