Posted on 08/22/2014 5:32:51 AM PDT by lifeofgrace
My wife and I decided to do a bit of downsizing this summer. We went through our budget, line by line, and set up new limits for what we spend. I am blessed with a good job, and we are not really hurting to make ends meet. But we noticed that our spending started to spiral up, up and away. Really, we have better things to do with our hard earned money than throw it away on stuff that doesnt matter.
It took us several years to get from the financial Thelma and Louise I was when we were first married to some level of discipline. At this point, everything we own is either debt free, or equity positive. The only loans we have are on the house and cars, and theyre all worth more than what we owe. Tomorrow I could sell everything we owe on and have money left over (for what? I dont know). We cut things until it hurt. I sold my Subaru STI rally car for a more, well, gentlemanly sedan that cost half as much. My wife gave up some of her favorite essential oils, and we all decided to eat out less.
One thing we didnt cut is our giving. We actually increased that (you know, that thing about better use of money and all). Another thing we didnt cut, and likely cant cut, is our taxes. I know exactly, to the penny, how much we spend on groceries, clothing, fuel, household items, eating out, and a whole raft of other budget items. I am absolutely anal retentive about using budgeting and tracking software to classify every penny. My wife even breaks down Wal-Mart receipts into categories so we know what we bought.
I decided to find out exactly what we pay in taxes. So for the month of September, I am going to track taxes in my budget software. Every single penny. That means the tax on groceries, restaurant taxes, ad valorem taxes, withholding from my gross pay, and even the gas tax per gallon when we fill up. Ive heard it said that we work at least one day a week just to pay the government. I want to see if that holds true, or are paying more?
At the end of September, Ill report on the results. I might even throw in a mid-month update. And yes, I am going to look at the sales tax on our vehicles and spread it out over the loan and allocate that. Like a good accountant, I know how to accrue. As a matter of fact, if any of you readers know of some obscure tax that I might miss, let me know in the comments. I want to capture everything. Im not, however, going to take it overboard. I only want to capture the taxes we directly pay or are included for specific items (like gas) in the final price. I dont want to go back five levels into corporate taxes and dividend taxes and factor that in. First it would be ridiculously complex to calculate. Second, it would be irrelevant to the results.
One more question for readers who are willing to make some gentlemans bets. Do you think my tax will turn out to be more than one days work, less than one days work, and if so, by how much? Give me a percentage number. The person who nails it closest to the actual will win um, something, whatever I find thats worthy of such an honor to give to the winner.
Good luck, my friends, and lets see together how this tax experiment works out. Check back on sgberman.com for the results.
2 days, min., easy peezy.
9.25 days
Very difficult to calculate, and would be very, very large.
Second, it would be irrelevant to the results.
Yeah, the government wants you to think that. If you understood just how large that was, revolt would happen quickly.
I agree, at least 2 days. By the time he pulls all of the taxes figures off the regular monthly utility bills, cable TV/internet, phone bills, etc.
So far, work one does for ones self is still untaxed.
It depends on how much you earn—because some taxes are progressive.
But, if I had to guess, I’d say about 1.7 days per week.
Cities like to call them fees. Indirectly taxed goods add up too. Add even more for regulatory costs. Every thing ypu buy has taxes built in from the producer. I would say upwards of 60% of all income goes to some form of tax or fee.
Does that include vacation weeks and holidays (math based on 5/52) or on days actually spent at work?
I was assumng a 5 day workweek... that’s the way I understood the author’s question. I ignored vacation... for most people that’s a couple weeks out of the 52.
Most months there are 20 work days. Two days of taxes would be roughly 10%. The 9.25 days would be around 46% effective tax rate.
Not knowing where the writer lives its hard to be accurate, but I’d say its between 9.25 and 11 days.
I always figured that one only got paid for the days one actually worked (though some, like 0bama, contribute to progress when being absent from work).
DpM vs. DpW
Bookmark.
So my guess of a likely minimum is 40% (2 of 5) or 8 of 20.
I don’t think that’s important to the main question at hand.. which is closer to the idea of “tax freedom day.” In other words, how much of your income gets siphoned off and run through the government?
It’s a tough calculation to keep track of. That’s why it’s easier to keep an eye on total government spending in relation to the total economy. I think the number comes out to something 25% Federal and 6% state, in relation to GDP. On average, people are going to have to match that, although everybody’s mileage is going to vary.
After more consideration I think I’m low. In New York the effective income tax is 60% for some people. Its easily 50% for many people who make good incomes but aren’t millionaires.
Add in sales tax and the other we pay on a daily basis and I bet you’re up to 60-70%.
The tax burden on the average American family is about 41%. I believe this figure is from the Cato Foundation.
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