Come the Revolution

Most financial blogs are not political. That’s not what they are there for, but certain parts of political philosophy and policy will naturally become entangled with the way any FIRE oriented person might think.

Tax policy is obviously something that effects people in early retirement or who are trying to save more money. If tax rates are lowered then naturally there is more money in your pocket. For an early retiree who is relying on capital gains and dividends as passive income then preferential rates are clearly helpful to maintaining the lifestyle. I have a slightly different perspective.

Cards on the table; in the US we are considered pretty left wing, although in Europe we would be considered more left of center. One of the biggest complaints about marquee policy positions such as universal healthcare or free tertiary education is that is would raise taxes. Of course that is true, these things don’t pay for themselves (although many successive governments don’t seem to have a problem in not balancing the budget).

At present I pay around $12000 a year for family healthcare on the exchange. This has an out of pocket expense maximum of $14000 a year, similar to most plans like this. So in the event of major medical catastrophe we would be out around $26,000. Obviously we won’t spend this every year, but as we age then premiums will go up. I don’t think it’s unreasonable to expect on average to be paying north of $15,000 a year.

In-state tuition at the University of Oregon is $12,000 a year and we have two kids. So if say in-state tuition was free (you would still pay for room and board) then we would save $12,000 a year for 8 years.

So if there was universal healthcare and free in-state tuition then we would save $15,000 a year most years and for 8 years save $27,000. So if someone said I could save $27,000 a year but would have to pay an extra $10,000 a year say in taxes then clearly I would bite their hand off. Obviously this is slightly selfish, not everyone has kids and not everyone is buying health insurance for a family of four.

So i’m simply saying that for some families raising taxes is not necessarily a bad thing (as long as we know where the money is going!). And for those who are still working but looking at FIREing then it’s possible that paying for college and health expenses are the two biggest things that could be preventing them from pulling the trigger.

I do find the US establishment’s view on these types of things very interesting. To a lot of the US these are considered “Socialist” ideas. In reality they are at most Social Democratic. However I do think a lot of people don’t actually understand what Socialism is. No one in congress is advocating taking back the key industries into state control or the removal of the capitalist economy. In fact I believe the introduction of a larger safety net in the US would actually provide for greater free market fluidity as it would provide an easier path for people to become small business owners or entrepreneurs.

In today’s society it is almost impossible to separate your personal philosophy from politics and it is easy to be pigeonholed. That is especially problematic in the US due to there only being two main parties, each of which is moving further away from the center. Most people’s beliefs sit on a spectrum and it shouldn’t be binary.

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