Now, if you live in super-frugal mode, then you will be taking much less from society than most: your resource use will be less; you will not be ripping up asphalt with a car to the same degree; and so on. Another thing to consider is that tax laws might not be fair but they should, if your society is not ruled by corruptness, reflect to some degree the morals agreed on by society. Thus, if you happen legally not to pay taxes, then this may in a weak sense be morally valid in your society. However, that is very different from actually trying to avoid taxes – which is perfectly immoral. Of course, though, one should try to be guided by stronger morals than these watered down and practified ones.

Traditionally, the retired are exempt from moral obligations to contribute: the idea is that they have already contributed enough. EREs are in a different category: they have not paid the same amount of taxes, mortgage payments, utility bills, grocery bills, frivolous spending, etc.; nor have they worked the same hours. However, are these sort of metrics really useful? To me, they show how our present societies catastrophically focus on the wrong things. I am convinced that many, perhaps most, people live their working lives without contributing any net value: you have come up with a new ad campaign or Igadget? Whoopee! That’s no net contribution. To make things worse, the our system itself requires far too much, so even if you are doing good, then it might be that that good should be superfluous. Eg., if you are a road worker, then you might be doing net good building roads, but those roads shouldn’t have nearly as much ravaging traffic on them in the first place – in fact, those roads shoud perhaps not even be there. Another example: you are a doctor or policeman and are doing net good in society – but it would be even better if people were less sick and/or poor.

One conclusion is that normal people’s possible net contribution may often be found outside of their work sphere, and that is no different for EREs. Whether one is ERE or not, one should try to contribute.

Finally, if you do intend to leech on the system by living super-frugally but still using public services, then that is bad – but it is a miniscule evil compared to the HUGE evils of the super-rich and of big companies that pay next to nothing compared to their leechings. No excuse for tiny leeching, but people tend to rant at welfare mothers (the unfair cliche) and ignore – yeah, even defend and glorify – the real criminals.

Very interesting blog, Jacob.

@krantcents: The goal is to reach FI at the earliest possible moment so one doesn’t have to work if one doesn’t want to. You have to weigh your values; if traveling in “retirement” is more important to you than quitting your job at the earliest possible moment, by all means include it in your budget and work longer to save for it.

Jacob is retired already, he spends his time sailing and practicing martial arts and stuff.

Not if my experience is any guide: that is, not if you’ve praciced “extremely rewarding income-producing investment activities” in the … oh, let’s say … 7 years leading up to your planned “extremely early retirement” date.

If you believe in payment according to means and in effecting change to support what you believe, then why not take action rather than talking about it? The most effective way for you to so effect this change is to join us: arrange (legally) to exploit every loophole you can find in the IRC. I’m neither a lawyer nor a financial professional of any sort, and I am able to easily zero out my federal income taxes at very little time cost to myself. I know of no better way to get something done than to lead by example and see who follows. How many people have to exploit the IRC before lawmakers get the picture and unscrew the code? I’d prefer them to scrap the whole gig and start over, but we’ll see what they come up with in the way of incremental changes. So, how do you wield your liberty? What actions do you take to effect change such that everyone pays according to their means? (I politely and in good faith suggest that your lecturing on morality has very little effect at all.)

I see nothing wrong with a person paying only their “fair share” of taxes. I just think we may define what is fair differently.

In a perfect utopia I’d support the Libertarian ideals to limit government and depend on individuals to always do the right thing. The problem is that in reality individuals are happy to trounce on the rights of others and ignore the common good. Schools, police, roads, libraries, etc are items that absolutely benefit the common good and it is your duty to pay for these services. The environment and defense are areas that require federal oversight as well. Even if you don’t use these services directly they provide a broad lift to our entire populous, and you benefit from the indirect affects.

There is also the issue of tyranny of the majority. What that means is that rural areas would never get phone service and electricity. Cyclists would never get bike lanes (since most people drive cars, right?). Corporations would run unchecked to discriminate, commit accounting fraud, violently put down unions, and ignore the safety of workers. OSHA, SEC, FDA, EPA, FAA, DoE, FEMA, NASA, HUD, FHA, FDIC, etc all of these agencies and organizations do good things! These responsibilities are not easily replicated by the private sector. Left unchecked the little guy would get squashed. Bureaucracy is expensive but it is sometime still the best way to do important work.

Moving to a pay for service model would certainly cause many people slip through the cracks, not to mention how it would hurt social mobility and the equality of our society. Do you want to deal with a police officer that is paid by general tax revenue or a neighborhood vigilante group? Do you want to haggle about prices before the firemen will douse the flames? Liberty is about having the power to affect change and not about making sure you don’t pay for a library you don’t personally use.

My mom taught me to share my birthday cake with all of the other kids even if they didn’t bring a present to the party

It is difficult to quantify the right amount of taxes but I have my ideas. To make it short and sweet, everyone pays according to their means (wealth AND income) but not according to the skill of their CPA or CFP.

Seriously, I don’t see the problem for those that can achieve it to take advantage of what options we give them in the US. He’s not doing anything illegal or immoral.

It does seem best that Early Retirees would use their time to do things beside serving themselves and I suspect Jacob will and is already. Someone who has the discipline & knowledge to become retired at a very early age, will go quite crazy doing nothing.

Also, I don’t remember reading anywhere that anyone is required to pay taxes when their income is low, no matter how they earn that income.

Btw…Jacob, thanks for the blog. I find it interesting and thought provoking many times. I will NOT be retiring early, since I’ve chosen to have a big brood instead. But I find inspiration to reach for my own early retirement (65?) just by reading. I don’t know yet when I’ll retire as I’m working on stupid debt instead but thanks for giving me ideas anyway.

@steve – 1) as far as I understand I can put my $4000(2007) limit in either a ROTH or a Regular IRA. Contrary to popular opinion scientists don’t make a lot of money. I make about as much as a long-haul trucker except that I also pay rent. Until recently DW worked as a grad student (they get paid even less). DW could take full deduction and I could deduct almost all of my IRA contribution. But of course, if our AGI was $103k I would go for the ROTH. 2) Yup, 1040, lines 25, 32 and 40 for an individual. 3) I think I need a W-2 income to contribute to the IRA. I’m not sure about the HSA though. The plan is to work enough to fully fund these and then live off of the investment income. 4) I saw an even better job on craigslist. Unfortunately it was in the wrong city, but the job involved leading a group of fitness (no hammering!) cyclists for a fitness ride every Saturday.

@adfecto – I guess you’re a socialist (I never would have suspected that!). What I see is how the government effectively steals my work and how it has been doing so for many years. Robbing is perhaps a better term since I would be going to jail at gun point if I refused to pay taxes. If there was an option to pay 0% taxes and then pay per use, I would take it (if I could please have the $50k+ I have paid in taxes so far back). It is not like these services would not exist (if there was a demand for them) if there were no government. The government just takes the money from productive people and gives it to less productive people. Insofar the market is efficient this is true by definition (I do support tax for externalities like pollution and defense). Well, this atlas shrugged. Actually one of the great benefits I get from being in the USA is in paying for less in tax than I would in Europe. People are economically freer in the US.

Thanks for the link to retiresyd, I’ll be grilling her with some Q’s soon. ;-\

Your paper delivery suggestion is genius! You get to bike *for* work!

You’re only going to live to your 90s? I’m gunning for triple figures! Just had my last grandparent pass away at age 99, so the trend is good. We’ll see how the parentals do en route the century mark.