This is a crosspost from my blog sgberman.com. This isn’t normally something I’d post to RS but if anyone’s interested in how much tax an average middle-class family pays, feel free to follow this. –Steve
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 doesn’t 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 they’re all worth more than what we owe. Tomorrow I could sell everything we owe on and have money left over (for what? I don’t 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 didn’t cut is our giving. We actually increased that (you know, that thing about better use of money and all). Another thing we didn’t cut, and likely can’t 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. I’ve 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, I’ll 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. I’m 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 don’t 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 gentleman’s bets. Do you think my tax will turn out to be more than one day’s work, less than one day’s 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 that’s worthy of such an honor to give to the winner.
Good luck, my friends, and let’s see together how this tax experiment works out. Check back on sgberman.com for the results.