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When I searched HD I was surprised how many articles and Forum posts I wrote about taxes, all kinds of taxes over several years. The topic is so universal and so complex it is never dull and never not controversial.
These days social media is inundated with posts about taxes, the very great majority are nonsense or fake information. My favorite these days is seniors should be tax free because they “paid their dues.” Or, they should not pay property taxes if they don’t have a mortgage. That isn’t even logical. If you were paying property taxes and a mortgage isn’t it easier to pay property taxes when you don’t have a mortgage payment? You don’t need a spreadsheet to figure that out.
I live in the highest property tax state in the country. I have lived here all my life, my family has lived here for nearly 200 years. I knew property taxes were high, I have paid them since 1971 when we bought our first house. I knew they would continue after I retired which is something every other person knows as well. Isn’t factoring that in part of basic planning for retirement, including survivor planning?
Recently a comment on HD contained these words “tax averse.” That got me thinking. Should we be tax adverse? If everyone enthusiastically embraced that idea, think of all that could collapse – education, Social Security, Medicare, our communities, heck, our country.
Like everyone else I pay income, sales, property and assorted other minor taxes. Add it all up and I would probably have 25 to 30% more to spend if there were no taxes.
I would also have a lot less of the many things taxes provide. It really upsets me when I read or hear that taxes are “illegal,” “a scam” or “the government or “they” are ripping us off.” People wonder out loud- “we don’t know how “they” spend our money. I think to my self or sometimes out loud “look it up.”
How does you local board of education, your town, your state spend money? You will find the vast majority of spending goes to services benefiting people. It’s not much different for federal taxes. Over 47% of the federal budget is directly for people – SS, Medicare, Medicaid and other health programs.
Many people complain about loopholes, which are actually legal ways to be tax adverse. They complain when wealthy people use them, but in reality investing in a Roth or using municipal bonds, accepting tax credits etc. are a form of loophole as well. What is tax planning after all but seeking ways to minimize the taxes we pay.
I am very bad at tax planning, I never did it. Some retirees even move to avoid income taxes, but in the end may find overall they are not saving money. I use municipal bonds, but then it may not be my best financial move. I use QCDs too, certainly a loophole many retirees can use, but before I discovered them, we gave the same amounts to charity anyway. That’s the extent of my attempts at planning.
Yup, our view of paying taxes is a curious thing. The most curious to me are the people who see no need for taxes at all or make no connection between taxes and the society in which they live. Documented taxes go back to 3500 BC and I bet there was grumbling when someone had to turn over a portion of their harvest for taxes and no doubt the person down the road was surely not paying their fair share.
I believe the proper term is “tax-averse.”
I believe you are correct. Typo correction.
Thanks largely to the articles I’ve read here over the last six years, I think I have done the right things, not necessarily to lower my taxes but to be savvy about helping people and organizations that I support. Donations to qualified charities will get me a reduction in what I owe. Helping family and friends won’t, and I am okay with that. Like many (or at least some), I believe that paying taxes in a democracy is a privilege. I’m a supporter of a different healthcare payment system and would gladly pay higher taxes if such were instituted. Imho, far too many healthcare dollars go to middlemen rather than for the actual services. But I don’t want to get political here – it’s just my opinion based on research I did in the past.
You Nailed it Linda. Take my recent experience with my part D inhaler. I was prescribed a brand name steroid inhaler due to an upper respiratory infection I luckily contracted on the way home from our two week UK trip. I checked the insurer’s formulary and there was not one generic covered. When I went to pick up the inhaler much to my suprise (not really) my “copay was $235/monthThis is for a medication that my son took in early elementary school for his asthma, he is now 38.
This is one of why healthcare expenditures in the US is so damned larger with poorer outcomes compared to other large economies with better outcomes. As I understand it this is due to a scam the government allows the drug companies, pharmacy benefit coordinators, and insurers push on us, with the government cooperation.
First the government allows patents to be renewed without significant changes in medications. One example is the change in inhaler propellants but not the medication itself. Then the drug companies, colluding with the pharmacy benefit managers to inflate the retail price. The two then split the inordinate profit, and the pharmacy benefit managers coordinators (often owned by the insurer) pay a kickback to the insurer.
