the process

How Subsidies Make Early Retirement Possible, Even Without Obamacare

Subsidies are in the air right now, with them likely going away for health insurance under the next presidential administration. And though we’re hoping we get some certainty soon about where our health coverage will come from and how we’ll pay for it in early retirement, the truth is that we’ll be completely fine. As high-net-worth, soon-to-be early retirees, we have nothing to complain about, and no leg to stand on to claim hardship. We’ll figure things out, whatever may come. Instead, our hearts are with those who can’t afford higher health care costs, and we hope that any changes in the law won’t put undue burden on them.

A Subsidy By Any Other Name

An interesting thing, though, is that we’re actually a bit relieved that we likely won’t be getting a health insurance subsidy, because we always felt a bit icky about the whole set-up. Mainly we didn’t like that we’d get a bigger subsidy than many middle class families even with our higher net worth. But there was also something about the word “subsidy” that just didn’t sit right with us, making clear that others would be paying for something we’re using in such a blatant way. Turns out, that’s no accident. “Subsidy” was chosen as the word to go with Affordable Care Act premium assistance on purpose.

And “subsidy” is just one word for a concept that most of us embrace openly and unquestioningly: the idea of incentives for things that provide a social good of one sort or another.

We call these subsidies lots of different things — public services, tax credits, tax refunds, tax deductions, public assistance, etc. 

In our case, we get lots of tax benefits that we accept without question, like the mortgage interest tax deduction, and a tax write-off for the property tax on our bigger-than-we-need house. It’s easy to see the logic behind wanting to incentivize home ownership, to ensure that we take literal ownership in our communities, which theoretically makes them stronger and safer. It’s just like we incentivize having kids via the child tax credit, because it’s clearly a social good to have future taxpayers who will pay for our Social Security and Medicare. // The Pointlessness of Second-Guessing -- Early Retirement Blog, Financial Independence Blog, Not Second-Guessing Your Actions

Paved public trails — a subsidy we enjoy on a regular basis

But giving us a bigger write-off for buying more house than we need only serves to drive up home prices and create more sprawl, it doesn’t create more social good. Our tax and safety net system is neither consistent nor fair, nor always based on good economic reasoning. But it is rife with manipulative language that affects how we feel about things — and by extension, how we feel about the people who benefit from them.

So what we call things matters. Calling something a subsidy feels icky, but calling it a “library book” or the “401(k)” makes it feel entirely different, even though it’s essentially the same — using public funds in the interest of the public good, even if doing so doesn’t benefit everyone equally. It’s not by accident that ACA assistance was deemed a “subsidy” while the mortgage interest subsidy is called a “tax deduction,” or the tax break on the money you invest in your IRA is called “retirement savings.” One makes you feel bad for taking something, while the other absolves you of guilt because you’re simply giving a bit less. (Consider: If you own your home and take the mortgage interest deduction, you live in “subsidized housing.” Does that change how you feel about the deduction? Words are chosen on purpose.)


In Defense of Subsidies

Today, I’m sharing a journey through my life, viewed through the lens of the many subsidies that have gotten me where I am today, though almost none of them are actually called subsidies. Much like our recent Of Boosts and Bootstraps post, this is all about choosing the lens through which we see things, and how that lens matters to our public policy. // How subsidies make early retirement possible, even without Obamacare // Poor subsidizing the rich / Tax breaks to build wealth

I’m Completely Self-Made… If You Don’t Count All the Subsidies

In many ways, I’m the embodiment of the American Dream: the child of an immigrant mother and of a father whose family has been in the country for centuries. Both of my parents grew up very poor, yet advanced to the middle class by the time I was born. And I’ve been able to continue that trajectory, making my way into the upper middle class or possibly even upper class, depending how you define that, without financial assistance from my family.

As I’ve shared before, I always worked hard in school and could claim that everything I’ve earned has been all me. But not only was it not all me in a hard work sense — I had lots of help and support from many, many people along the way — it also wasn’t all me or all my family in a financial sense either. There were subsidies helping me along at literally every turn. Let’s take a look at them, and then discuss whether it was all worth it to society.

The Subsidies That Made My Success Possible

Before I was born, my dad’s college was paid entirely by the U.S. Army, meaning that a poor kid from a small town gained access to the middle class — made possible by federal defense spending

My parents met while my dad was stationed with the Army overseas, and my mom had a job on his base — made possible by federal defense spending

When I was born, my parents had just bought a house that was a stretch budgetarily, but was in a much safer neighborhood and better school district than where they had just lived — made possible by the mortgage interest deduction, which let them buy the stretch house

We moved several times when I was growing up, but my parents always placed a premium on school district quality, often stretching again to buy a house in a better district. Growing up, I always felt safe where I lived, which helped me stay focused on school, unlike too many kids who grow up in poor neighborhoods — made possible by the mortgage interest deduction and by unequal public school funding, which benefits some students while hurting others

My dad became disabled in his 40s when I was growing up, after my parents divorced, and he received disability insurance which is required by state law to provide a certain level of coverage, and received Social Security disability benefits, meaning that I got to stay in my good school district all the way through high school even though my caretaker could no longer work — made possible by state funding of insurance regulation, and by federal Social Security 

I received a mostly free college education from the state where we live, based on my high school academics, living in a good school district and a safe neighborhood, and not having my education derailed by poverty. I took out a small amount of loans to make up for what my scholarship didn’t cover — made possible by the mortgage interest deduction, unequal public school fundingstate-funded college, extra taxpayer dollars to pay my scholarship and living expenses, and federal underwriting of my loans

