My taxes are done! By my calendar they are late. As ridiculous as that sounds when April 15th is still two months away, it is very unusual for me to wait this long to file. Why the hurry? When you are a resident family (or any family) and there is the possibility that you could get back some of the money you paid to any entity, you claim it as soon as it is available. You don't wait until the very last minute.
We don't usually anticipate getting a very large refund because I play with our tax withholding (W4) to ensure we keep as much of our money as possible each pay period when we actually need it. Last year it was about a thousand dollars. This year it almost quadrupled. We had some new factors that changed the dynamic of our refund. For one, we had another child. Every kid counts, and we certainly spent more than they give credit for. Second, we had a substantial amount of student loan interest we didn't previously have. I complain about it, but apparently it helped. Why ask me to pay it now anyway when it appears that you are giving it all back. Thirdly, in addition to our regular generous contributions to our church we had a nice sized donation to Goodwill. The saving receipts, picture taking, itemizing, and data entry into their system really paid off. I wouldn't have guessed it to be as large as they said it was, good thing I didn't guess.
BUT, this year I am questioning the tax system. I don't think I really paid much attention to the power of taxes and what they mean on an individual level. Maybe because I am getting closer to the day when taxes will be a much larger percentage of my income I am starting to care. Let me tell you my personal feeling about taxes.
I feel guilty taking the federal income tax refund the IRS calculates I am to receive. The total of our refund is $300 less than the total of our federal income tax withholding and our payroll taxes (medicare/SSI). Instead of feeling elated at getting that money back, that we desperately need, I feel like I am a loser. I didn't contribute to anything. They basically refused to take my money and they are broke. They don't want it for our national defense, they don't want it to help fund social security, they don't want it to fund medicare. I want to be a tax payer. I want to have skin in the game. I want to feel like I have a right to say something about how our taxes are spent, but when I am not actually paying taxes do I even count? Yes, I know I count. Luckily, to vote you don't have to actually pay taxes. But I am of the mindset that everyone should pay something. Zero is unacceptable. At the same time I am not about to send in a check just because I am feeling generous. Nobody really does that, do they?
Before I made any claims to statistics I wanted to find out if I was actually part of them.
I am part of the 99%. That's obvious. But not part of the group that wants to overturn the system. I just want the system to work like they said it was going to work. You know the promise: work hard, play by the rules, get ahead. I feel as though we have done it right. We have certainly worked hard, we played by the rules, and while we will be ahead in a few years we could have been ahead a little now had the global economy/housing market not tanked. Now we have to pay someone to buy our house.
I am part of the 48% of Americans who don't pay federal income taxes. In fact my effective tax rate is -.47%. That's right a negative tax rate.
But here lies the problem that I have with my taxes. It feels like one big shell game. I give you some now, because I am required by law, you then give all (or nearly all of it back) and during the year I feel like I am actually paying taxes when we both know that I am not. You give me a payroll tax break but my state raises the income tax nulling that break. You give me my federal taxes back so I can give them to the state, or more accurately this year to the bank so we can leave our house.
Our federal refund increased this year but so did the state taxes that we paid. They nearly doubled. While I am wishing that I could pay federal taxes I do not share the same feelings about my state taxes. In fact I get physically ill when I think about them. We live in a state that has one of the highest income tax rates and property tax rates. I will not miss their taxes. We have never received a refund of any of our state taxes. In fact, most years we end up having to pay a little more.
Last year our state taxes were $1,764 this year they were $3,200 plus another $3,100 that we paid in property taxes. $6,300 or $525/month just for state taxes (not including sales tax) is a lot of money for one little family.
I am thrilled at the prospect of moving to a state with no state income tax. It does beg the question why there is such a difference among the states when it comes to how they tax their residents. I would happily give some of the money I paid to the state to the federal government but I understand my state has already spent all of my money and then some. It's hard to feel too guilty about our tax situation after I consider what we do pay.
Taxes do matter.