Meanwhile through Mark Cuban’s Cost Plus Parmacy I was able to obtain a like medication for $90, including delivery.
The negative is this amount does not go towards my Medicare deductible.
Don’t confuse the plan co-pay with the drug cost. Another plan could have a lower co-pay but higher premiums. By going outside your Part D plan you lose the credit for the out of pocket Medicare annual limit. That may or may not matter depending on your total drug use, but it can be a big benefit.
Connie hit the limit two months ago and the rest of the year she has no drug costs. Before the limit two of her medications were over $300 each per month which was her co-pay.
A valid point.
A universal insurance system (quite different from “healthcare” system) that covers everyone and replaces all existing systems or better said they become part of it funded by a combination of taxes, premiums and out of pocket cost sharing does not have to cost more than is spent among all the systems in place now and among all individuals. It’s not added costs, it’s reallocation of what is spent now, but in a uniform and fairer way.
The so-called middlemen dollars are not significant in the scheme of things. Insurance company profits are a very small part of premiums and most of the services they provide would still exist as they do now under Medicare.
Instead of dealing with 6-7 insurance companies health care providers would deal with one.
RQ…
Like millions of Americans, I do not object to paying taxes to support the necessary needs of civil society, like defense, infrastructure, and education. etc.
But I, and millions of Americans, vociferously object to waste, fraud, and abuse at all levels of government. Think Minnesota Somali Fraud and California bullet train…roads to nowhere…and countless congressional pork barrel projects too numerous to mention. We also object to “temporary taxes” that never seem to end…think Toll Roads, for example.
Some of your points are valid, but not unlike many of your posts, this post is one-sided.
What irritates me the most about the subject of taxes is people who constantly repeat moronic left-wing talking points about “taxing the rich.” Whenever you ask one of these mental midgets “how much is their fair share,” you never get a coherent answer.
You know that the top 10% “the rich” pay overwhelmingly more taxes than the entirety of the bottom 50%. In 2023, the latest figures I could find, the top 10% of Americans paid 70.5% of all US Income Taxces. The bottom 50% paid a whopping 3.3%.
One comment on property taxes…
In the United States, one NEVER truly owns their land or their home, because as long as the government, at any level, can confiscate your land or home for taxes, overwhich you, as the consumer, have absolutely no control, and overwhich the government is exercising unlimited taxing authority, the government owns your land or home. I have no problem limiting property tax collection for a fixed period; for example, for as long as the land’s owner maintains continuous ownership, limit property tax collection to 20 years. After 20 years, property should be exempt from further taxation until it is sold or passed to someone OUTSIDE OF THE IMMEDIATE FAMILY.
Lastly, meaningless comments about how much tax Musk, Bezos, Buffett, Zuckerberg, et al. pay are nothing more than jealousy and envy. As President Trump told Hillary Clinton in the presidential debates years ago, he uses the tax laws as Congress has written them, just like all the Democrat millionaire donors she received her campaign funds from. If she doesn’t like that, she needs to complain to Congress…but of course she doesn’t and never has.
For most of my life, I happily paid income taxes, secure in the knowledge that every single tax dollar I paid in directly benefited my family… because my father, stepfather, and father-in-law were all military men, either on active duty or in retirement. Not a single tax dollar of mine was wasted, fraudulently spent, or abused. All my tax dollars went directly to their active duty pay or retirement checks.
As they passed away, and their wives passed away, all that changed for me. Since my stepfather’s death in 2018, unfortunately, my tax dollars have fallen into the waste, fraud, and abuse category. Since 2020, however, Social Security and medicare benefits have softened that blow, as my wife and I began collecting our hard earned and well deserved benefits.
I still pay taxes on 85% of my Social Security benefits, but through careful tax and retirement planning, I enjoy significant retirement income and pay taxes in the 10% or 12% bracket, depending on Roth Conversions.
I could NOT disagree with you more.
At the risk of sounding moronic, I need to point out that the U.S. “rich” pay some of the lowest tax rates in the world and enjoy tax breaks not found anywhere else. Also, at the risk of sounding left wing, every time there is a tax cut for the rich or corporations we are told that it won’t affect the deficit because of “trickle down economics” which has never been the case.
