David Henderson has a post describing a friend who has had highly variable income:
- In 15 of the 25 years, their income was < $100K.
- In 10 of those 15 years in which their income was <$100K, it was also < $50K
- In 2 of those 10 years, their income was $0.
- In 5 or 6 of those years, their income was > $500K.
- In 1 of those 5 or 6 years, their income was just over $900K.
All of their 5 or 6 high-income years were years in which their marginal tax rate was 39.6% or 35%.
...To make this income, they work 6 to 7 days a week for 10 to 12 hours a day. ...Because they work so hard, some of the things the rest of us do and don't hire people for, like gardening, minor repairs to the house, etc., are things they hire people for. These payments are largely non-deductible from their taxable income.
The last point is really interesting. If you hire a "secretary" so that you don't have to do your own typing, you get to write her salary off as a business expense (that is, you don't count her salary as part of your income). But if you hire a gardener so you don't have to do your own gardening, you do have to pay taxes on that as income. It seems like an arbitrary distinction. If I think my time is better spent doing my "main" job and I pay others to do the rest of the things I need done in my life, why does it matter if such a person is typing for me, or gardening?
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