In our controlled and manipulated capitalist culture (many may argue that we were a totalitarian police state), many of us, including myself, have grown up in hyper materialism and consumerism. We learned to believe that personal success came with being bigger, better, faster, good-looking, skinnier, more prosperous, smarter, and every else. Personal self-satisfaction and introspection of self remained elusive! Gaining attention, approval, envy, glory, jealousy, and power energizes excessive consumption. I continue to be particularly addicted to gas-guzzling V-8 engines, with a beautiful muffler purr, and . . . with high horsepower.

https://www.youtube.com/watch?v=gLltqSTalYA

Article:

Over the decades, consumerism has evolved into hyper-consumerism, a trend that can lead to dire financial consequences. This excessive consumption can quickly turn into an addiction and then into debt serfdom. When individuals strive to acquire things on credit, they unknowingly step onto a financial treadmill that can soon become a nightmare. This is the condition of a payment enslaved person and debt-serfdom. They find themselves trapped, constantly chasing enough income to keep up with the costs. American household debt climbed to a staggering $16.51 trillion at the end of the third quarter of 2022, a stark reminder of the perils of hyper-consumerism. It's a cautionary tale that urges us to reconsider our spending habits and the actual cost of our desires.

https://www.newyorkfed.org/microeconomics/hhdc.html

Consumers often overlook the significant burden of taxes on their financial health. They pay federal, state, local, use, excise, and sales taxes on almost every dollar of purchases and consumption. In many cases, redundant taxes on products, goods, or services add to the financial strain, making it crucial for consumers to be aware of these financial traps. These redundant taxes, essentially taxes on top of taxes, can significantly increase the cost of goods and services, further burdening the consumer.

Consumers must understand that inflation can significantly erode their purchasing power. Suppose the cost of goods and services increases by 10% annually. In that case, the consumer must pay a higher price for the same items, effectively reducing their ability to afford the same standard of living. This and rising income taxes can create a significant financial burden. However, with proper financial literacy and management, consumers can navigate these challenges and maintain control over their finances.

Consumers who borrow funds to purchase things pay sales taxes on the original purchase. When they earn income (to pay off the debt), they pay all the related taxes at their highest marginal rate. (A marginal tax rate is the highest expected percentage per government schedule.) Six excellent examples are taxes on cars, gasoline, alcoholic beverages, airplane travel, hotels, and cigarettes.

It's important to recognize that governments play a significant role in perpetuating hyper-consumerism. The more consumers purchase, the more taxes the government receives to spend at will. This perpetuates government power and the status quo, often at the expense of consumer financial health. Understanding this dynamic is crucial for consumers to make informed financial decisions. By being aware of how their spending contributes to the government's income, consumers can better manage their finances and avoid hyper-consumerism.

Our current taxation system comes in multiple forms and is often redundant and compounding.

The identifiable primary taxes include 100s more hidden taxes.

• Federal income taxes,
• Social Security taxes,
• Unemployment taxes,
• State income taxes,
• Payroll taxes,
• Property taxes,
• Consumption or excise tax, like California's gasoline taxes. We pay 71 cents and 54 cents per gallon of gas.
• Use tax
• County tax, city tax
• Tariffs (tax on international trade)
• Per capita taxes,
• Capital gains tax,
• Recapture tax,
• Death taxes,

Special assessments and tolls are add-ons and are usually hidden.

• The litigation and liability tax, 10% of the gross domestic product, pays for all litigation, lawyers, the legal system, and employees. Liability in America has become a parasitic drag.
• Inflation and reduced purchasing power are the most significant taxes. If the currency's value deflates and the consumer must pay more for goods and services, that amount represents a hidden tax.

80% of the government income occurs from consumer spending.

The more we consume, the more we will be required to pay taxes and assessments, and the more indentured we will become in debt serfdom. The intended model is as follows: the more houses, furniture, cars, body modifications, multiple pets, many vacations, and ornaments you possess, the better. Dinners out, flowers for a wife or friend, and purchases of bobbles and widgets all incur taxes. I must admit that I have been one addicted participant!

There's a striking lack of public concern or government-led initiatives to raise awareness about the dangers of excessive consumerism. Instead, the government seems to be complicit in maintaining the status quo. They do this through advertising, media campaigns, and even fear-mongering, all of which distract us from the real issues and keep us spending. This should be a wake-up call for all of us, urging us to take a more critical look at our spending habits and the societal norms that encourage them.

In his classic book Parkinson's Law, C. Northcote Parkinson states that expenses will rise to the income level.

In other words, people will (in almost all cases) increase their spending to consume 100% of their income. They will buy more things or take more vacations if they make more.

Assume that a consumer is considering the purchase of a new $40,000 automobile. The purchase requires a 20% down payment of $8,000 and financing of $32,000. The auto loan requires monthly principal and interest payments until the debt has a zero balance. Before interest payments, the consumer must make $64,000 to pay off the principal. A consumer earning enough to be taxed at the highest marginal rate must make $2.00 for every $1 principal reduction on the $32,000 loan. You can consult your CPA or enrolled agent for clarification, depending on your tax rate and ability to write off business-related expenses.

Let's do the numbers:

Note that the interest rate for a super prime borrower is 5%, with an annual percentage of 5.47%. A non-prime is 7.25% interest and 9.81% APR. A subprime borrower is at 10.11% interest with an APR of 15.86%. Prime borrowers represent 55%, and nonprime and subprime are 45%.

https://www.forbes.com/sites/jimhenry/2022/08/29/high-prices-for-new-and-used-cars-squeeze-out-borrowers-with-subprime-credit/?sh=3b705af91baf

• $32,000 at 10% interest for 60 months = $679.91 monthly loan payment.
• $679.91 times 60 months = 40,794.33.

