Can we make it on one income?

simplyelise · May 2015

didn't want to wade into this, but alas, here I am!

short+sassy a fair bit of school funding comes from property taxes and local bonds/taxes. It's really different from state to state, but I'm fairly certain property taxes are always part of the equation.

The 47% number is talking about federal income taxes. If you're working, you're likely paying SS and medicare. I'm in a governmental non-profit organization, so I only pay medicare, but it means I won't be able to draw from SS. But most of those 47% are paying SS and medicare payroll taxes. If they're not working and they're retired, that likely means they don't have much in taxable income because the money they receive has already been taxed or comes from SS.

The 47% also does not account for state taxes. Here in Missouri, our top tax bracket starts at 9k for a single earner. So if your AGI is over 9k, you pay in the top state income tax bracket (6% right now).

This NPR graphic and article does a good job explaining who the 47% are: http://www.npr.org/blogs/money/2012/09/18/161337343/the-47-percent-in-one-graphic

Now, I understand the frustration as one of the 53%, and especially seeing people who get governmental benefits or don't pay their share when they can and should. I just wanted to point out that it's not *quite* as cut and dry as 53% of us support the 47%.

hoffse · May 2015

short+sassy said:

AprilZ81 said:

smerka said:
Don't get me wrong. The tax code is messed up when a family like mine pays nothing in income tax. But it is also kind of hard to feel sorry for you when your tax bill is around the median family income for your state (AL, right?)
@smerkka What is your point? You were pretty much bragging that you had two kids and pay nothing in federal income tax. 47% of Americans don't pay federal income tax. That means that 53% of Americans pay 100% of the tax bill. It gets frustrating (to me anyway) because if 100% of Americans paid just a little bit of tax then the tax rate wouldn't need to be so high.

Boy, did I get an education today! I had no idea this was the case. That is abysmal and now you all have bummed me out, lol.
So, if I'm understanding correctly...not only am I in the 53% who pay all the taxes. But then some of my taxes (though probably more state) go toward public schools to educate the children of the 47% who pay no federal...even though I don't and never will have a child?
Don't misunderstand, I wholeheartedly love public schools and don't mind my taxes supporting them. I think good public schools help our society's future, as a whole, tremendously. But still.
I also find it ironic that at the tender age of 15...a very child myself...I paid federal and state income tax from my little paycheck. Yet full grown adults with full-time jobs can get away with paying nothing? Argh!
I know this isn't the popular opinion and it would never fly in this country...since most voters have children...but even before this thread I have wondered why and thought it was unfair that parents get dependent deductions. I mean, if someone chooses to have a child(s), that's great...but why does that deserve a tax break? Maybe it made sense in the past when we wanted to grow the population, but it doesn't anymore.
Sorry to hijack your thread a bit, OP!
For your questions, for what it's worth, both my sister and a good friend are SAHMs in So Cal.  I'm pretty sure both of their husbands make less than what yours does.
In the case of my friend, her and her DH never have two dimes to rub together because of that choice. In fact, their house almost went into foreclosure when she decided to not go back to work after she had her baby. But that is what they were willing to do, if they had to, in order for her to stay home with their child.
In fact, despite the fact that her child is now old enough to go to elementary school, my friend is still choosing to not go back to work and to home school her daughter instead. So.Hard.to.not.be.Judgy.
But, my point is, if you all want to make it work, you will make it work.  And you all are in a much better place than they were. Her income was more than double yours and they didn't have much savings.
My sister and her DH have a nice, middle class lifestyle.  They actually have two children, but she stopped working toward the end of her pregnancy with the first.  At the time, she probably made in the neighborhood of your current income. They are pretty good with money and had (still have) savings, though probably not quite as much as you all. At least at the time my sis stopped working. They have always rented, which is often more expensive.
My sister does pick up some extra income by babysitting a friend's child 2-3 days/week. Something like that might be a nice option for you also.