There is a big difference between accumulated wealth and high income and thus different definitions of rich I assume. Someone who accumulates wealth through investments such as many HD readers or Bezos are treated the same tax wise. The fact one person has billions and another a few hundred thousand is irrelevant in my mind. Likewise, the highest 37% tax bracket is 37% which the “wealthy” pay.
It’s not just the rich, the US has among the lower overall tax burdens. The absence of a VAT part of the lack of burden. Most of the direct tax benefits in the US go the average Americans (tax credits, standard and other deductions leaving an effective income tax rate for the lower 50% of 3.7%.).
When it comes to corporations, who benefits from the tax laws? I’d say there is plenty of trickle down in that case- workers and their jobs and benefits, reinvestment in products for the public and mostly shareholders who benefit from growing profits. Shareholders of all types, including through mutual funds, even pension funds, etc. There is no such thing as “the corporation” benefiting. It’s all connected.
100%
Mike, great comment. You hit the bullseye.
How would a town or school board construct a workable budget based on an estimate of how many homes would be sold in their community? What local services and school spending would you eliminate?
Dick your second question is spot on.
I started a taxpayer’s association in my previous town. After about 5 years I was elected to a four year term to the budget committee, then re-elected to a second consecutive term.
Whenever someone would get up at school district meeting and would off the cuff propose say a five percent cut in the school budget I would try to be next to speak. I would say to the person if they think there is five percent fat in the budget then surely they must have spent hours reviewing the proposed budget, and the previous year budget and surely could provide those present at the meeting with an outline of specific line items to be cut and their justification for those cuts.
Funny thing is, not once was there a response. 🤔
Mike, forgive me if this is a silly question — as a non-US citizen, I’m not totally clear on how property taxes work over there. But don’t they go toward funding essential services in the community? I’m wondering if what you’re suggesting might end up significantly cutting that funding down the line — or am I missing something?
My property tax funds garbage collection, street maintenance, and police and fire protection. It also pays for schools which are at the bottom of the ranking of all public schools in the state, while the school board focuses on renaming schools. The city has a police force whose members have no body cameras — one of the few in the Midwest in this situation. Also last year, the city put in operation an entire fleet of electric buses, but didn’t budget for electricity costs. Just a few examples.
Mark:
NOT a silly question at all. Your understanding is correct. Traditionally, property taxes fund education and other essential services.
If I were recommending cutting funding, I would agree with your concerns. However, I suggest that a citizen who has paid property taxes for 20 years and is retiring should not have to live with the threat of losing their home because of property taxes.
In Texas, where I lived for 25 years, a law permits homeowners to defer property taxes until the death of both spouses. Property taxes accrue and would be due if the home were sold or inherited.
I am retired in North Carolina. No such law exists here.
Despite RQ’s contention that arguments against property taxes are “absurd,” countless thoughtful minds hold differing opinions. Mine is one of them.
You’re entitled to your opinion for sure, but do you have a viable alternative for steady funding largely unaffected by economic gyrations year to year. I have been looking. Neither sales, income nor even a VAT meets the criteria. Greater subsides from the state spreads the risk a bit, but then local communities lose control and still are dependent on a larger body of politics.
You aren’t missing anything Mark. The argument against local property taxes is absurd. They have funded schools here since the 1840s. They are used because they are a stable income source communities can rely on to set their budgets. They are high for several reasons one being the independence many local towns want to maintain.
The wide-spread argument that retirees or people over 65 should not pay taxes is outright bizarre. Nobody mentions the impact on younger people if that ever happened. Visit my blog and you will even more wild posts people make on social media about taxes.
I think you and I have talked about this before, and I know what you think about it, but it’s an interesting example.
Our university town has excellent public schools, and there have been multiple bond issues over the decades to give more money to local schools. Most people in town are in favor of the schools staying excellent, so these bond issues always pass.
