8 ms·

This sounds crazy to me. Maybe you're living in a place with a really high cost of living? What's included in "services, utilities, fees, and taxes that you pay

by pc2g4d 12y ago

This sounds crazy to me. Maybe you're living in a place with a really high cost of living? What's included in "services, utilities, fees, and taxes that you pay when earning $100k" ?

zaroth 12y ago
It's completely bonkers when you lay it all out there. On $100k of family of 4 household income... it's a combination of actively paying taxes, and missing out on credits; Payroll taxes* = $ 15,300 Federal income taxes = $ 6,500 CA income taxes = $ 4,000 ACA Subsidy = $ 12,000 Food Stamps = $ 8,000 EITC = $ 5,000 Disability = up to $30,000 if applicable Energy credits = ??? Housing credits = ??? Waived fees = ??? Some of these are refundable credits or progressive credits which you lose by earning too much, so it's a direct cost of working. Every progressive subsidy is mathematically equivalent to a progressive tax. The $12,000 ACA "tax credit" is actually a $12,000 progressive tax. It's the single largest tax hike against the middle class... possibly ever? This doesn't even get into the property tax side of the equation, since we're talking direct cost of working, not cost of owning things like houses, and cars. But that's part of the overall conversation of the war on the middle class. [Edit] There are even property tax circuit breakers where you get credits on property tax for earning less, so that should be in the above table. That's separate from housing credits such as means-tested rent control. Then you can start to pay for the personal costs of actually going out and earning that income.... everything from child care, to transportation, to business clothes, etc. And then that's still not even counting opportunity costs, e.g. I'm too busy at work, now I have to pay for a plumber, contractor, mechanic, landscaper, take-out dinner, etc. versus doing it on my own time. Think, all the things you could do for yourself in 2,080 hours per year... * Don't be fooled by the employer hiding half the cost from you.
- danans 12y ago
  - The $15,300 in payroll tax is over and above your 100k. If you are going too call that a tax on you, then you need to call your income $115,300 for the purposes of the % calculation. - You can't subtract the opportunity cost of not working from your income when you make $115k, because you've made the decision to work and earn that salary. - The EITC is for people who work (hence the "earned" part). If you chose to go exclusively on govt assistance, your max EITC is $11 for a family of 4: http://www.irs.gov/uac/Newsroom/Earned-Income-Tax-Credit-Do-I-Qualify http://www.irs.gov/uac/Newsroom/Earned-Income-Tax-Credit-Do-... - I don't doubt that there is a measurable amount of disability insurance abuse, but the fact remains that you probably have a disability that prevents you from doing child care. The poor still often have to pay for childcare. In any case, the average annual benefit for a family of 4 comes to about $24k, not $30k: http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/ http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/ Subtracting the opportunity cost of not working from vs working at 115300k muddies the comparison. It's more sensible to compare the two scenarios separately: 115300-15300(payroll tax)-6500(fed tax)-4000(CA tax)-8000(foodstamp equivalent food cost)-2600(typical employee cost for PPO-health program)= 78900 vs. 12000(ACA)+8000(food stamps)+11(per EITC comment above)+24000(per disability citation above) = 44011 Even this comparison isn't apples to apples. In the $100k figure, are you accounting for the employer paid portion of health-insurance (and the lower rates that those in a employer-negotiated plan pay?), any tax-free employer retirement plan contributions, and other pre-tax benefits (DCAP, flex-spending account, employee health insurance contributions?). If you own a home, are you accounting for the mortgage interest and property tax deduction? I do agree with one sliver of your argument: making financial progress on $100k income is challenging for a family of 4 in VERY high cost-of-living places such as the Bay Area, where that remaining 79k easily gets eaten up by childcare, housing, food, transportation, etc. Is the standard of living on the $115k salary equivalent to that of a family of 4 on govt assistance? I don't know, but I doubt it, and I would bet on the latter's standard of living being significantly worse. Neither situation is easy street. EDIT: wording. EDIT2: formatting
  - dragonwriter 12y ago
    > The $15,300 in payroll tax is over and above your 100k. Actually, only half (the employer share) is.
    - zaroth 12y ago