Yep, pretty much. Though your local schools are probably going to be funded primarily through things like property taxes. The 47% rate is a bit high - it's closer to 43% these days due to economic recovery. But it's still pretty lopsided, and that's a major reason why the tax system needs an overhaul.

I would much rather see the dependent deduction go away and instead fund mandatory (extended) maternity leave. But that's another topic for another day

vlagrl29 · May 2015

schools are funded thru property taxes for sure - I see it when I pay our property taxes at the end of every year.

Xstatic3333 · May 2015

vlagrl29 said:
schools are funded thru property taxes for sure - I see it when I pay our property taxes at the end of every year.

@Gdaisy am I crazy or is NH an exception to this?

short+sassy · May 2015

simplyelise said:
didn't want to wade into this, but alas, here I am!

short+sassy a fair bit of school funding comes from property taxes and local bonds/taxes. It's really different from state to state, but I'm fairly certain property taxes are always part of the equation.

The 47% number is talking about federal income taxes. If you're working, you're likely paying SS and medicare. I'm in a governmental non-profit organization, so I only pay medicare, but it means I won't be able to draw from SS. But most of those 47% are paying SS and medicare payroll taxes. If they're not working and they're retired, that likely means they don't have much in taxable income because the money they receive has already been taxed or comes from SS.

The 47% also does not account for state taxes. Here in Missouri, our top tax bracket starts at 9k for a single earner. So if your AGI is over 9k, you pay in the top state income tax bracket (6% right now).

This NPR graphic and article does a good job explaining who the 47% are: http://www.npr.org/blogs/money/2012/09/18/161337343/the-47-percent-in-one-graphic

Now, I understand the frustration as one of the 53%, and especially seeing people who get governmental benefits or don't pay their share when they can and should. I just wanted to point out that it's not *quite* as cut and dry as 53% of us support the 47%.

Thanks, that is a good explanation and distinction. I did understand the 47% was referring only to federal income tax. I wasn't trying to say the parents who don't pay federal taxes don't contribute to public schools...I was more pointing out their children are already getting a free education paid for by everyone (which is a GREAT thing!), so why do they get tax breaks so large they end up paying no federal income tax also.

But I realize was a bit confusing because I was talking about federal taxes at the same time I was talking about a service funded by...I actually thought state taxes...but I see from your response and @hoffse that it is more from property taxes. That was interesting to learn. Now I at least feel slightly better for the property taxes I have to pay, lol.

smerka · May 2015

I would like to ask you all to not resent the people who don't pay income taxes. I get your anger. I really do. But is it my fault We qualified for these tax deductions? We qualified and we took them. We would be idiots not to. Please place your anger where it belongs - on the politicians in Washington.
In my state, the majority of school funding is done through property taxes, which is why our property taxes are so stupidly high. $9,700 per year on a house worth maybe $275,000. Other states structure it differently. My state is always 48, 49, or 50th in state funding for schools.

short+sassy · May 2015

@smerka, I totally agree with you and that is where my anger is. I don't blame you or anyone else for taking whatever deductions they are entitled to. For example, I own a house and also think its dumb and unfair that interest is a deduction people can take on their taxes. But I take it also, because I can. My posts were not at all meant as an attack on you or the "general you" of families who fall in this category.

But it does make me angry that the system is set up this way. I wasn't even aware of it until today and found it quite shocking.

I would love to see a much simpler tax system...without all the deduction this and that B.S. Maybe a flat rate tax. Maybe do away with income taxes all together and impose a federal sales tax. One pro with that is you'd catch all the criminals who make money doing illegal things like selling drugs. Under our current system, obviously they don't pay taxes on their "profit" from selling coke. But under a sales tax system, they would...every time they used their ill gotten gains to buy something.

Not knowledgeable enough to say either one of those would be a good system...they all have their pros and cons. But when current IRS tax codes are hundreds of pages long...that's a broken system.

That is crazy high property tax. And then to have it coupled with what looks like poor funding for schools is extra frustrating. I'm sure my state, Louisiana, is battling you all for the bottom. Our sales tax is higher than the norm (9%), but our property taxes are at least okay. My two favorite snarky state mottos:

"Louisiana...leading from the bottom for 200 years."

