Hallelujah, I Have to Pay Taxes!

By on April 8, 2011

By Sharon O’Day –

Tax Day is rapidly approaching in the U.S.  The closer it gets, the greater the gloom you feel descending over people.  You see, they’re struggling with the fact that they’re going to have to write down in black-and-white (and acknowledge) how much they made last year, how much they took home … and how much they have to pay in taxes. 

We face lots of resistance when it comes to being honest with our money.  Most of us prefer the woolly estimates we have in our heads based on the story we tell ourselves about our financial situation.  But that’s a discussion for another day.

 Today we’re going to celebrate the fact that we need to pay taxes at all.  While we’re at it, let’s celebrate the fact that we have to pay a lot … because the more we have to pay, the more we’ve earned.  (I’m assuming you’re using every legal means to minimize what you pay; there’s nothing patriotic about paying more than you should.)

What makes me such a contrarian?  First of all, we live in a country that, despite its current upheavals, is bountiful and ripe with opportunity … and the underpinnings of such a place need to be paid for somehow.  Hence, taxes.  But beyond that, think of the alternative:

If you did not have to pay anything to the tax man, it would mean you are earning so little from all the various sources (earned income, interest, dividends, etc.) that—after deductions—you are virtually at zero.  That is not a place anyone would choose to be.

Interesting fact, though:  earning that little would mean that with every additional dollar you earn, your happiness would increase.  But that’s not the case at all levels of income.  How’s that?  Well, a 2010 study by Kahneman and Deaton shows that until you reach a level of $75,000 in annual household income, your happiness increases with your income because you are able to cover more and more of your basic needs. 

Why does that only hold to $75,000?  One theory is that once all our basic needs are met, somewhere in that $75,000 range, our spending patterns change.  We don’t stabilize our lifestyle costs and bask in the peace of mind that comes from having excess income.  Instead, we start pushing up the cost of where we live, by changing neighborhoods and “moving up.”  We change how we dress and maybe where we buy our clothes.  We change how we eat, straying from our cautious buying patterns and filling our grocery carts with “wants” rather than needs.

What happens after that?  Here’s the slippery part:  unless we have a very healthy relationship with our money, we will increase our expenditures to match or exceed our income.  We do that to keep us in the same psychological place where we’re comfortable.  If what is familiar to us is being under tremendous financial duress, we’ll keep ourselves there.  If we don’t feel we deserve the joy of financial security, we’ll be sure we don’t have it. 

So here’s what I wish for you.  As Tax Day approaches, I wish that you will have blown past that $75,000 threshold with clarity of what money means to you and what it does for you.  I wish that every extra dollar you have to pay the tax man reflects even more dollars saved somewhere to ensure that you get to enjoy the long life of financial security you so deserve.

Happy April 15th!

Sharon O’Day is the author of the upcoming book “Money after Menopause.”  She’s a global finance and marketing expert with an MBA from The Wharton School.  Sharon has dedicated the last 10 years to understanding the money issues that hold women back from reaching financial security. Website:  http://SharonODay.com

About Sharon ODay

Sharon O’Day is the author of the upcoming book “Money after Menopause.” She’s a global finance and marketing expert with an MBA from The Wharton School. Sharon has dedicated the last 10 years to understanding the money issues that hold women back from reaching financial security. Website: http://SharonODay.com Twitter: www.twitter.com/SharonODay Facebook: www.facebook.com/SharonODayFB.

2 Comments

  1. Lovie

    July 22, 2011 at 5:23 am

    good articles.

    • Sharon O'Day

      August 17, 2011 at 9:08 am

      Thanks, Lovie. Sorry I didn’t respond sooner, but I honestly didn’t see the comment until today. Don’t you love what Living Better is creating here?

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Hallelujah, I Have to Pay Taxes!