The Four Sectors of Employment or “Gross” Money

How do we define wealth?  Some would say it’s your salary.  Yet others would tell you it’s your winnings on the casino floor or regular poker rounds.  And a few might even claim it’s how much you can stuff under your mattress or the number of digits attached to your bank balance.  At the end of the day, wealth is basically measured by your standard of living:  your net income – after the government  and the tax man reach into your pockets and take what they claim is theirs.   Let’s not fool ourselves into thinking that income taxes are fairly distributed across the board.  The rich are the ones who eventually influence and  dictate policies, so it is only natural that the tax system works in their favour.  If you look at the overall picture – and the four sectors of employment – it becomes clear why the rich are able to get richer and the rest live from pay cheque to pay cheque.

Sector 1:  The Employee

The employee is the one who works 9 to 5.  This is the category of the lowest prosperity.  You might make $10/hour, but then the tax man goes in and takes back a healthy portion of your income.  It’s a pretty simple formula:  the more you make, the more he takes.  Despite the healthy gross income, no one is ever impressed by the amount withheld in their ‘deductions’ columns.  You get paid, pay taxes, and then you get to spend.

Sector 2: The Self-Employed

Being your own boss has its perks, but you’d better be prepared to work your butt off, occasionally having your ‘job’ spill into your personal life.  The first benefit of the self-employed is that they are allowed to pay taxes at the end of the year.  And any economics major can tell you the importance of the ‘time value of money:’ a dollar today is worth more than a dollar tomorrow.  Another perk:  tax deductions on everything from the lease of a new vehicle to the purchase of office furniture.  The benefit to being self-employed is that you get to increase your standard of living by spending your hard earned money on daily life requirements while reducing the amount of income tax you pay.  Get paid, spend and then pay taxes –  minus the deductables.

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