      My Macroeconomics 101 class claimed it's been "proven" the full cost of payroll taxes is born by the employee. It's obvious when you are self-employed that's the case, it's less obvious on W-2, but the net effect is the same. Going from "Payroll Cost" on the Company Income Statement to "Net Benefit" on the Family Annual Budget, $140,000 becomes about $15,000, and actually often times much less, or negative. You have to take a careful accounting of where all the money is going, and what your expenses would have been had you NOT earned any of that money, and just stayed home. Unfortunately, it's an extremely demoralizing exercise. If you go a step further, and even say I'm going to earn some gray-market money off-the-books from home instead of taxable income... then you really do just throw in the towel. But all the numbers I'm quoting are assuming the completely legal and above-board approach. The good news for all the self-employed boot-strapping startups out there; STOP paying yourself. It's the absolute worst use of your company's cash. If you take a full and honest accounting, you aren't actually paying yourself anything, you're mostly just paying government taxes and forgoing government benefits. Think of it as the unwritten startup tax credit if it makes you feel better! :-)
      - dragonwriter 12y ago
        > My Macroeconomics 101 class claimed it's been "proven" the full cost of payroll taxes is born by the employee. Whether or not that's true, that's already reflected in you showing the full cost of payroll taxes (employee + employer share) as an expense to the employee. What you failed to do is show all of the income that pays that expense (including the money from the employer that goes directly to paying the employer share) as part of the income from which that cost was being paid. > The good news for all the self-employed boot-strapping startups out there; STOP paying yourself. It's the absolute worst use of your company's cash. Perhaps its worse for your company, OTOH, it mitigates the risk to you should the company -- as many do -- fail, since in that case you will have forgone labor income for equity in the failed firm.
- dragonwriter 12y ago
  > * Don't be fooled by the employer hiding half the cost from you. You can't count it as a cost on you without adding the value of the employer share to your base income. > Every progressive subsidy is mathematically equivalent to a progressive tax. Wrong. You've basically made the same error as you did with employer share of payroll tax -- a progressive subsidy is arguably analogous to (but "mathematically equivalent" is still too strong of a term): 1. An addition to your income (whether or not you receive the benefit, maximum or otherwise) equal to the maximum benefit provided, and 2. An additional tax equal to the difference between the maximum benefit and the amount you actually receive. Its absolutely not even similar, much less "mathematically equivalent", to the latter alone, which is how you presented it.
  - zaroth 12y ago
    > You can't count it as a cost on you without adding the value of the employer share to your base income. I agree with you, but I think I did that. I was trying to say $100,000 of payroll expense causes $15,300 of payroll taxes. Then the other taxes, and subsidy phase-outs, pile on from there. > Its absolutely not even similar, much less "mathematically equivalent", to the latter alone, which is how you presented it. You are right, they are not "mathematically equivalent", let me try again; By "progressive subsidy" I mean a declining benefit as you earn more. That is, income from the government which decreases as you earn more. An example is Medi-Cal and ACA subsidies, food stamps, shit we didn't even mention SSI, etc. By "progressive tax" I mean an increasing tax rate as you earn more. That is, an increasing number of cents out of each dollar in payroll expense is confiscated as you earn more. An example is Federal Income Tax. The progressive subsidy offsets the benefit of early income, the progressive tax offsets the benefit of later income. The net effect is reducing the vast majority if not all of the the "Realized Family Benefit" from $0 - $150,000 of [household] payroll expense! I mean, it's disgusting to think about that way, but it's the economics of the system we've created.
    - dragonwriter 12y ago
      > > You can't count it as a cost on you without adding the value of the employer share to your base income. > I agree with you, but I think I did that. You did not. Or you calculated the tax wrong, but it looks more like the former than the latter. > I said $100,000 of payroll causes $15,300 of payroll taxes. You said when "earning" $100k, you pay $15,300 of payroll tax, you did not say $100k of payroll causes $15,300 of payroll tax -- and interpreting earning in the usual way for such a discussion (i.e., the income shown on your pay stub subject to payroll tax) -- this is exactly correct; at $100k of such income, the total payroll tax (employer + employee share, Social Security + Medicare) is exactly $15,300. If you are looking at the employer's payroll expense, however, though, that's not $100k, its at least $107,650 (the employee's income subject to payroll tax -- which includes the employee share of the tax -- plus the employer share of the tax.)
oscilloscope 12y ago
That sounds like it covers all necessary expenses and taxes, which means there's $40k of discretionary income. A savings rate of 40% is excellent, especially if you can invest it for 10-20 years.
- zaroth 12y ago
  No, I'm just talking about just take-home pay. Then you can start paying living expenses with what's left.

