Why It is Better to Pay More Taxes Than You Owe

Tax time has come and gone this year and my friends are all on tight budgets because they don’t believe in tax refunds. They are among those “why give the government a free loan” thinkneks who don’t mind increasing the national debt each year. Of course my friends are disgusted with the government for running up all that debt, but they like to bring home bigger paychecks.

I look at it the other way around. If I pay more in taxes than I need to then I am helping the government avoid a little bit of debt. More importantly, I am living on a smaller budget than I would if I took home as much money as I can possibly squeeze out of my paycheck.

And then there is the added benefit of bringing in a whopping $2000 refund the next year. So while my friends are all digging around looking for money to pay the government, I am able to enjoy the fruits of my frugal living.

What you do with that refund is your business. Researchers tell us that about 30% of Americans use their tax refund to pay down debts. Another 28% put their money into savings or investments. And about 26% of Americans use their refunds to buy food, clothing, and other necessities. I guess the rest just spend their money wherever they can.

I usually pay off my debts. Before you can save you have to reduce your debt. Unfortunately, from time to time I have to run up some charges on my credit cards. I do this to keep them active or because I have an emergency. So that tax refund sure comes in handy when I have a few thousand dollars in credit card balances.

Like everyone else I wish we could pay less in taxes each year but who would pay for all the services we use? You use roads, traffic lights, police protection, fire protection, military defense, and other community resources without thinking about it. Well, we do joke about “our tax dollars at work” whenever we hear a story about some government project that makes no sense. But taxes are a necessary part of our life. I won’t call them evil. They are just necessary.

Working your taxes into your frugal budget is a smart way to manage your money in my book.