Total tax burdens (beach, state, retired, years)

[TuborgP]

Taxes are part of a much larger picture and can change on the dime as determined by a state legislature. The cost of housing is as much a factor in property taxes as is the rate per $1,000. A lot depends on what you want out of retirement and where to most cost effectively accomplish that lifestyle and that involves more than just taxes. It is often a state v state comparison and if you live in state x your working years the cost of living in state y isn't relevant unless you move to there and not from there.

[ohio_peasant]

Originally Posted by TuborgP

Taxes are part of a much larger picture .... It is often a state v state comparison and if you live in state x your working years the cost of living in state y isn't relevant unless you move to there and not from there.

Well-phrased! I think that the hypothetical consideration here is for persons who are well-compensated professionals, living and working in high-tax states; who also happen to be relatively rootless. They serve out their careers, accumulate funds, and then what? Should they move, or retire in place?

Should a high-octane banker in London or Frankfurt or Hong Kong retire in place, or move to somewhere more placid and lower-taxed? Should our London banker move to say southern Italy? Should a New York banker stay in NYC, or move to rural Alabama?

Though I'm reluctant to divulge personal details, even in an anonymous forum, here goes: I "grew up" in an affluent but quite moderately-taxed part of the country. The affluence ensured a strong tax base, so that rates could be moderate, despite provision of excellent services. Then I found employment in a different state, where the overall economy is doing poorly, but my particular employer is doing well. My employer, and its associated service-businesses, form an insular bubble of prosperity in an otherwise moribund and bleak post-industrial town. Because the overall tax-base is poor, tax rates are comparatively high. After all, we still need roads and schools. Despite having lived here for 2+ decades, I've formed no lasting connections – personal, social or cultural. Early-retirement is a distinct possibility. I have no family (literally), and can move to California or for that matter to Cambodia – and even to places that don’t begin with "C". Decades of earning like a lawyer, but living like a sharecropper, place me in a position akin to the celebrated "Mr. Mustache Man". MMM moved to where he can bicycle everywhere, where he could be a real-estate investor and take odd-jobs in the skilled trades where he excels. Taxes were a factor, but not the leading factor. I'm not as handy or as enterprising. I'm not going to buy investment properties or to do skilled-carpentry jobs on the side. The main consideration is where I could retire to continue living a sharecropper's lifestyle, but at lower tax rates.

The OP's point, as I understand it, that is mere reputation for being high-tax isn't necessarily borne out by reality, when actually making a systematic calculation of costs. "High tax" could apply only to a select group of people, to whom say a particular personal-finance article is marketed. Others may find their taxes to be comparatively low, even if the persons in question are doing quite well financially. Still others might find that their taxes are indeed higher, but that the costs are manageable and are overtaken by more pressing concerns.

I love California, and in particular Los Angeles. That's where I went to grad school, and those memories remain the fondest of my life thus far. But to my parsimonious and narrow-minded self, it's just sickening to ponder how much I'd be paying in state income tax if I retired in California. And this is very debilitating, because I don't wish to be the sort of person who incessantly rails against taxes, with the associated political and cultural implications. And yet that's the person whom I'm becoming.

[Escort Rider]

^^^^ Astute post, Ohio_peasant, as usual. I do not claim that my original post here "proves" anything at all. I got curious about my own total tax burden, made an effort to quantify it, and posted the result, partially as a springboard for further discussion in the context of having something specific to go on as opposed to general statements about taxes.

As you point out, whether one feels burdened by the Calif. state income tax depends quite a bit on what one's income is, since that tax is highly progressive in structure. It also depends on one's attitude toward taxation in general. I am not particularly upset at the $3,500 (a rounded-off figure) I paid in Calif. income tax in 2014. Yes, that is high. But I really like living where I do for a lot of reasons which are not necessary to repeat here, and to me it is worth it. In fact to me, it is a very small price to pay.

[lae60]

I think that the OP gave really good information about how taxes DIRECTLY affect one, but the INDIRECT effects are of great consideration as well.

Businesses are highly taxed, much more than many other states. I only have personal information about the unemployment tax, which I will post here. I legally hire babysitters. So, they are considered household employees. I pay them a salary and pay the SS, unemployment, workman comp, disability, etc. for the employees as any other business would. I generally have a babysitter for a year or two, until they move on by their own choice. I never fired a babysitter and had one apply for unemployment. However, my unemployment rating is the highest the state offers F++. So I pay the highest rate, much more than big employers who have numerous employees and who actually fire employees that collect unemployment. How that this be? Well the state over spends the money they collect each year and then charge us the overcharges to our accounts. My account is now in the negative and has been since the second year I hared a babysitter. Each year it goes more negative. Why? because each year they spend more than they have and charge the extra cost to our accounts. I will never be able to get into the positive because their charges are so much for my small 'household business'. The way the state set up this tax and runs the program makes the cost way more than it should be for a 'business' that never made a claim.

Because of the way the state runs the taxes and fees given small businesses many businesses leave the state. So the INDIRECT cost of a high tax state is the loss of small businesses and thus jobs.

[Themanwithnoname]

Originally Posted by Escort Rider

^^^^ Astute post, Ohio_peasant, as usual. I do not claim that my original post here "proves" anything at all. I got curious about my own total tax burden, made an effort to quantify it, and posted the result, partially as a springboard for further discussion in the context of having something specific to go on as opposed to general statements about taxes.