"Thank god for Mississippi and West Virginia, so we don't come in last on everything." (No offense to anyone living in those states...I'm sure you have a similar snarky motto with Louisiana inserted in).

AprilZ81 · May 2015

simplyelise said:
didn't want to wade into this, but alas, here I am!

short+sassy a fair bit of school funding comes from property taxes and local bonds/taxes. It's really different from state to state, but I'm fairly certain property taxes are always part of the equation.

The 47% number is talking about federal income taxes. If you're working, you're likely paying SS and medicare. I'm in a governmental non-profit organization, so I only pay medicare, but it means I won't be able to draw from SS. But most of those 47% are paying SS and medicare payroll taxes. If they're not working and they're retired, that likely means they don't have much in taxable income because the money they receive has already been taxed or comes from SS.

The 47% also does not account for state taxes. Here in Missouri, our top tax bracket starts at 9k for a single earner. So if your AGI is over 9k, you pay in the top state income tax bracket (6% right now).

This NPR graphic and article does a good job explaining who the 47% are: http://www.npr.org/blogs/money/2012/09/18/161337343/the-47-percent-in-one-graphic

Now, I understand the frustration as one of the 53%, and especially seeing people who get governmental benefits or don't pay their share when they can and should. I just wanted to point out that it's not *quite* as cut and dry as 53% of us support the 47%.

BTW, SS is taxed as income. It feels like double taxation to me since your income was taxed to begin with from your paycheck then when it is distributed back to you in retirement it is taxed again as income.

Oh and unemployment benefits are taxable income as well.

smerka · May 2015

There are people who pay income taxes on the income they get breaking the law. One of my coworkers had a client who was a prostitute and she paid taxes on her earnings.

SS is not always taxable. It depends on the other income you have. Also 15% is never taxable.

MommyLiberty5013 · May 2015

short+sassy said:
@smerka, I totally agree with you and that is where my anger is. I don't blame you or anyone else for taking whatever deductions they are entitled to. For example, I own a house and also think its dumb and unfair that interest is a deduction people can take on their taxes. But I take it also, because I can. My posts were not at all meant as an attack on you or the "general you" of families who fall in this category.
But it does make me angry that the system is set up this way. I wasn't even aware of it until today and found it quite shocking.
I would love to see a much simpler tax system...without all the deduction this and that B.S. Maybe a flat rate tax. Maybe do away with income taxes all together and impose a federal sales tax. One pro with that is you'd catch all the criminals who make money doing illegal things like selling drugs. Under our current system, obviously they don't pay taxes on their "profit" from selling coke. But under a sales tax system, they would...every time they used their ill gotten gains to buy something.
Not knowledgeable enough to say either one of those would be a good system...they all have their pros and cons. But when current IRS tax codes are hundreds of pages long...that's a broken system.
That is crazy high property tax. And then to have it coupled with what looks like poor funding for schools is extra frustrating. I'm sure my state, Louisiana, is battling you all for the bottom. Our sales tax is higher than the norm (9%), but our property taxes are at least okay. My two favorite snarky state mottos:
"Louisiana...leading from the bottom for 200 years."
"Thank god for Mississippi and West Virginia, so we don't come in last on everything." (No offense to anyone living in those states...I'm sure you have a similar snarky motto with Louisiana inserted in).

As a point of relevant information to this MM conversation, one of the latest GOP candidates for President, Dr. Ben Carson, is FOR a flat tax. This would simplify the tax code for all people - reduce or eliminate loop holes - and make it so that IF you earn an income, you pay taxes. Everyone would pay takes at the same rate. Hypothetically, if the flat tax rate were at 5% then a person grossing $100,000 would pay $5,000. A person grossing $50,000 would pay $2,500. A person making $1,500,000 would pay $75,000. Everyone would have skin in the game.

