Friday, April 4, 2008

Hang in there, we’ve almost made it to Tax Freedom day

It’s remarkable to think that the average taxpayer will shell out more in federal taxes than he/she will pay for housing! Is housing getting less expensive or are taxes getting out of control? (sarcasm)

According to the data found at the Taxfoundation.org, it takes 79 working days to pay the average federal income tax bill and 62 days of working to pay for housing.

That’s a lot of days in the old coal mine. Essentially, all of the work completed and money earned from every tax paying citizen from the beginning of the year through the last week of April is channeled to the Fed to pay the tax bill.

That special day in April has been dubbed Tax Freedom Day. If you paid all your taxes, up front, as you earned your salary, Tax Freedom Day would be the first day of the year that you could keep any money for your household. Or in simpler terms, it’s the first day of the year in which you stop working for the Government and begin to earn money for yourself.

For some background, the Tax Foundation Organization is a nonpartisan group that advocates a simpler tax system, and tracks the occurrence of Tax Freedom Day each year. They have calculated this years Tax Freedom Day to be April 30, 2008.

But, of course there is more. We have not added in the state taxes, yet. To pay the total tax bill, Americans will work an average of 120 days to pay all of their taxes and 105 days to pay for basic needs: food, clothing and housing. As ridiculous as that sounds, this is nothing new, it seems for the last 20 years Americans have been paying more in total taxes than they pay for basic needs.

There really isn’t much one can do, except maybe move to a less taxing state. That eliminates the East coast as a possibility, since there’s nothing inexpensive about their tax rates. For instance, Vermonters pay 14.1% followed closely by Mainers at 14%.

Rates tend to drop a couple of points as you head out West. Tennesseans and Alabamians are two of the least taxed coming in at 8.5% and 8.8%, respectively. But the real winners by a large margin are Alaskans with the lowest rate of 6.6%.




4 comments:

  1. I also dislike the way our investments are taxed. We assume all of the risk, and yet the Govt gets a nice slice off the top if there are profits, and they want that slice to be paid in full at tax time. Now let's say you lose money in the market, if there are no profits to offset the loss, you can only claim a max of $3000.00 loss in any given tax year, and the remaining amount has to be rolled forward.....nice way for them to maximize their returns and minimize their losses.

    ReplyDelete
  2. Yes, the government has it set up to their advantage. The IRS wants their slice at the moment of sale. And if they don't get it, there will be a penalty to pay.

    I have never understood the loss limit of $3000 in one year. I suppose it is to safeguard against potential abuse of an unlimited loss amount.

    ReplyDelete
  3. i've got a capital loss carryover that will pad my income for life, apparently.

    ReplyDelete