I had a conversation recently with a friend of mine who threw out a thought that really caught my attention, “Being financially independent is the best thing that anyone could ever do – better than giving to charity. If you are financially independent, you automatically give more to the poor than most Americans, and you save others from having to give to you”. At first, I thought this was kind of harsh (maybe he had a fear of poverty), but it really resonated with me as being particularly true. A recent Washington Times article noted that Americans average giving is 4% of what they earn. So, does the percent of your taxes that fund government charity programs equal more than this?
I thought it would be great to really look and see how much someone who was financially independent “gives” to charity, as well as how much they don't take from Uncle Sam's charity. To make the math simple, I'm going to call financially independent as someone who makes $100,000. That would mean they need to give over $4,000 through government wealth transfer to be higher than average.
How Much Wealth You Transfer Each Year
Based on the 2010 Federal Taxpayer Receipt, someone who earns $100,000 would give the following amounts to social “charity” programs (not including Medicare and Social Security):
- Medicade and Children's Health Insurance Programs: $492.20
- Other uninsured Health Programs: $41.40
- Unemployment Insurance: $202.40
- Food and Nutrition Assistance: $165.60
- Housing Assistance: $101.20
- Earned Income Tax Credit: $161.00
- Child Care Support: $27.60
- Temporary Assistance for Needy Families: $36.80
Total: $1,228.80 – So, not even close to the average amount given to charity, but that is still a large sum.
How Much “Charity” You Don't Use
So, now I thought it would be interesting to see how much I would save others by not benefiting from government programs. If you make $100,000 per year, as in the previous example, you would not be eligible for any of the benefits that your tax dollars paid for. However, if you were below the federal poverty line for your state, you would qualify for almost all of the programs.
So, for this example, let's say I'm a family of two – just my wife and I. Combined, we only make $18,000 (At first I didn't think this was possible, but if you only work part-time, 20 hours per week, at minimum wage of $8.50, you end up at this income level). Since we have no kids, we don't qualify for some programs, but here is how much we would receive with what we would qualify for:
- Housing Assistance: $1,064/mo for a studio apartment (so $12,768 per year)
- Unemployment Assistance: $93/week for up to 52 weeks ($4,836 per year)
- Earned Income Tax Credit: $1,721
Total: $19,325 per year. And that is with no children! If we did have children, our benefit would increase by around 50%!
So, not having to receive benefits really saves others a ton of money. But how much does it save each person? It is important to note that only about 55% of taxpayers pay income taxes in excess of the benefits they receive. So a whopping 45% of Americans actually get more than they pay in. That means that about 35 million taxpayers have to foot my income. Thank you!
So, what is the bottom line? Being financially independent does not replace giving to charity – sorry folks! While you do transfer wealth to needy individuals, it doesn't make up for it all! However, by being financially independent you do save others a boatload of money! While there are truly some in need, that is really a ton of money for a couple without children. They would actually receive more in benefits than they even made in a year. That seems a bit excessive – much more like a handout than true aid.
Think about this – especially students. Next time you go to your guidance counselor tell them that you don't care what you do, as long as you become financially independent. What will their reaction be!
What are your thoughts? If you are financially independent and pay the bulk of U.S. taxes, do you escape having to give to charity? What about not being a charity case, is that worth something? And do you think it is right how much we actually transfer to individuals?