Throughout my growing up years, I was fortunate enough to travel around the U.S. and to Europe several times, which broadened my perspective and made me a more grateful, compassionate human being — made possible by federal interstate highway funds, federally-funded air traffic control and federally funded international diplomacy and foreign aid


A remnant of the Berlin Wall, brought down by significant U.S. investment in post-War Germany and the Cold War

I also enjoyed learning opportunities at local libraries, and enjoyed free recreation at public parks — made possible by state and local funding of public services

All the while, I was kept safe wherever I went by local and state police who patrol our roadways for speeders and drunk drivers, and by the men and women who serve in our armed forced to make the world a safer place — made possible by federal defense funding and by state and local funding

Once I started working, I was able to save much faster thanks to tax benefits bestowed upon me, like retirement savings and health insurance benefits being considered pre-tax, and by the Social Security earnings limit that says I don’t keep paying into Social Security after earning above a certain amount — made possible by the laws around 401(k)s, IRAs and health insurance and the Social Security earnings cap

My dad and Mr. ONL’s parents all have military/VA pensions and health care, in addition to Social Security, that ensure that we will never be in a position of having to support them on our own, and giving us tremendous peace of mind — made possible by federal defense and veterans funding, and federal Social Security

We own a rental property with a respectable cap rate, thanks to the many tax write-offs we are afforded as landlords such as depreciation — made possible by federal tax code that incentivizes rental property ownership

We will have our house paid off next year, as well as have an amount saved that is significantly higher than it would be without the tax breaks we receive, allowing us to retire at an absurdly early age — made possible by the mortgage interest tax deduction, 401(k) and IRA laws, property tax deductions, charitable tax deductions, etc.

When we retire and begin selling shares of our index fund investments, most of that income will only be taxed at the highly discounted long-term capital gains rate, meaning that our dollars will stretch much farther — made possible by lower federal and state tax rates on long-term capital gains, and higher income thresholds for taxes on dividends

In short, subsidies have been an ever-present force in my life, undoubtedly a force for tremendous good. Without them, I most likely would have grown up poor like my parents did, probably would have received a far worse education, and who knows what I’d be doing now. That path into the middle class would have been far less open to my parents and me, and moving up into the upper middle class or higher would be vanishingly difficult to imagine. In addition, we’d still be years away from early retirement if subsidies hadn’t helped us save faster, assuming we could have ever gotten into our professions without the boosts that got us there.


We plan to spend a lot more time at national parks in retirement, thanks to — you guessed it — taxpayer funding of the parks (subsidies!)

What You Have Gotten In Return

I take seriously my responsibility to recognize what I’ve received, and to pay it forward. So, for the record, here’s a brief rundown on what society has received in return for heavily subsidizing my life to this point:

Thanks to growing up in safe neighborhoods and good schools, I’ve stayed out of jail and prison, saving society approximately $30,000 per year.

Thanks to growing up in the middle class, not poor like my parents, I never experienced food insecurity or the obesity that often follows it, saving society my share of the $150+ billion that obesity costs taxpayers every year, not counting the food stamps I likely would have needed while growing up.

Because I grew up in safe neighborhoods and wasn’t forced out of my good school district by my dad’s disability, I went on to earn a valuable degree from a prestigious university, and went into a lucrative career path that has allowed me to pay federal and state income taxes for 15 post-college years so far, most of those in a middle or high income bracket.

I’ve more than paid back the sticker cost of my education to my state through income tax, as well as paid large amounts in sales and property tax, thanks to the purchasing power of my high income, and especially when paired with Mr. ONL’s higher income, equally made possible by subsidies.

I’ve made a point of donating to a range of charities on a recurring basis, with my excess earnings made possible by subsidies, advancing a number of important social and environmental causes. After we retire, we’ll continue donating money to these causes as well as donate much more of our time and experience to expand their work.

After we retire next year, we will still continue to pay a range of taxes, including property tax on our primary home and rental property, sales tax on items we buy, a small amount of income tax, use taxes on gasoline and utilities, and other travel taxes (airport fees, etc.).

Because we have been able to save aggressively, thanks to educational subsidies and to subsidized retirement savings, we should never require public assistance such as SNAP (formerly food stamps), housing assistance, true Medicaid coverage (for very low-income, not Medicaid expansion subsidies), or any of the very limited number of programs still available to adults living in poverty. Depending on what shape Medicare and Social Security are in by the time we get to our 60s or 70s, we may still take those benefits, but we’d be just as happy not to need to.

So, what do you think? Were all the subsidies I’ve received in my life ultimately in service to the social good? Was I a good investment?


Backpacking — for free! — on national forest land, 100% subsidized

Early Retirement… Already Made Possible By Subsidies

When we’ve talked about the ACA and subsidies, we’ve occasionally gotten comments along the lines of “It’s ridiculous that millionaires are receiving subsidies for their health care.” And while we agree that there should have been some sort of asset test built into the law to exclude high net worth families from claiming the same subsidies that low net worth and low-income families can receive, the larger fact is that high net worth people have so much of their existence already subsidized every day. This article by the Washington Post highlights only a few of those ways that rich people benefit from government hand-outs, though none of them are called “subsidies” for obvious reasons. And for those of us who now find ourselves higher up the income ladder than where we grew up, our very existence as high net worth people was already made possible by subsidies, as I described above.

Drawing the line here, saying “No, this ACA subsidy is bad, but all the others are fine,” is arbitrary, and ignores how much of our lives are subsidized in reality, especially for the rich. (Consider: Tesla drivers literally pay nothing toward maintaining the roads that they use every day, because roads are funded by gas taxes. Guess who drives the least fuel-efficient cars on the road and therefore pays the most to maintain them? People who are forced to drive old cars because they can’t afford new ones. The poor subsidize the rich in more ways than most of us can imagine.)

