Ever wanted to see how your state’s taxes stack up against those of your neighbors? Well, here comes Intuit with a nifty visual tool:
Turbotax.com: Comparative Look at State Taxes
It’s an interactive presentation, and I’m particularly fond of the page’s ability to rank states based on sales taxes, gas taxes, income taxes, and pretty much whatever else a financial dork like me could think up. Oh yeah — median income’s in there, too. Pretty timely that I discovered this page just now, as here in a few weeks I’ll be rolling out a post on my household’s effective tax rate for 2011.
NOTE: Special thanks to Chris, a student in Ms. Cramer’s social-studies class in Goodyear, Arizona, for tracking this down … and to Ms. Cramer for sending me the URL!
Barry wrote:
…haven’t yet seen your ‘2011 Effective Tax Rate’ post, but you should consider the many indirect/hidden taxes & fees that you actually pay. Your real tax rate is about double what you think it is !
You seem to include only ‘direct’ taxes in your 2010 calculation — so you’re missing quite a bit.
Government — local, state, and federal — taxes a retail product at every step of its production and distribution. The usual retail ‘Sales Tax’ that you directly see… is only part of the effective-tax you pay on all the stuff you buy.
Most manufacturers are hit with at least 20 different taxes, including excise taxes, property taxes, energy taxes, corporate income taxes, worker’s compensation taxes, etc. It’s all hidden in the final retail price you pay.
These hidden taxes typically range from 25% -75% of the retail price, depending on the product. For example, taxes account for about 30% of the cost of a loaf of bread or restaurant meal; 38% of the cost of a pizza; 50% of the cost of a beer; 75% of the cost of hard liquor; 40% of an airline ticket; 55% of gasoline; and 25% of the cost of electricity. Check your water and telephone/cell bills — they’re loaded with taxes– and taxes disguised as “fees”.
And your employer does not pay half your total Social Security (FICA) taxes — you pay it all in reality … you just never see it in your pay statement.
Very important to count ALL taxes in your calculation — the taxes that are easy to see… and the many that are NOT.
Michael wrote:
Very important to count ALL taxes in your calculation — the taxes that are easy to see… and the many that are NOT.
Your comment is spot-on. However, how do you propose I calculate the “nots?”
Barry wrote:
[“Your comment is spot-on. However, how do you propose
I calculate the “nots” ? “]
Easiest way is to estimate the hidden consumer taxes as a percentage of your annual retail spending.
Most folks spend at least 90% of their net income on normal categories (housing, food, transportation, clothing, entertainment, etc). Hidden taxes are 25-75% of those costs (except straight mortgage payments); just choose a conservative estimate of that tax factor (.. say 25%) and multiply that by your approximate retail spending annually — that gives you a rough (but useful) dollar figure for hidden taxes.
For example, if your full gross pay is $60K per year, calculate the obvious taxes and estimate the hidden ones:
— 15% Federal Income Tax = $9K
— FICA (12.4% SocialSecurity & 2.9% Medicare Taxes) = $9.18K
— State Income Tax (2%) = $1.2K
— Misc payroll taxes (0.75% Unemployment Insure,etc.) = $450
$60K minus above taxes ($19.83K) = $40,170 net pay
{one third of your ‘real paycheck’ goes to taxes instantly}
(Note that the U.S. Supreme Court has repeatedly ruled that FICA payments are legally ‘taxes’ only. Citizens have no legal claim on any supposed benefits from Social Security or Medicare; any benefits received are at the whim of the current U.S. Congress — and could be totally abolished tomorrow, at the stroke of a pen.)
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You diligently save 10% of your net income, but must spend the rest each year on normal living expenses ($36K). But the hidden taxes on that spending (25%, conservatively) cost you another $9K. So taxes actually cost you 48% ($28.83K) of your true annual income.
Of course, things are more complicated than the above example… but probably worse for most average Americans, who have no clue what they really pay in taxes.
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