The last couple of bond issues, though, got some pushback. There were some legitimate concerns about how the school board has managed money, but the main thing was that these taxes on top of more taxes were getting to be onerous, at least in the views of some. There were concerns about senior citizens on limited incomes being taxed to the skies, so in order to help the bond issues pass, optional exemptions were written into the two most recent ones. The senior citizen can choose to apply for the exemption or not. They are still paying for the schools because of earlier sources of funds that do not have those exemption options built in. They’re just not being forced to pay even more if they feel they can’t (or just don’t want to).
I saw this as a political trade-off to try to serve the needs of different constituencies, not primarily a way to be nice to senior citizens.
I recently “celebrated” my fiftieth high school reunion. As part of the festivities there was a tour of the high school. I participated in a tour by one our teachers who is still teaching there (his 63rd year). I was appalled. This is an affluent community in an Ivy League town with a teaching hospital which years after I graduated moved to the next town.
There had been some pretty minor upgrades while I attended, and since graduation the middle school had moved out of their adjoining building.
They had repurposed rooms such a gyms over and over again until they were unrecognizable for the function they were being utilized for. There was no flow or apparent organization to the building.
Now the town does provide a very good education, but the main buildings have to be over 100 years old. This in an affluent community.
And doesn’t such a program merely shift costs to younger families some of whom are struggling more than seniors likely while trying to prepare for their future? Any tax relief such as this needs to consider the consequence’s on everyone.
Why should a senior receive a tax break based on age and income while a 40 year old with the same income picks up the extra cost?
In NJ a person 65 can apply to have their property tax frozen and increases paid by the state if the household income is under $178,000 a year. That is twice the median income in the state. And it’s ridiculous.
Up until a few months ago a 65 + could get a rebate for half the tax bill up to $6500 if income didn’t exceed $500,000. The state retroactively cut that benefit before we got the third of four payments because there was no room in the budget.
That’s just irresponsible in my book.
Maybe these people: A separate Census Bureau–based analysis put the “majority income” share lower: over 40% of seniors rely on Social Security for a majority of their income, and 14% rely on it for 90%+ of their income.
The exemption is age-based only, not income-related. And I’m sure you’re right that some seniors in town are more well-off than young families, but I also know some seniors who are on very tight budgets. As I said, I think the bond issues were written that way to help them to pass.
Thanks for bringing up Minnesota. It does not get enough “ credit” for being among one of the worst managed states in the union with a rapid descent in recent years. You bring up just the tip of the iceberg… in fact there was an 18 BILLION tax surplus ( from years of over taxation) that evaporated in ONE ( 2023) session at the state capital building …. Followed by … you guessed it, pressure to raise taxes further. Public School RESULTS are imploding there while taxpayers keep paying more dollars. Unlike – evidently New Jersey, ( who knew?) Minnesota’s state government is not accountable, competent or efficient.
Quinny, typically I agree with you 💯% of the time. I think you miss an important point. People don’t mind paying their fair share. The issue is the waste and grift which they see resulting in wasted $$. That’s the rub. We have a pending amendment in Florida on the property tax issue. Ill vote for it, not because I think we should not be taxed, but a message needs to be sent that they should not treat residents as an unlimited piggy bank. Oink…
I will cancel out your vote. We don’t need an amendment to send a message.
Clearly there is waste and inefficiency, just like there is in any business. Always has been always will be.
But people treat government as some independent being unto itself. Government is people doing many different jobs, our friends, neighbors and maybe family members are government. Every day spending money on things we need and want. To accept waste and inefficiency are primary drivers of taxes is to say the people who make up government are incompetent people who don’t care at all even while paying taxes themselves.
Frankly, this fraud and waste issues is political smoke and mirrors. Some people actually believe SS can be made solvent merely by eliminating fraud. As ridiculous as that is, it’s what some people see as the easy way to handle the issue. To some extent that’s true for property taxes as well. Property taxes have been used since the 1840s because they are far more stable revenue to set budgets than say, sales or income taxes.
If we were able to be 100% efficient it would change the need for taxes very little. The cost of schools typical equal 50-60% of property taxes and half that is directly related to teacher pay and benefits. What should we do about that? Most surveys say people think teachers are underpaid.
People tend to see taxes as taking away, but ignore the giving back.
