Credit Dilemma, Part 2

The Third Horn: High Taxation

If it costs an individual more to live today, exactly the same applies to society as a whole; or, in more precise terms, to the government that administers, sustains, and protects the economic life of the people. Thus the third horn, and one we all know and talk about too, the inevitable accompaniment of the successful life. In a word, taxes.

Spell out its implications in figures, and the present-day tax impact on capital and earning power is clear. In 1939, a married man with two children earning a salary of $25,000 paid out about $1,700 in income taxes. In 2003 a person on the same salary will pay some $3,750 in taxes. Do you want to earn a net of $100,000? Then you must gross at least $128,000.

This is what economists call the "tax squeeze." The phrase is apt. A person's earnings, his profits or his inheritance are caught in the grip of a vise; the excess is squeezed out. What is left may be enough for support, but it often leaves precious little for security. Security, if you remember, is based on capital, and this is what taxes make it so difficult to accumulate. The problem is the same for nearly all the stages of success in society; for the salaried junior or top person; for the businessperson; even in some degree, for the person of fortune.

THE GREAT EQUALIZER

Here, then, the three horns. There is no getting around them. Like the mythical ones of old, they are encountered by everyone who charts a course through the seas of our world today. Together, they form a great equalizer which is at the heart of the current problem of estate creation.

To the woman who is earning $400 per week, hard put to make ends meet even on a day-to-day basis, an income of $50,000 or $100,000 seems like unbelievable wealth. She cannot believe there are any financial problems for the possessor of such an income. What she does not realize is that the dilemma for these incomes-widely separated though they are-is essentially the same. That is what makes the accumulation of wealth just as knotty a problem for the Joneses as for those who want to keep up with them.

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