As you point out, whether one feels burdened by the Calif. state income tax depends quite a bit on what one's income is, since that tax is highly progressive in structure. It also depends on one's attitude toward taxation in general. I am not particularly upset at the $3,500 (a rounded-off figure) I paid in Calif. income tax in 2014. Yes, that is high. But I really like living where I do for a lot of reasons which are not necessary to repeat here, and to me it is worth it. In fact to me, it is a very small price to pay.

Quality of life is important.

For you: it's remaining where you are used to.


For me: I enjoy my parcel of land (which I couldn't afford, or afford to pay the taxes on in Cali) and the freedom from excessive regulations (practically any. Only ones I have deal with polluting other properties. I could build a skyscraper out of Popsicle sticks for all they care)

Works for you, works for me!

Cheers.

[CSRSJim]

Originally Posted by Escort Rider

There has been voluminous discussion about taxes in the Retirement Forum, especially with regard to comparing tax burdens among different states. I started thinking about this and for the first time in my life attempted to add up all the taxes I pay. In some cases I had to resort to estimates. Here is the result for the year 2014.

Federal income tax liability $10,937
Calif. state income tax liability $3,468
Property taxes $2,846
Auto registrations $297
Medicare taxes on wages $64
SS taxes on wages $237
Gasoline taxes (estimate) $400
Sales taxes (estimate) $1,000
Hotel/motel taxes (estimate) $200
TOTAL $19,449

I was hoping others would post some similar numbers like you did.
So here are mine. I have not retired yet, but in Maryland you don't get much, if any, breaks at age 55-64. Pension exclusion $26.3k at age 65.

Wages $93,500 (Engineer with Masters Degree, Prof License, 32 yrs experience)
AGI $104,500 (Interest, Dividends, Sale of stocks, etc)
Fed Taxable income $89,600 (single filer)
Federal income tax liability $17,200 (CSRS Pension is about 91% taxed by the Feds unlike SS)
State Taxable income $99,200 (Fed itemized deduction reduced by state taxes)
Maryland state income tax liability $7,600 (State and local/county)
Property taxes $3,742 (3 bedroom home, 2,000 sqft)
Auto registrations $440 (3 cars: 1973, 2005, 2009)
Medicare taxes on wages $1,690
Fed Pension payroll withhold/tax $8,100 (CSRS don't get Social Security, but pay 7% payroll)
Gasoline taxes (estimate) $362 (11,000 miles driven, 790 gallons, $0.458/gallon tax)
Sales taxes (estimate) $1,000
TOTAL $40,134 this is killing me! I plan to move out of MD when I retire.
That is 45% of my Federal Taxable income.

[Escort Rider]

Originally Posted by CSRSJim

I was hoping others would post some similar numbers like you did.
So here are mine. I have not retired yet, but in Maryland you don't get much, if any, breaks at age 55-64. Pension exclusion $26.3k at age 65.

Wages $93,500 (Engineer with Masters Degree, Prof License, 32 yrs experience)
AGI $104,500 (Interest, Dividends, Sale of stocks, etc)
Fed Taxable income $89,600 (single filer)
Federal income tax liability $17,200 (CSRS Pension is about 91% taxed by the Feds unlike SS)
State Taxable income $99,200 (Fed itemized deduction reduced by state taxes)
Maryland state income tax liability $7,600 (State and local/county)
Property taxes $3,742 (3 bedroom home, 2,000 sqft)
Auto registrations $440 (3 cars: 1973, 2005, 2009)
Medicare taxes on wages $1,690
Fed Pension payroll withhold/tax $8,100 (CSRS don't get Social Security, but pay 7% payroll)
Gasoline taxes (estimate) $362 (11,000 miles driven, 790 gallons, $0.458/gallon tax)
Sales taxes (estimate) $1,000
TOTAL $40,134 this is killing me! I plan to move out of MD when I retire.
That is 45% of my Federal Taxable income.

Interesting, CSRSJim, and thank you. The one conclusion from your information which leapt out at me right away (and which I already knew, actually): California is not the only high-tax state!

[CSRSJim]

It looks like I had about $20k more AGI than you, and paid all of that in extra taxes... So I got none of it.

[BellaDL]

If the purpose of reviewing total tax burden is to select the state with the lowest taxes, I'd think we should only look at state/local taxes:

State income tax
Property taxes
Excise Tax/Use tax
Personal property (car, boat etc) tax
Auto registrations
Gasoline taxes
Sales taxes
Hotel/motel taxes

It may be that the total state/local taxes come out to be a relatively small portion of your total tax burden (including federal, social security, medicare etc) or your income but if all things are equal, why would anyone want to live in a state with high taxes?

IMO, other factors affecting COL such as utility/services (heating, cooling, water, sewage, garbage disposal, snow removal ), and the cost of a home (initial cost + fees if any) should be taken into account.

[txfriend]

I’m in my 70's, retired and living in Texas.

Adjusted income tax paid $11,200
Property tax $5,500
Auto registration and inspections $324
Local road tolls $125
Sales tax 8.25% estimate $2000
Gasoline tax $115
Also many other taxes tacked on to every bill.