So even though ACA subsidies are going away, every early retiree — as well as virtually every person in the country — lives a life filled with subsidies, tax breaks and public services without which life would look very different. The next time you hear someone bashing subsidies, remind them what the word really means.


Are You a Good Investment?

What are some subsidies that have helped you along on your path to success? Has seeing my list helped you rethink any part of your past, present or future? Do you think you’ve ultimately been a good investment? And what about me — have I been a good investment of society’s dollars? Let’s chat about it all in the comments. :-)



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104 replies »

  1. Interesting way to think about it. I especially like the bit about Tesla’s being subsidized by the poor.

    I hadn’t heard that one before.

    Call them what you will….but the tax advantages of REITs and low dividend income taxes have definitely helped my net worth over the years!

      • REITs/RICs are not taxed, thus they do not have the double-taxation that corporations have. Assuming 40% corporate tax and 15% personal tax rate and 100% of income available is paid out, the following shows how REITs/RICs can actually be more tax efficient than corporations, even when held in a non-tax advantaged account. When REITs/RICs distribute dividends, they are distributing their untaxed income ($100 REIT/RIC income->$100 ordinary dividend-$15 personal tax=$85 investor income). When corporations distribute dividends, they are distributing income that has already been taxed once ($100 corp income-$40 corp tax->$60 qualified dividend-$0 personal tax=$60 investor income). At higher personal tax rates (say 33%), it still works the same:
        $100 REIT/RIC income->$100 ordinary dividend-$33 personal tax=$67 investor income
        $100 corp income-$40 corp tax->$60 qualified dividend-$9 personal tax=$51 investor income

      • Interesting. Thanks for the info, Max! Almost everything I’ve read has recommended to hold REITs in tax-advantaged space because they are taxed at ordinary income rates.

      • Yes, well in a tax-advantaged account, it becomes an even better deal for the investor, until you go to pull it out of your account in retirement anyways…
        In a Roth, yes, definitely the best of both worlds. In a traditional, maybe a wash depending on tax rates in the future.

      • I’m not following the logic on that one. Everybody with any form of earned income has access either through the regular channels or the backdoor channels. For it to be subsidized, something would need to be subsidizing it. For health care subsidies, it is the people over 400% FPL are doing the subsidizing, for child tax credits and extra personal exemptions, it’s the people who don’t have children who are doing the subsidizing. The folks with massive mortgages or high charitable contributions get subsidized by folks with no or little deductions. Who is subsidizing Roth style retirement accounts? People who choose not to save for retirement? :-D

      • The subsidies are not always quite that direct. Like I still subsidize GMO corn farmers because I pay federal income taxes, even though I make an effort not to buy GMO/non-organic corn and don’t buy the junk food and beverages that stuff ends up in. Anything that’s tax-deferred now or later is subsidized generally by federal income tax payers because in reducing your own tax liability, you’re either raising the liability for someone else, or you’re reducing the amount the government has to spend, which is reducing the jobs or benefits to others. (Note: This is not a defense of that system, just an explanation of it.) ;-)

    • Thanks, Mr. Tako! And yeah, it’s true for Teslas and all electric vehicles. Not to say the taxes won’t change, but as for now, taxes on electricity do not pay for roads, and this is something we’ll have to reckon with at some point.

  2. I live in a state that has become increasingly more regressive in its tax structure and restrictive in its social net. For every complaint about “welfare moms” and “deadbeats” I think about how much more monetarily those folks complaining benefit from government choices….better schools, more amenities (libraries, parks), more tax breaks because of the SS tax structure and deductions, and safer communities.

    And work-sponsored health insurance IS subsidized…it’s part of the compensation package but not subject to most payroll taxes on either the employer or worker side, so frankly I never felt bad about receiving the ACA subsidies.

    • I’m so curious who those folks think “welfare moms” even are anymore. Don’t they know that the olden days of “welfare” are gone, and the only things left (TANF and WIC) are not enough to let you sit around and get rich. Sigh. But this all proves the idea that the words matter. No one thinks of good schools or tax breaks as “subsidies,” they just think of them as something well-to-do people deserve. Subsidies are for those other people, those poor people. And so right — our health insurance premiums and benefits have always been pre-tax, and while you can now elect them to come out of your paycheck post-tax, they are very much a subsidy for people who have employer-based coverage!

  3. Very interesting take. Like you said, it’s all about how you frame it. Receiving a tax break through the mortgage deduction vs. receiving a break on premium costs through subsidies. I agree that some sort of net worth measure be used to determine subsidies for healthcare (much easier said than done though).

    • Thanks! It’s interesting how we think we see things objectively, but in reality our views are so shaped by language and other perceptions. As for an asset test, ACA subsidies are not the only things without them — asset tests often end up becoming abusive and intrusive (not to mention very resource-intensive in terms of public employees having to verify everything), so they’re not a great answer either!

  4. I’d never thought about some of these tax deductions and other benefits as subsidies, though we jokingly use the term loosely to describe family gifts and hand-me-downs, i.e. “My sister subsidizes my wardrobe” or “The grandparents subsidize the kids college fund,” just to acknowledge we get a lot of boosts here and there.

    “No man is an island” comes to mind–we’re all interdependent on one another in society, and the ways those complicated connections shake out are rarely “fair.” And of course, those with greater wealth tend to get the better end of the uneven deal. I agree that makes paying your taxes and giving charitably, as well as working hard, even more important. Great post!

    • I hadn’t thought of them as subsidies either! And absolutely we’re all connected to each other, like it or not. ;-) Couldn’t agree more with you that paying our fair share and giving charitably are doubly important for that reason. (And it’s why I bristle whenever I read about people trying to reduce their taxes to as little as possible!) ;-)

    • That is why economists call them “tax expenditures”, which are functionally equivalent to a subsidy, by having the same effect.