As the consumer pays the loan, they will also pay taxes on the principal reductions. The actual monthly payment, including taxes, is about $1,100, almost twice the stated monthly payment. Calculated costs do not include gas, maintenance, and insurance.

Many debt-serfs cannot afford the $5,000 down payment, so they may lease the automobile for 48 to 60 months for only $1,100 upfront. The lease payment is about the same as a car payment: $843 per month. The debt serf must earn income and be taxed to make the monthly lease payment. At the end of the lease term, the debt-serf will have done nothing but a long-term rent-a-car, with no equity build-up and the inability of a long-term hold!

https://www.bankrate.com/loans/auto-loans/auto-lease-calculator/

Once consumers reach a point of no return, the only option is to obtain more credit cards and accrue more debt; credit card companies allow the debt serf to make minimum payments on the balance owed, even though the interest accrues at 22%. Does using a hypothetical $30,000 credit card debt at an average rate of 22% reflect trouble in paradise?

Minimum monthly payment = monthly annualized interest rate + 1% of balance

• $30,000 times 22% divided by 12 = $550 . . . 1% of principal balance = $300
• $550 + $300 = $850 regular monthly payment

If the consumer stopped using credit cards and changed the payment schedule to a 60-month amortized loan at 22% annualized interest, the monthly payments would be about the same. However, all credit card purchases must cease for five years to ensure debt freedom.

Can you hear the screaming and outrage from the addicted and entitled consumer serfs? Yes, they grew up to believe they were special, entitled, and of the privileged few. That is what gets them into trouble.

Let's say this consumer makes $90,000 per year. After all federal and state tax deductions and possible pension deductions, the net is $54,000, or 60% of the consumer's income. The net reflects a monthly spendable income, referred to as take-home pay, of $4,500. The consumer must pay for housing, transportation, family living expenses, medical insurance, and credit card payments.

They may spend more than the net spendable amount for a minimum credit card payment. Hearing of someone living on 105% of one's monthly income is expected. Some consumers turn daily living expenses and social events into long-term credit card debt. The United States has about 162,000,000 workers, of which half could not come up with $500 for an emergency car repair or insurance collision deductible. Hence, more credit card debt, or even worse, taking out a payday loan with a 40% interest charge, is sometimes done.

In the automobile lease example, the car payment for gas, maintenance, and insurance amounts to 1.00 dollars per mile. An average of 10,000 miles per year would equal $583 per month, and fifteen thousand miles per year would equal $875.00 per month.

• Lease Payment of $843.00
• Auto-related expenses        : 583.00
• Credit Card Payment of $ 850.00
• Medical Care 500.00 (for a bare-bones policy)

Paying expenses of $2,776 leaves a discretionary income of $4,500 from the net income salary and take-home pay for living expenses of $1,724 per month.

The only way out of this debt serfdom is to reject spending other than the expenses necessary to live. Frugality must become the norm. This is easy to say but extremely hard to do. No, there is no Recovering Debt Serf Association where you may go to reinforce the emotional support you need to break the addiction. Why not? Consumers allow themselves to stay addicted because the system was designed that way.

Let's consider some known pockets of debt that will contribute to serfdom. The debt binge encompasses every segment of our society, including government borrowing.

• Total consumer debt, including real estate loans, revolving, credit cards, and student loans: 18.25 trillion
• Auto loans: $1.42 trillion
• Corporate debt: $24 trillion
• https://www.statista.com/statistics/1277325/outstanding-corporate-debt-securities-usa/#:~:text=From%20a%20total%20of%20almost,debt%20issued%20by%20financial%20corporations.
• Government debt, on the books only: $31 trillion, which is an obligation of the US taxpayers
• $220 trillion of unfunded commitments, such as social security, Medicare, Medicaid, and government and private employee pension retirement plans.

Almost all American enterprises are debt-driven, with the expectation that the consumer will ultimately be required to pay. All participants will pay federal and state taxes on the principal reductions for this accrued debt. Business enterprises often pass their debt payments on to consumers or tenants through higher prices.

What would happen if a significant portion of US consumers reached a saturation point where they could not spend any more money and tapped out with debt up to their eyeballs? Millions of consumers would never be able to pay off their debt, and many would become completely insolvent. The concept of public service is a misnomer. The taxpayers are the public servers, with public employees and labor unions as protected beneficiaries.

Welcome to the state of collective consumerism in the USA. If consumers do not spend, tax receipts diminish, and the government cannot pay its obligations. The millions of government-employee labor union members will scream: You promised me a big fat pension retirement!

You are probably aware that 10s of 1,000 retail stores are closing. The common assumption is that web-based, online purchases have displaced brick-and-mortar retail locations. That is only partially true. Web-based purchases make up approximately only 8% of all retail spending.

California allowed criminals to steal $950 per occurrence with arrest or threat of prosecution. A spring-up industry is criminal gangs coordinating thousands of thefts daily and selling merchandise online for a considerable discount. Retail stores suggest that selling enough to pay expenses and yield a profit to the investors is impossible. So, they are closing stores in the usual crime-based neighborhoods.

Our society has reached a point where most consumers have spent themselves to death. The fallout is apparent in many industries, such as retail, automobile/transportation, and food services.

Additionally, residential rents and house payments have increased, consuming much larger disposable income. Remember, the renter first earns the income, pays the required taxes, and then pays the rent. The homeowner gets a minor deduction for interest and property taxes.

Having and raising children is also a significant expense that requires taxable income. Additional Expenses include medical, clothes, food, education, and child care. About one-third of families in the US spend 20% of their net household income on childcare or daycare. Some folks use a credit card to pay for child care. The abusive tax structure shows that most families and unmarried couples require two or more wage earners.

There is little pushback from the voters and consumers. All of the above will continue in the future.