IMHO anyway.
I believe most people don’t understand taxes because the topic and how taxes are calculated is(are) so complicated to the point that people tune out. The second issue with taxes is that most people think they pay too much except for Warren Buffett. Finally, the people that set our taxes are influenced too much by political donations of the affluent and corporations.
To some extent I agree, for most filers taxes are not that complicated. There is withholding, a few deductions, maybe a credit and not much more.
While incredibly complicated, i believe most of the tax provision are there for pretty good reasons both corporate and individual. Have the reasons and their validity changed over the years, perhaps. But consider the tax provisions designed to motivate taxpayers into certain action.
Is the “carried interest” provision for the Ken Griffiths of the U.S. designated to motivate them to acquire more pied a terre(s)?
We Americans have an odd relationship with government. We complain about taxes and government spending in the abstract, but we really like the programs that benefit us.
True and not unique to Americans.
Yeah. I think it’s more pronounced here because our unique diversity gives this several different dimensions.
When I research this subject I find that Europeans still complain about taxes, but generally have a better understanding of what they receive in return for their taxes.
Americans just seem to complain.
I have a friend in England now retired who pays nothing for health coverage, no premiums, no out of pocket costs and insists it’s all “free” despite paying high taxes all his working life, but in retirement does not worry about paying for any healthcare. Americans can’t say that for sure.
check out breast cancer survival rates in the US vs UK— they’re higher in the US. That’s because screening starts earlier and there is easier access to new pricey treatments here. Given your family situation, you should be concerned about that. Me too — I was diagnosed at age 47 — three years earlier than the first screening would have occurred in the UK. I’ve since lived cancer free for over 30 years. I’ll pay for that!!
5-year survival rate is about 2% difference. I pay for that too, but it’s hardly related to the matter at hand. In any case, paying for healthcare under our system is not easy or possible for many Americans. I would debate that easier access to new treatments is a universal benefit in the US. The overall 5-year relative breast cancer survival rate for Black women in the United States is approximately 84% compared to 93% for white women. I wonder if a tax funded universal insurance system would change that?
In any case we are talking about taxes and what they provide, not healthcare systems. The choice does not require a socialized healthcare system like the UK.
Two things:
1) when I Google breast cancer survival rates US v UK, AI indicates the US average is 90.2% v 86 in the UK so that’s 4.2%. My guess is the numbers are averages across demographics and stages in both counties.
2) is this because if taxation or health care system? I’d argue the two are interconnected. Screening doesn’t start until age 50 in the UK —probably
because the finances of the UK national health can’t support 40 as in the US.
Taxes also pay for some screening in the US — think Medicaid. Early screening is associated with higher survival rates. As a person who was diagnosed very early and did survive, I am more than willing to pay taxes to assure others have the same benefit. Incidentally, early detection also accounts for disparities in other common cancerd such as colon, lung, etc.
As for advanced treatment, I think where care is obtained definitely matters. That’s why I continue to live in a city with property taxes that are considerably higher than those even in NJ.
Just curious what are high property taxes in your location? As i have mentioned i pay $14,000 on a two bedroom condo. Houses less than a mile from me pay $25,000 to $50,000 in a small town with no industry and few businesses.
For a 2000 sq ft house on a 45OO sq ft lot, I’ll be lucky if my taxes are $20,000 this year. I won’t know until just before Christmas! Ho! Ho! While this is still affordable for us, I do have great sympathy for many of the folks for whom I do taxes at Goodwill. I do see older people, with very modest means, who are being taxed out of very modest homes. These people could never have imagined paying outrageous taxes on little 800 sq ft homes— and couldn’t have planned for the tax. I also do Homestead Credit when prepping their tax— at most it’s about $2400 — and usually less.
The city is the state capital and home to the UW flagship campus, but there is also substantial business, most notably in insurance, biotech, and AI. Epic Sysrems, the developer of My Chart and other health care software, is also present.
But no state income tax, correct ?
Absolutely is a state tax— I think in the middle of the pack as state rates go. Also city and county sales taxes.
Sounds like a spike in a very short time if it was a surprise and couldn’t be planned for.
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