  5. Great post – this is why I keep coming back, you consistently look at the world around you in a different light.

    Totally agree on the language framing of certain programs – I always hated the term “Food Stamps” – it drives a very negative connotation.

    PS: am currently taking a public bus that is subsidized by both the gov and my employer

    • Thanks so much for saying that, my friend. :-) That’s better than making money on the blog. Haha. Enjoy your subsidized bus ride! I’m glad to help pay for that, because it gives low-income people and kids a way to get around, and takes cars off the road. So much social good!

  6. I think the most important part of your article is that none of us are truly “self made.” There are so many obvious and hidden hands supporting us throughout our growth as human beings, whether in private or through public subsidies.

    I always liked Warren Buffett’s comment that he won the ovarian lottery. Lol! He said if he had been born to different parents in the same society or in another society in the world, his wealth and success would be completely different. Also if he had been born 250 years earlier, his skills in probability and capital allocation would have been not as lucrative. Or if he had been born in hunter-gatherer times, he would have been relatively useless!

    Chance is not the only factor, but it certainly IS a factor.

    More importantly for us, how does it change our mindset and behavior when we realize others had a hand in our current success? To me, the only natural response is gratitude. And the outgrowth of that gratitude is to do what matters. We’re very fortunate, so why not use our wealth, good health, sharp minds, and financial independence to make the world a better place?

    Thanks for the morning inspiration!

    • I love every word of this comment, Chad! I’m in total agreement — none of us are self-made, and we owe much to those around us, chance, public support AND our own efforts. Trying to focus on only one isn’t looking at the whole picture. I love Warren Buffett’s example, too — he’s a wise man. Like you, I always come back to gratitude when I think about this stuff, and I often wonder why some people seem so resistant to gratitude. There is literally NO DOWNSIDE to feeling grateful, so it’s utterly befuddling to me when people insist that they are entirely self-made.

  7. I’ve enjoyed many of the same subsidies as you. There’s no two ways around it – we are ALL subsidized in one fashion or another. It’s a part of our society – for good or for bad. As a Libertarian, I’m generally on the opposite side of subsidies, but if they are available, I’m naturally inclined to take them. After all, my tax dollars fund those same subsidies.

    You’re right that rich people are heavily subsidized, especially when it comes to our insanely complex system of taxation. It’s ridiculously complicated, written in large part by bought-and-paid-for politicians who write in exceptions, exemptions and other qualifiers to help benefit the companies and people who devote heavily to their livelihoods in D.C. It’s a sad state of affairs, and we Americans probably don’t even know the half of it.

    Regarding healthcare, I’m not at all weirded out by taking subsidies. We hardly use healthcare anyway, but we’ve paid handsomely for it over the years. I realize that we’ll definitely use that healthcare more as we get older, but even so, we naturally want to minimize what we spend on something that we don’t currently use so that money can be better utilized elsewhere (investments, for example). Thus, if subsidies exist based on our extremely low income (coming soon!), we’ll gladly take them.

    Regarding what makes a “good investment” from a human perspective, I believe that if we lead good lives and are productive members of society, we are good investments. If we continue to funnel tax dollars back into the system, we’re *especially* good investments because we help to fund subsidies used by those who actually need them.

    But the line sure is fine!

    • I think a lot of folks are in the same boat as you and me in terms of having benefited from these subsidies! And whether we like the idea of our tax dollars being spent this way, it’s good to recognize that a huge percent of our taxes come back to us directly one way or another, instead of just disappearing into some black hole. But yeah, if you have these things available to you, take ’em! That’s what they’re there for!

  8. I’d say I’ve been a fairly good investment for societies coin. :) Student loans – repaid, jail – nope, contribute to SS for 24 years now – check, don’t cheat on taxes, and donate to different causes I like. Also, I’ve found more oil and natural gas than my family will ever consume in our lifetimes, not even counting Mrs. SSC. That adds royalties and overrides to the federal gov’t, states, and other programs subsidized by those activities.

    It’s all an interconnected web and can go many ways: the rich subsidizing the poor, the poor subsidizing the rich, everyone subsidizing everyone else in one way or another.

    My retirement is subsidized by my employers match to 401k, their exra compensation to another plan altogether (i.e. their form of a pension you don’t have to wait 20+ years to get), and their subsidy of my current healthcare, parking garage fee, bus subsidy if Houston wasn’t a horrible public transportation city, they even subsidize my portion of our gym fees.

    I for one am fine with these whether they’re called subsidies, deductions, allowances, what have you. I don’t know about you guys, but we haven’t been able to claim most deductions for child care, the house, student loans and more due to our income level. Yeah for first world problems? Finally getting to qualify to use some of those deductions is something I look forward to in the future, lol.

    • I’ve (probably obviously) been fine with most of the help I’ve gotten, too, though I think a lot of that was because I didn’t think of that stuff as “subsidies.” (Such an icky word — makes me think of high fructose corn syrup and obese children!) ;-) But realizing that they’re all one and the same, they’re just called different things, helped me a lot. So even though the Rs in Congress are now talking about switching to tax credits for health care, it’s all the same thing, and we’ll take whatever is advantageous to us! I *was* able to write off student loan interest in my early years, and losing that write-off when my income got to a certain point did actually give me the nudge I needed to pay it off early — so even losing the subsidy benefitted me! Haha. And we almost certainly won’t be able to itemize in the future, so we expect that a lot of those write-offs will go away for us… but the standard deduction is itself a huge subsidy!