I know there's the argument of, "Well, the person making $50,000 is hit a lot harder than the person making $1,500,000." While that is true, it does level the playing field though. It gives people a feeling of contribution to the greater pot. And, if everyone were contributing, I think you would see a decrease in the class warfare that has run rampant. For so many reasons, a reduction in this problem alone would do wonders for the social health of our Nation. Furthermore, I think there would probably be a threshold minimum, like if you made less than a certain amount annually, then you pay (hypothetically) 1% - something still so you are vested in the group's pot.

This is somewhat related. I have told this story before. When I worked for USBank during the Great Recession, so they did not have to lay anyone off, the Bank decided that across the board every employee from the CEO on down to the PT Tellers would take a 5% pay cut. We all did. It worked. No one was laid off due to the recession! And, it created an upbeat culture in the Bank as a whole. People felt more unified and working together.

I know the USA is quite a bit larger than a bank (duh), but the idea is the same with a flat tax.

vlagrl29 · May 2015

smerka said:
I would like to ask you all to not resent the people who don't pay income taxes. I get your anger. I really do. But is it my fault We qualified for these tax deductions? We qualified and we took them. We would be idiots not to. Please place your anger where it belongs - on the politicians in Washington.
In my state, the majority of school funding is done through property taxes, which is why our property taxes are so stupidly high. $9,700 per year on a house worth maybe $275,000. Other states structure it differently. My state is always 48, 49, or 50th in state funding for schools.

Take the deductions you can. We always do as well especially since we are both self employed. 2 years ago we qualified for the earned income credit. When I saw we didn't get as much back in a refund as that year it was because our AGI was more last year. Your property taxes are crazy. Our house which was purchased at $200k has property taxes of $2700 ish every year.

hoffse · May 2015

smerka said:
I would like to ask you all to not resent the people who don't pay income taxes. I get your anger. I really do. But is it my fault We qualified for these tax deductions? We qualified and we took them. We would be idiots not to. Please place your anger where it belongs - on the politicians in Washington.
In my state, the majority of school funding is done through property taxes, which is why our property taxes are so stupidly high. $9,700 per year on a house worth maybe $275,000. Other states structure it differently. My state is always 48, 49, or 50th in state funding for schools.

Yeah I'm not resentful toward you or anybody else who gets these breaks - if you qualify for them, you would be stupid not to take them.

It's the system generally that I dislike. The tax breaks are structured as much for political reasons as financial ones. While I understand the political power of money, the collecting of revenue for the country as a whole should really rise above.

Ironically, one reason why things at the IRS have gotten so messed up recently is that they keep having their funding cut. Not just in real money terms, but in nominal terms - year after year they get less. They simply don't have the manpower to enforce the revenue laws anymore, and reports coming out of the oversight office suggests that taxpayers are figuring that out and starting to take advantage by scamming the system in higher numbers than ever... Seems to me that the agency collecting the money is the first group you would want to fund, right? Apparently not if you are Congress...

I like the idea of a true flat/consumption/VAT tax system. But I think we would need to do away with or modify some of the other tax triggers to really make it fair. I think we would also find that tax rates were up around 20-25% or more on consumable goods in order to collect enough revenue through that method. But short+sassy is right that fewer people would be able to fly under the radar if your taxes uniformly hit you at the checkout line. People who earn money illegally are obligated to pay taxes on that money. But I'm sure you can guess how often that actually happens.

ErikaB123 · May 2015

Short+sassy, thanks for your advice, I have considered possibly watching another child at home to bring in a bit of income. I think the tax break for having children is good --- up to a limit. It should be 3 kids at max so that people don't just pop kids out for the extra money. We need people to have children and should be encouraging it for the sake of our economy. If you look at Japan, Germany...many other countries where there is a zero population growth- they will be in big trouble in the future.

I do think we will be able to make it. By putting 20% down on our house (over 80k), our savings went way down but I think it was the right investment looking at how rents have shot through the roof in our area.

Thanks again ladies, I really do appreciate it.

Can we make it on one income?

Re: Can we make it on one income?

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