This post may contain affiliate links. Please read our disclosure for more information.
I was bored last night, so I decided to determine what my effective tax rate for 2017 is going to be. Since I know what my income and property taxes will be for 2017, this calculation was rather straight forward. Here it is.
2017 Effective Tax Rate Without Obamacare Subsidy
| Income (Pension + Dividends + Interest) | Federal Tax | State Tax | Property Taxes | Sales Taxes | Total Taxes | Effective Tax Rate |
|---|---|---|---|---|---|---|
| $30,000 | $930 | $564 | $2,102 | $1,200 | $4,796 | 16% |
The only thing that posed a little problem was estimating the amount of sales tax I would pay in 2017. To get this number, I took what we spent in 2016 ($36K) and removed those spending items that weren’t subject to a sales tax (property taxes, gifts, HOA dues, dental services, etc). This left me with $24K. I then took this amount and multiplied it by 5 percent. The result was $1,200. Is this a fair estimate of what our sales tax bite will be in 2017? I think so. Our spending should be a little less this year, and while some of the things we’ll purchase will face a sales tax greater than 5 percent (gas, for instance), a lot won’t (food, clothing, cell phone plan, etc.). Five percent thus strikes me as a good compromise.
Okay, assuming my sales tax estimation is legit, I will pay $4,796 for government in 2017. On a $30K income, that will give me an effective tax rate of 16 percent ($4,796 ÷ $30,000). Not bad. My effective tax rate for 2017 might not be as low as Warren Buffett’s, but in the scheme of things, it’s very reasonable. I get to spend the bulk of my income on what I want to spend it on, and I contribute something to the commonweal. I’m not a total moocher.
Or am I?
What would my effective tax rate be if I included my Obamacare subsidy for 2017? After all, my Obamacare subsidy is the equivalent of a tax refund. Money that I would have dished out to abide by the health insurance mandate is being dished out by the federal government instead. Here, then, is my effective tax rate with my Obamacare subsidy added to the mix.
2017 Effective Tax Rate With Obamacare Subsidy
| Income (Pension + Dividends + Interest) | Federal Tax | State Tax | Property Taxes | Sales Taxes | Obamacare Subsidy | Total Taxes | Effective Tax Rate |
|---|---|---|---|---|---|---|---|
| $30,000 | $930 | $564 | $2,102 | $1,200 | -$23,376 | -$18,580 | -62% |
Whoa! Minus 62 percent (-$18,580 ÷ $30,000)! Are you sh*tting me? That effective tax rate makes a mockery of Warren’s. Consider me an honorary One Percenter.
The Rant
First, with the introduction of Obamacare, it pays really well to be income poor and asset rich. Because my household income is less than 200 percent of the federal poverty level, I’m entitled to a $23K gift from the taxpayers. It doesn’t matter that I have over 30 times my annual living expenses sitting in the bank and various investment accounts. The federal government doesn’t care about that. All it cares about is my paltry income.
Second, the federal government shouldn’t be giving a $23K gift to a rich person. But of course the insanity of the Obamacare subsidy guidelines isn’t the only thing that’s out of control. This boondoggle is just the tip of the iceberg. Here are some other things the government shouldn’t be doing.
- Paying $400 billion for 2,457 fighter jets. The Chinese could probably build 20,000 comparable planes for that amount of money.
- Investing $150,000 in every child’s K-12 education and ending up with a high school graduate that is typically bereft of any real job skills and barely literate.
- Charging people over $100K for a college degree that doesn’t necessarily enhance one’s job skills or critical thinking skills but allows one to go on more job interviews. Really? $100K for a piece of paper that signals to employers that its holder isn’t a total moron? Can’t the government devise a cheaper credential?
- Promising retired public servants lucrative pension and healthcare benefits and then refusing to fully fund those obligations. Illinois’s pension system, for instance, is only 40 percent funded.
- Being over $19 trillion in debt and allowing massive numbers of unskilled immigrants (legal and illegal) to enter the country annually. According to one study, over 50 percent of immigrants receive some form of welfare. Meh. We have enough native-born dependents. Do we need to import more?
Final Thoughts
I don’t see how this ends well. Those wedded to the status quo are too powerful. They see the huge monstrous cliff right before us, but they don’t care. They were promised. They’re gonna get what they’re entitled to no matter what. So we’re gonna drive over that huge monstrous cliff. The only way to mitigate the horror of the impending crash is threefold: be completely debt free, be largely self-sufficient, and be physically fit.
If you can’t achieve these three things by the time we launch ourselves into the fiscal abyss (10 years from now? 20 years?), you’re screwed. Be afraid. Be very afraid.
Leave a Reply to Lila Cancel reply