  9. From mortgage interest deductions to capital gains relief to disability payments and social security, I can honestly say we’ve tried to take advantage of any “subsidies” available not only to us, but to any family members we could enlighten (shout out to Dad for teaching me to do my research). I’ve navigated VA benefits for our elderly parents and childcare benefits for our children, as well as helping my brothers deal with the labyrinth of details and documents necessary when applying for both short and long term state disability benefits, a few examples amongst many others. I’m a firm believer in accessing and utilizing any benefit legally available, and if doing so allows someone to retire early and contribute in a different way (other than payroll tax withholding), then that’s all good, too. As far as the ACA looking only at income when determining subsidies (and not net worth), that methodology is not unique to that program. Some subsidized programs allow the recipient to own a home, regardless of value, as well as some liquid assets. I have friends who live in a very high cost area who receive subsidized ACA with a seven figure bank balance, while we do not. They pay less for both of them than I pay for myself, and substantially so. But we chose to relocate to a lower income area, where Mr. AR’s pensions alone kick us out of subsidies. We could have stayed where we were, with our $4700 PITI, the traffic, the crowds and everything else we loathed. We opted not to, and in doing so, we lost the option of subsidized ACA healthcare, but we feel we gained much more than what we left on the table. If I could get the subsidy, you bet I’d take it! I was looking forward to taking the social security file and suspend benefit until they phased it out, and why not? I paid into the program and was eligible for the benefit (at that time). I walked two relatives through the process, one of whom was grandfathered in and actually receives the benefits. We even discussed divorce so I could obtain health care coverage at a huge discount (or possibly free), but the logistics, expense and stress on the kids and grandkids made that path an unreasonable one (and now I’d really be left holding the bag with this administration removing subsidies completely). A draconian solution to be sure, but without national healthcare in this country you do what you need to do to protect your assets. Whatever subsidies, tax benefits, loopholes, etc. are legally and ethically yours to take, there should be no shame in you taking advantage of. If the program has been set up in an unfair manner due to some unintended consequence, the issue should be addressed and remedied at the appropriate administrative level. But in the meantime, by taking the subsidy, the money freed up to do good elsewhere is still put to work in other, different and very likely better, less costly ways. “Subsidies” help society; that’s their purpose, you’ve worked for them, and there’s no guarantee they’ll be available going forward (as we’ve recently experienced). They’ve dramatically improved the quality of our lives and the lives of those around us, and I’m grateful for them 🔗.

    • What a screwed up system we live in if you considered DIVORCE to try to make your finances more logical. Ugh! :-( In truth I don’t support asset testing for public programs, as it tends to be incredibly intrusive and disrespectful to recipients (read Matt Taibbi’s “The Divide” if you want to completely depress yourself over how horrible it can be for poor people), but I also don’t love the idea of us *not* being self-sufficient when we have the means to be. But then again, as my life story shows, self-sufficiency is mostly a myth. ;-) I agree with you that people should mostly take the subsidies available, though, because they are there to promote a social good. Even if we as a country end up footing lots of health care subsidies, it’s undoubtedly cheaper than absorbing the higher costs of not getting preventive care when uninsured and relying on emergency care at crisis moments.

      • We have friends who are considering getting divorced down the line because of what they see happening to their parents (and in-laws) as they enter nursing home care. It is so scary!
        This is a great read – and one that worded so wonderfully (as always) – that you show us all how much we have benefited from these “subsidies” without calling them that!

      • WOW. This is opening my eyes in a bad way. I am so sad that this is even on the table for discussion, and that this could make financial sense for people!

        Thanks for the wonderful compliment, Vicki! :-) Always appreciate your support!

    • Mrs. SSC and I have seriously discussed that option for many of the same reasons mentioned above. Not right now currently, and we wouldn’t plan to separate, but for financial and/or health reasons further down the road, yep, we’re totally down with it if it protects our assets or helps us out.

      Yes, that is very screwed up that our current national “support systems” make being divorced more attractive than being married. At least on paper from a legal standpoint. Ridiculous.

      • This is shocking to me. I had no idea that there were so many benefits to being single that it would actually incentivize smart people to consider divorce. :-(

      • One of the many reasons we were procrastinating getting married was the huge extra tax bill we will get hit with in April versus being single – it’s almost five extra figures in taxes and that’s just federal! Separately vs Jointly, it’ll still be a similar hit.

      • That part I knew, and we have always been OK with that, because we feel like we should pay our fair share. I just didn’t realize what a difference it can make in terms of other factors in retirement like long-term care.

      • Ah yes, I never thought about the long-term care factor as in my family, the men have always predeceased their wives by at least a decade and so the means testing wouldn’t have mattered.

  10. Oh jeez. Where do I start? First Time Homebuyer Tax Credit? Energy Efficient Tax Credit to put in Dual Pane Windows? Deduction on federal return just for paying my state income taxes ?

    The unfortunate part about our convoluted tax code is that a lot of people are either too lazy or too busy to research it to use it to their advantage. So we’ve created an entire industry of professionals whose job it is to be the “go-between” with a profit motive. That”s the biggest problem and why I’d love to see something like The Fair Tax (which both parties hate, and probably will never happen in my lifetime.)

    Our current tax code is exactly what makes early retirement possible for most of the people in this corner of the internet. At a federal level, we are primarily taxing income rather than consumption. If you can “hack that”, and be asset rich and income poor, you’ve won. Regardless of what individual subsidy policy comes and goes over the years.

    • Yeah, exactly. We’ve all gotten lots of help along the way, so acting like this stuff is only for *certain* people is a false way of looking at it. And the tax code is certainly a mess, and built with too many components that economists agree don’t actually incentivize the beneficial behaviors. I’m not remotely opposed to those incentives — clearly I’ve benefitted a ton from them! — it should all just be a lot more transparent.