by pc2g4d 12y ago

This sounds crazy to me. Maybe you're living in a place with a really high cost of living? What's included in "services, utilities, fees, and taxes that you pay when earning $100k" ?

zaroth 12y ago

It's completely bonkers when you lay it all out there. On $100k of family of 4 household income... it's a combination of actively paying taxes, and missing out on credits; Payroll taxes* = $ 15,300 Federal income taxes = $ 6,500 CA income taxes = $ 4,000 ACA Subsidy = $ 12,000 Food Stamps = $ 8,000 EITC = $ 5,000 Disability = up to $30,000 if applicable Energy credits = ??? Housing credits = ??? Waived fees = ??? Some of these are refundable credits or progressive credits which you lose by earning too much, so it's a direct cost of working. Every progressive subsidy is mathematically equivalent to a progressive tax. The $12,000 ACA "tax credit" is actually a $12,000 progressive tax. It's the single largest tax hike against the middle class... possibly ever? This doesn't even get into the property tax side of the equation, since we're talking direct cost of working, not cost of owning things like houses, and cars. But that's part of the overall conversation of the war on the middle class. [Edit] There are even property tax circuit breakers where you get credits on property tax for earning less, so that should be in the above table. That's separate from housing credits such as means-tested rent control. Then you can start to pay for the personal costs of actually going out and earning that income.... everything from child care, to transportation, to business clothes, etc. And then that's still not even counting opportunity costs, e.g. I'm too busy at work, now I have to pay for a plumber, contractor, mechanic, landscaper, take-out dinner, etc. versus doing it on my own time. Think, all the things you could do for yourself in 2,080 hours per year... * Don't be fooled by the employer hiding half the cost from you.

