My tax burden
Nov. 8th, 2017 02:17 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
livingdebI was reading MOSTLY TRUE: California’s taxes are 'among the highest in the nation' and got curious about my own tax burden. (And then I wonder where all my time goes.)
State Income Tax
Texas has no state income tax.
Sales Tax
When we were first allowed to start deducting sales tax from our federal income taxes, I tried to calculate how much sales tax I paid. Except for that time I bought a car, it was much less than the almost $600 that I'm allowed to deduct based on my income. In fact, I'm just going to round this to 0%.
Property Tax
I do own a house, and Texas has a big property tax. Not to worry, it can increase by no more than 10% per year! That never adds up, eh? Fortunately, my house cost only about 60% of the median house cost when I bought it. Even this year, with my neighborhood getting gentrified since they moved the airport, my house is still worth about 82% of the mean [according to my county's recent estimate of my assessed value ($241K) and Realty Austin's estimate of the median for September 2017 ($293K)].
My taxes this year are $4723.97 which is about 2% of the total value of my house.
To figure out the percentage of my income, I should figure out my real income. I get $27K from my pension. I get about $100 from interest and $300 from taxable dividends. And let's add 7% (the average growth rate over time of the stock market) of my IRA. Wow, that's $12,829. Of course I do get to leave this out of my federal income tax calculations because I already paid taxes on it, and I also don't think it's safe to pull out that much and am normally calculating just 4% as my prospective income ($7,331). But like rich people everywhere, I should look at my entire income to figure out the real percentage.
Anyway, my total income is about $34,700. So property taxes come out to about 13.6% of my income. Ouch! To be fair, I have a roommate, and if we were married, I would technically be paying half of that. But for now the house is all mine and the tax burden is all mine.
Total State and Local Taxes
According the article linked to above,
California ranked sixth highest on this list at 11 percent. New Yorkers faced the highest burden at 12.7 percent, followed by Connecticut at 12.6 percent. Alaskans paid the smallest share of their income, 6.5 percent, in state and local taxes.
Obviously, this is some sort of average--it's different for different people. My 13.6% looks pretty terrible. Maybe I should move to California! But if you cut it in half (roommate!), my 6.8% looks pretty good.
Still wondering about my total tax burden.
Federal Income Tax
I am always in the 15% marginal federal tax bracket. I get substantial deductions for property taxes (duh!) and charitable contributions. When I'm not bunching deductions, my effective tax rate is somewhere between 5 and 10% of my adjusted gross income. These days I'd say about 7%. That would be more like 5.5% of my total income.
Sin/Luxury Taxes
It looks like I'll spend about $250 on gas this year. According to the US Energy Information Administration, on average we pay $0.184/gallon in federal taxes and an average of $0.2785/gallon in state taxes for a total of $0.4625/gallon. Actually, according to a link on there, taxes are lower in Texas, just $0.20/gallon which they say leads to a total of 0.444/gallon. Anyway, let's say gas is $2.00-2.50/gallon, that would mean about 20% of my gas costs are taxes or about $50, which rounds down to 0%.
I don't buy alcohol, cigarettes, or anything else I can think of that has added taxes inside. Except occasionally to make vanilla extract. This rounds to zero as well.
Total
5.5% income tax + 0% sin/luxury tax + 13.6% property taxes = a total tax burden of 19.1%. If you include only half my property taxes, that's 12.3%.
Now I'm wondering how that compares to other countries. According to the Tax Policy Center, taxes average 26% of gross domestic product. Hmm, is that comparable to tax burden? I guess it makes sense that I pay less than average. I make less than average and have more charitable contributions than average.
The amount is lower for the US than most countries on the list with the OECD average being 34% and Denmark taxing the most at what looks like 46%. I would have thought Norway was near the top and it is indeed in the top half with what looks like 38%, but there are eight countries ahead of it.
State Income Tax
Texas has no state income tax.
Sales Tax
When we were first allowed to start deducting sales tax from our federal income taxes, I tried to calculate how much sales tax I paid. Except for that time I bought a car, it was much less than the almost $600 that I'm allowed to deduct based on my income. In fact, I'm just going to round this to 0%.
Property Tax
I do own a house, and Texas has a big property tax. Not to worry, it can increase by no more than 10% per year! That never adds up, eh? Fortunately, my house cost only about 60% of the median house cost when I bought it. Even this year, with my neighborhood getting gentrified since they moved the airport, my house is still worth about 82% of the mean [according to my county's recent estimate of my assessed value ($241K) and Realty Austin's estimate of the median for September 2017 ($293K)].
My taxes this year are $4723.97 which is about 2% of the total value of my house.
To figure out the percentage of my income, I should figure out my real income. I get $27K from my pension. I get about $100 from interest and $300 from taxable dividends. And let's add 7% (the average growth rate over time of the stock market) of my IRA. Wow, that's $12,829. Of course I do get to leave this out of my federal income tax calculations because I already paid taxes on it, and I also don't think it's safe to pull out that much and am normally calculating just 4% as my prospective income ($7,331). But like rich people everywhere, I should look at my entire income to figure out the real percentage.
Anyway, my total income is about $34,700. So property taxes come out to about 13.6% of my income. Ouch! To be fair, I have a roommate, and if we were married, I would technically be paying half of that. But for now the house is all mine and the tax burden is all mine.
Total State and Local Taxes
According the article linked to above,
California ranked sixth highest on this list at 11 percent. New Yorkers faced the highest burden at 12.7 percent, followed by Connecticut at 12.6 percent. Alaskans paid the smallest share of their income, 6.5 percent, in state and local taxes.
Obviously, this is some sort of average--it's different for different people. My 13.6% looks pretty terrible. Maybe I should move to California! But if you cut it in half (roommate!), my 6.8% looks pretty good.
Still wondering about my total tax burden.
Federal Income Tax
I am always in the 15% marginal federal tax bracket. I get substantial deductions for property taxes (duh!) and charitable contributions. When I'm not bunching deductions, my effective tax rate is somewhere between 5 and 10% of my adjusted gross income. These days I'd say about 7%. That would be more like 5.5% of my total income.
Sin/Luxury Taxes
It looks like I'll spend about $250 on gas this year. According to the US Energy Information Administration, on average we pay $0.184/gallon in federal taxes and an average of $0.2785/gallon in state taxes for a total of $0.4625/gallon. Actually, according to a link on there, taxes are lower in Texas, just $0.20/gallon which they say leads to a total of 0.444/gallon. Anyway, let's say gas is $2.00-2.50/gallon, that would mean about 20% of my gas costs are taxes or about $50, which rounds down to 0%.
I don't buy alcohol, cigarettes, or anything else I can think of that has added taxes inside. Except occasionally to make vanilla extract. This rounds to zero as well.
Total
5.5% income tax + 0% sin/luxury tax + 13.6% property taxes = a total tax burden of 19.1%. If you include only half my property taxes, that's 12.3%.
Now I'm wondering how that compares to other countries. According to the Tax Policy Center, taxes average 26% of gross domestic product. Hmm, is that comparable to tax burden? I guess it makes sense that I pay less than average. I make less than average and have more charitable contributions than average.
The amount is lower for the US than most countries on the list with the OECD average being 34% and Denmark taxing the most at what looks like 46%. I would have thought Norway was near the top and it is indeed in the top half with what looks like 38%, but there are eight countries ahead of it.