      • If anyone is acting like subsidies only happens for a specific group of people, then they are just being ignorant. Most of the push back I’ve seen seems to be on “moral” grounds.

        When did it become the government’s job to legislate personal morality?

        If you’re financially independent and you disagree with where your tax dollars are going, there’s nothing stopping you from moving across city, county, state or country lines to somewhere that’s more to your liking.

        The kicker is not everyone is financially independent and can afford to move around on a whim and that’s when it all starts to get dicey.

        Solution? Well above my pay grade.

      • Well… you know that a lot of our new leaders feel VERY comfortable legislating morality, especially when it comes to women’s bodies, what religions people practice or who people love. :-( But I agree with you that it’s not actually their job! And absolutely — public expenditures vary so much that you can always move somewhere that matches your priorities. That said, the states that tend to be most anti-tax are also those that historically *use* the most tax dollars, while those that understand the important role of taxation and public investment tend to be net tax donors. Ironic…

  11. In addition to having federally subsidized loans, I also got Pell grants and federal work-study grants and state scholarships! Then I was funded on NIH funded grants to do health research continuing school.

    I owe my education to the entire US population! And I’m perfectly happy to continue paying my share of taxes to continue funding education now.

    • So glad you got all that support for your education! And how fantastic that you’re paying it forward and paying your fair share to ensure that others get the same opportunity. :-)

  12. First things first, are those your turns in the top photo? Looked like a nice spring ski day.

    Thanks for highlighting the fact that our government dollars do benefit individuals. While there are government benefits for all income levels, there are numerous ones for high income earners as others have highlighted. I have been a recipient of many of the benefits you mentioned.

    • Yes, indeed! Well, Mr. ONL’s. ;-) It was a pretty perfect day. And it doesn’t surprise me at all to know that you’ve benefited from subsidies, too, because virtually all of us do!

  13. Words are pretty much the most powerful force most of us have at our disposal in a regular basis, and we never seem to take them seriously enough. I couldn’t agree more – words have an impact and what we call something absolutely matters.

    It has always baffled me when folks attempt to divide society into ‘givers’ and ‘takers’. We are ALL takers. The most we can control is how much we give, and hope to balance out the scales.

    And to your point of the poor subsidizing the rich, I’d also like to add that of immigrants subsidizing the citizens. I know so many high tech workers who worked here for a decade or less and then headed back home. They paid their share of social security and Medicare taxes (on their not inconsiderable salaries) and will not reap any of those benefits.

    • Absolutely we are all takers. (Though it IS true that the states that are most anti-tax are also those that take in more federal tax dollars than they contribute — irony.) And you’re so right that immigrants subsidize citizens, too. It’s true with high tech AND low tech workers.

  14. I’ve written about this before some years back and I still believe it’s true – I’ve benefited greatly from both subsidies and my own hard work. There’s simply no way to separate the two and judge how I benefited from one or the other in isolation and that goes for just about anyone else with any degree of success in society. People just fail to realize exactly how much they benefit from taxes, especially as children, and go on to claim they don’t take anything from the government. Sure, if you don’t have clean water (Flint!), roads to drive on, access to electricity or internet, any kind of basic education at all, then maybe you’ve not benefited from the government. But that’s pretty unlikely.

    • I know you know this, but it’s never my intention to downplay the role of hard work and perseverance. I’ve absolutely worked hard in my life, and I’m proud of that. But I also recognize that hard work alone wouldn’t have gotten me where I am, nor would it even likely have been possible if I hadn’t had all these boosts. So yeah, totally with you! The myth of the “self-made man” is completely that — a myth. There is simply no one who hasn’t benefited one way or another from public services, even if they’ve never directly gotten a government check.

  15. I hadn’t thought about the subsidies this way before. We’re not eligible for them anyway, which stinks, but even if we were I would feel weird accepting them. That also doesn’t make much sence, because good gracious have we paid our share in taxes!

    We’ve also benefited, though (student loans, good schools, $80 annual national parks pass!!!, all my family gets paid by the government [teachers, military, disabled, gov’t workers, VA employees, Social Security and Medicare benefits]), so all in all I figure that every $1 we pay in taxes comes back to our extended family somehow, it’s just routed through an inefficent bureaucracy first.

    It is still hard to see patients who make poor choices and cost the system a disproportionate amount of money. We have folks who visit the ED more than 300 times per year each without actual emergencies, and the taxpayers foot the bill every single time. I don’t know what the answer is.

    • So funny, isn’t it, how the word “subsidy” itself affects how we see something, when the truth is that you, like all of us, have benefitted enormously from public dollars, all of which are “subsidies” going by different names. And as for those folks who have to use the ED, I fear that getting rid of the ACA subsidies will only make that problem worse. Making it HARDER for people to get health insurance will never be a step in the right direction.

  16. Your article had some very good points that many high earners take for granted. If you like NPR and podcasts, I’d recommend a couple episodes on Planet Money: #217 the art of living at the poverty line and #387 the no-brainer economic platform. I completely agree that the government should subsidize their citizens as a leg up for them and more importantly their children. Giving people incentives for “good choices” with tax breaks results in more people contributing in the long run. It’s a great return on investment. I will make the argument that the system really needs to be restructured to be more effecient. The no-brainier platform podcast makes interesting arguments about this scenario. While that might result in pain for a lot of people for a few years, it will benefit the most amount of people in the long term.

    • I love those Planet Money episodes! Great that you’ve recommended them here — definitely encourage others to check them out! And no argument that we need to make things more efficient AND effective. A lot of tax incentives don’t work as intended, and that’s not okay.