danans 12y ago
- The $15,300 in payroll tax is over and above your 100k. If you are going too call that a tax on you, then you need to call your income $115,300 for the purposes of the % calculation. - You can't subtract the opportunity cost of not working from your income when you make $115k, because you've made the decision to work and earn that salary. - The EITC is for people who work (hence the "earned" part). If you chose to go exclusively on govt assistance, your max EITC is $11 for a family of 4: http://www.irs.gov/uac/Newsroom/Earned-Income-Tax-Credit-Do-I-Qualify http://www.irs.gov/uac/Newsroom/Earned-Income-Tax-Credit-Do-... - I don't doubt that there is a measurable amount of disability insurance abuse, but the fact remains that you probably have a disability that prevents you from doing child care. The poor still often have to pay for childcare. In any case, the average annual benefit for a family of 4 comes to about $24k, not $30k: http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/ http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/ Subtracting the opportunity cost of not working from vs working at 115300k muddies the comparison. It's more sensible to compare the two scenarios separately: 115300-15300(payroll tax)-6500(fed tax)-4000(CA tax)-8000(foodstamp equivalent food cost)-2600(typical employee cost for PPO-health program)= 78900 vs. 12000(ACA)+8000(food stamps)+11(per EITC comment above)+24000(per disability citation above) = 44011 Even this comparison isn't apples to apples. In the $100k figure, are you accounting for the employer paid portion of health-insurance (and the lower rates that those in a employer-negotiated plan pay?), any tax-free employer retirement plan contributions, and other pre-tax benefits (DCAP, flex-spending account, employee health insurance contributions?). If you own a home, are you accounting for the mortgage interest and property tax deduction? I do agree with one sliver of your argument: making financial progress on $100k income is challenging for a family of 4 in VERY high cost-of-living places such as the Bay Area, where that remaining 79k easily gets eaten up by childcare, housing, food, transportation, etc. Is the standard of living on the $115k salary equivalent to that of a family of 4 on govt assistance? I don't know, but I doubt it, and I would bet on the latter's standard of living being significantly worse. Neither situation is easy street. EDIT: wording. EDIT2: formatting
- dragonwriter 12y ago
  > The $15,300 in payroll tax is over and above your 100k. Actually, only half (the employer share) is.
  - zaroth 12y ago
    My Macroeconomics 101 class claimed it's been "proven" the full cost of payroll taxes is born by the employee. It's obvious when you are self-employed that's the case, it's less obvious on W-2, but the net effect is the same. Going from "Payroll Cost" on the Company Income Statement to "Net Benefit" on the Family Annual Budget, $140,000 becomes about $15,000, and actually often times much less, or negative. You have to take a careful accounting of where all the money is going, and what your expenses would have been had you NOT earned any of that money, and just stayed home. Unfortunately, it's an extremely demoralizing exercise. If you go a step further, and even say I'm going to earn some gray-market money off-the-books from home instead of taxable income... then you really do just throw in the towel. But all the numbers I'm quoting are assuming the completely legal and above-board approach. The good news for all the self-employed boot-strapping startups out there; STOP paying yourself. It's the absolute worst use of your company's cash. If you take a full and honest accounting, you aren't actually paying yourself anything, you're mostly just paying government taxes and forgoing government benefits. Think of it as the unwritten startup tax credit if it makes you feel better! :-)
    - dragonwriter 12y ago
      > My Macroeconomics 101 class claimed it's been "proven" the full cost of payroll taxes is born by the employee. Whether or not that's true, that's already reflected in you showing the full cost of payroll taxes (employee + employer share) as an expense to the employee. What you failed to do is show all of the income that pays that expense (including the money from the employer that goes directly to paying the employer share) as part of the income from which that cost was being paid. > The good news for all the self-employed boot-strapping startups out there; STOP paying yourself. It's the absolute worst use of your company's cash. Perhaps its worse for your company, OTOH, it mitigates the risk to you should the company -- as many do -- fail, since in that case you will have forgone labor income for equity in the failed firm.
dragonwriter 12y ago
> * Don't be fooled by the employer hiding half the cost from you. You can't count it as a cost on you without adding the value of the employer share to your base income. > Every progressive subsidy is mathematically equivalent to a progressive tax. Wrong. You've basically made the same error as you did with employer share of payroll tax -- a progressive subsidy is arguably analogous to (but "mathematically equivalent" is still too strong of a term): 1. An addition to your income (whether or not you receive the benefit, maximum or otherwise) equal to the maximum benefit provided, and 2. An additional tax equal to the difference between the maximum benefit and the amount you actually receive. Its absolutely not even similar, much less "mathematically equivalent", to the latter alone, which is how you presented it.
- zaroth 12y ago
  > You can't count it as a cost on you without adding the value of the employer share to your base income. I agree with you, but I think I did that. I was trying to say $100,000 of payroll expense causes $15,300 of payroll taxes. Then the other taxes, and subsidy phase-outs, pile on from there. > Its absolutely not even similar, much less "mathematically equivalent", to the latter alone, which is how you presented it. You are right, they are not "mathematically equivalent", let me try again; By "progressive subsidy" I mean a declining benefit as you earn more. That is, income from the government which decreases as you earn more. An example is Medi-Cal and ACA subsidies, food stamps, shit we didn't even mention SSI, etc. By "progressive tax" I mean an increasing tax rate as you earn more. That is, an increasing number of cents out of each dollar in payroll expense is confiscated as you earn more. An example is Federal Income Tax. The progressive subsidy offsets the benefit of early income, the progressive tax offsets the benefit of later income. The net effect is reducing the vast majority if not all of the the "Realized Family Benefit" from $0 - $150,000 of [household] payroll expense! I mean, it's disgusting to think about that way, but it's the economics of the system we've created.
  - dragonwriter 12y ago
    > > You can't count it as a cost on you without adding the value of the employer share to your base income. > I agree with you, but I think I did that. You did not. Or you calculated the tax wrong, but it looks more like the former than the latter. > I said $100,000 of payroll causes $15,300 of payroll taxes. You said when "earning" $100k, you pay $15,300 of payroll tax, you did not say $100k of payroll causes $15,300 of payroll tax -- and interpreting earning in the usual way for such a discussion (i.e., the income shown on your pay stub subject to payroll tax) -- this is exactly correct; at $100k of such income, the total payroll tax (employer + employee share, Social Security + Medicare) is exactly $15,300. If you are looking at the employer's payroll expense, however, though, that's not $100k, its at least $107,650 (the employee's income subject to payroll tax -- which includes the employee share of the tax -- plus the employer share of the tax.)

oscilloscope 12y ago

That sounds like it covers all necessary expenses and taxes, which means there's $40k of discretionary income. A savings rate of 40% is excellent, especially if you can invest it for 10-20 years.

zaroth 12y ago
No, I'm just talking about just take-home pay. Then you can start paying living expenses with what's left.