  17. I don’t know if I have some kind of bias that means I’m blocking out a critical piece of information, but as far as houses are concerned, I don’t think we have bigger subsidies for a bigger or more expensive house. If anything, taxes are greater. We have to pay ‘stamp duty’, a one off tax on the purchase of the house if it’s above a certain value, and the only property tax on an ongoing basis is council tax. Our government seems useless at long term strategy, so each year or so there’s a new subsidy re properties (obviously I’ve not timed it well to take advantage).

    Obviously, a major difference is free healthcare, with nominal payments for dentist, eye care and prescription drugs.

    The tax system disproportionately disadvantages poorer people. In spite of the overall tax burden across the UK increasing, for 3 or 4 years we’ve come out better off, in spite of the fact that we’re in a position to contribute more.

    ‘Are you a good investment’ is a controversial question. Should someone who is not a good investment cease receiving subsidies? Are some deservingly poor and others undeservingly poor? What a rabbit warren to go down….

    • It’s also true here that you pay more property tax generally for a bigger house, but you get to write off that larger tax on your income tax along with your larger mortgage interest on your bigger house. Other credits are a flat number, but the ones associated with home ownership in the U.S. all advantage those who buy a more expensive home. And YES, your health care is SO much better than our messed up system.

      I mostly meant the “have I been a good investment?” question as a joke, because I would argue that all of the money society has spent on me has been well worth it, many times over. But I agree with you — thinking of human beings in terms of investments and ROI is not how we should be assessing things!

  18. Yeah, I always felt icky about the subsidy too. I’d prefer not to be on the same program as the poor just because I have no income, but substantial savings. I’d happily pay some money into the system, but as far as I can tell, that isn’t an option.

    It will be interesting to see what our new president does. I heard him state that he’d like to keep the requirement to accept pre-existing conditions (a stupid, redundant term if I ever heard one), but if you do that, you have to make everyone buy insurance. If you don’t, we’ll all just wait until we get sick to get a plan and then the whole thing goes belly up. Will Robinson, this does not compute.

    In any case, I like the way you think. I once had a huge house with a huge mortgage deduction. (Thanks Uncle Sam!) I now have a corporation where I put $51,000 away into a 401(k) every year (tax free) and write off all of my business expenses. (Thanks again Uncle!) Uncle Sam also loaned me money to go to college at a low rate. (Thanks yet again!)

    Most of us in this sphere live amazing lives and we should remember that ever day.

    • Hiya buddy! Yeah, we would have been happy to contribute to the system, too, or certainly to take a smaller subsidy, but there is no mechanism for that. Now we wait and see what the “repealed and replaced” option will look like… supposedly it will be so much better and yet magically so much cheaper, despite the lack of individual mandate! (Yay, economic ignorance!)

      Yeah, your subsidy list looks about right. I had no idea you were such a welfare king. ;-) What’s crazy is that your combined deduction/tax deferral on all of those things nets out to far more in lost revenue than what an average food stamps recipient receives, and yet we vilify that person and laud you for being smart with money. Hmm…

      • Welfare King! I never thought of myself that way, but you have a point!

        Do you think your retirement plans will change? Wait and see?

        Who knows, maybe it will come out better for you. Before the ACA, we could have bought a family plan for dirt cheap < $300/month as long as it didn't cover pregnancy. Maybe it will revert back to that? Who the hell knows.

      • ;-) Don’t know yet how our plans might change. Though I hope for the sake of people who don’t have the financial flexibility that we have that Obamacare doesn’t go away, I also hope the next Congress works on health care right away, so we can have some idea what we’re planning around sooner rather than later. If they have a new law passed by midyear, then we might not have to change our plans at all. But I don’t know how comfortable we’d feel quitting without any clue of what’s coming. Sigh. And those dirt cheap plans of the past had higher OOP maxes and a lifetime benefits cap, right? That’s the stuff that has been great about the ACA, and I hope we don’t lose those pieces!

      • Thanks for flagging this, TJ. I’m not necessarily interested in making just a general government payment, since proportionally that would mostly cover our war spending. It would be nice if you could specifically funnel it into healthcare.

      • Hmm, I’m sure you could find some sort of health care related charity if you did want to deviate your dollars from mostly war to health care or some other thing. :D I like because it’s not a multi-million operation so i feel like my contribution actually makes a difference.

      • We definitely do charitable giving to support that. I’m most interested in projects that work to improve health, not just through access to care, but through healthier habits and environments. Costs will never come down until waistlines get smaller!

  19. Good stuff. I am a little worried about not having the subsidy when 2020 rolls around. We have tried to do our part by eating healthy and living active lifestyles. You still can’t afford to take the risk of “something coming up”. Healthcare is such a wild-card for this community. One thing we can do is deduct health insurance as a business expense. We’ll just have to see how the next four years (or more) play out.

    • Yeah, I would be shocked if there are still subsidies in 2020! Though Rs in Congress are promising tax credits in their place, so there will probably be *something*… just unclear at this point what that something will be. And amen to not taking the risk that something could come up. Nobody ever gets advance warning on accidents, cancer or other costly chronic conditions, so it’s not worth it to go uninsured, even for a short time. (Plus I’m a little superstitious and would probably worry that I was jinxing myself by tempting fate!)

  20. I’m so with you on the word “subsidy”. My husband and I have actually agreed that we won’t apply for unemployment insurance even if we could because we feel that we’d rather the money go to others who need it more than us. I also, to be honest, feel icky that I would pay very little in taxes while living off my savings and investments in the future compared to how much I’ve paid while working. That one makes some modicum of sense, but I really do like paying my taxes.

    The mortgage interest and property tax deductions are interesting. Because we’re living in a “modest” (in quotes because it’s not modest, but is for our incomes) property, we can’t itemize our taxes anymore now that we’re married – our property taxes and mortgage interest don’t add up to enough! Hence the Donor Advised Fund we’re opening to bunch deductions. Where my parents live, if you stay in your property for a certain period of time, you get a reduction in your tax assessment value by I think 10-20%, which is huge!

    My public school educations were funded by taxes, followed by my public university education that was partially paid for with taxes and partially with money my parents saved for my university education that received tax breaks. My husband also had dirt cheap student loans!

    P.S. Sorry I’m behind in commenting!

    • You never have to apologize for commenting! ;-) I think it’s great that you are so focused on paying your fair share. As you well know, that is not typical in America! Way too many people are thinking instead about how they can get out of paying taxes instead of asking how they can contribute to the greater good. I love that you recognize how much of your success was made possible by public investment in you, and your DAF makes total sense! I will surely cry when we pay off the house and can’t itemize anymore. :’-( (But also, I’ll be okay, because we believe in taxes.) ;-)

  21. interesting line of thought for sure. some apples and oranges here though. Or at least different types of apples. I work with a lot of folks who retired from the military who after 20 years of service walked away with mostly free health care and upwards of $50K/year in pension. These are people in their early 40s. leading attitude is that this is a benefit that was earned (clearly) and a promise that was made. Some of the other items you mention like 401K and mortgage interest isn’t earned. Its offered as incentive to do something. Especially that mortgage interest deduction, which in my opinion is highly overrated and misunderstood (separate topic). Half my college education was paid for by an Army Scholarship. Tuition, books, and a nice monthly payment. I ‘earned’ this by qualifying grades and signing an 8 year commitment to the Government to serve in the military. My service was viewed as a pay back for the tuition paid.

    What’s interesting about the ACA subsidy and the FIRE community is that you are simply playing the game by the rules that have been given. I suspect some of those rules maybe changing in the next few years. Regardless of which candidate won i think the rules were going to change. So although it feels weird or even maybe ethically wrong to take a government subsidy when you have $$$ in the bank, that’s not really your fault. The fault is in the way the law is written. So a person with a 7 figure net worth with very little reportable income is viewed the same as a low income household. Only in our crazy world does that make sense.

    I’m also wondering how many folks are collecting a subsidy in this situation. What the news likes to report is healthy young people aren’t paying in and older sick people are. Clearly that’s a problem. But I wonder how many wealthy people who are either young or old are collecting a subsidy. My instinct tells me its pretty small but a interesting subgroup of people for sure.

    • Oh I definitely mixed apples and oranges here… and probably some bananas, too, and maybe even kumquats! Though, you *could* say that all military benefits are incentives, too, in that nobody would enlist without them. We’ve found that it takes a much, much bigger incentive to get someone to risk his or her life to serve our country — which makes sense. (And of course we owe it to our vets to take care of them and whatever injuries/health problems they may have as a result of their service.) I agree that taking subsidies (at least under the current, soon-to-change system) isn’t wrong in the least, but we’re not the only ones who felt weird about it, because it seems like it *should* only be for those who truly need the help. And your Q about FI subsidy recipients is a really interesting one! Don’t have a clue what the answer is. :-)

  22. Sounds like you are at least a break even investment! The real return to come over the next years! 😁

    The article makes senses. same in Belgium. Doctors visits are repaid partially. Who goes most? The poor living paycheck to paycheck or middle class and upper class? Same for solar panels.

    At the surface,the redistribution looks good, once you scratch , you see the flows.

    Enjoy your subsidies in FIRE. 😎

    • Haha — thanks for affirming that I have been at least a somewhat decent investment. ;-) I always appreciate when you share your perspective on things in Belgium compared to the States. I don’t really know how much of our system is unique to here vs. shared by other rich countries. So it’s interesting to know that you have many of the same subsidies!

  23. Thanks for sharing this thoughtful analysis. As a Canadian with a high income, I pay lots of taxes. I am glad to do so because my taxes help to fund a strong social network that includes equitable health care for all, social services, a national pension plan, schools, roads, hospitals, maternity leave, municipal infrastructure, etc., etc.

    One issue I worry about is what industries and corporations my investments fund. For example, like you, I would prefer not to subsidize the GMO corn industry. However, as the funds are bundled together, it can be difficult to select “ethical” investments. Have you written on this topic?

    • I haven’t tackled the ethical investment topic because (at least so far) we haven’t found a way to reconcile index investing with ethical investing. We know we’re invested in lots of things right now that we don’t like, as you probably are, but that bundled investment is a real problem in this way. Even the “socially responsible funds” generally include folks who do things like fracking and manufacturing guns. Sigh. If I learn anything new, I’ll definitely share it here — and please do the same!

  24. I got Pell Grants for college, which directly got me out of dire poverty. I used subsidized loans to fund the education that was not covered by my college’s or the federal grants I received. I take public transportation daily and walk on sidewalks that are designed for me. I use the skills I developed in professional school to volunteer for the betterment of my fellow human. I opened a business and utilize a sliding-scale, because I believe that many people who need my help can’t afford the going rate. Never been accused of a crime. Pay my taxes. No subsidies as a renter, but many subsidies as a small business owner. My AGI was reduced by nearly 10K last year, which is a significant percentage for me.

  25. Why not go steps further for the greater good of society I would suggest making the human being worth not gold silver or diamonds. Humans would be subsidized for being good example visiting elderly, girls and boys clubs,homeless and just saying hello but also based on work,understanding and giving. So based on the last three you could be subsidized. No need for welfare get out and doo good for the society and get payed.