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What Are Your Real Taxes?

Budgeting image with calculator and pen

What are your real taxes?

My wife and I were going through our budget and noticing all the taxes in every single bill.  When I think of taxes, generally it applies mostly to when we get paid.  This is not meant to be a political post in any way, but just a realistic look at the real amount we pay in taxes each year.

Below are some examples of what we really pay in taxes each year as consumers (I am using Maine taxes as an example, other states and countries are in some cases very different).

Taxes dealing with Automobiles:

  1. The cost to register a vehicle varies:
    • Passenger vehicles: $35
    • Motorcycles: $21
    • Disability plates: $35
    • Mopeds: $9
  2. Taxes on a used vehicle purchase in Maine is 5.5%
    • If you purchased a 12,000 car or truck that cost would be $660 for taxes.
    • Every year you register, you have to pay excise tax and you can see how that is calculated here.
    • An example of an excise tax amount:  For example, the owner of a three year old motor vehicle with an MSRP of $19,500 would pay $263.25.  Remember you pay excise tax every year and most homes have at least 2 vehicles!
  3. Gasoline tax
    • If you commute to work, we go through a lot of gas.  In Maine our state + federal tax rate as of this year is approximately 48.41 cents per gallon of gas.  When I was commuting to work, we were spending just over $50/month in fuel taxes.
    • You can calculate your fuel taxes by taking the number of gallons on average you go through in a month * 0.4841 and that is what you are spending on just the taxes.
  4. Tolls
    • Not all states have tolls, but up here in the northeast we have a lot of them.  It can cost $5-$10 per day just to go to work in tolls depending on where you need to drive, that is $25-$50 per week.

Phew, that is a lot already.  For a household with 2 vehicles here is what just an average family could see for expenses in a year, just for taxes.

2 cars = registration tax (35*2) + excise tax (263.25 *2)  + fuel tax ($50 *12) = $1,196.50 / year in just taxes.

Taxes dealing with employment:

  1. Employment taxes are all over the board depending on how much you make annually along with your family deductions.  For self-employed people making median or just above median income the general rule for setting aside money is around 25-30%.
    • If you make $50,000 annually that means setting aside $15,000 for taxes.
    • If you are self employed it feels like more, because your employer pays half of your social security tax, which is 15%.  When you work for an employer you only pay 7.5% in your paycheck and your employer pays the other half.  When you work for yourself, you pay the whole 15%.

Property Taxes:

  • When you buy a home, lumped into your monthly payment are property taxes.  Here in Maine you can expect to pay on average about $2,000 – $3,500 if you buy an average home in the state.  You can find places for less and there are a lot of places for more.
  • After you pay off your home, this bill really hits you in the face, because you have to write that check directly.

Cell phone taxes:

  • Have you looked at your cell phone bill to see what your taxes are?
    • In Maine these taxes equate to ~13.14% of the bill.
    • If your cell phone bill is $80 that means your taxes will be $10.51 per month (This site has estimates by state).  ($126.12 annually)  The average family cell phone bill is higher than this monthly, but I wanted to provide a fairly frugal example.

Food and Service Taxes:

  • In Maine we have a 5% tax on a lot of services, so you could see higher prices on some services due to this tax.  If you have a service that is taxed and it costs $1,000, you would pay $50 for taxes on this service.  Individual states vary on the percentage as well as the services.  Maine information is here.
  • Restaurants, lodging, and liquor are also taxed at 8%.  If you eat out and your bill comes to $100, you will pay an additional $8 in taxes + your %15 tip.  Where this adds up is if you get your coffee every day, eat out a few times a week, or go on a family vacation.  If you go on a vacation and spend about $2,000 in food, lodging, etc… On top of your $2,000 bill you will be paying Maine an additional $160 for your trip.  Check your state to find the rates in your area.

Other Taxes:

All these taxes do not include the smaller taxes we do not sometimes pay attention to.  Politicians have become very good at labeling these additional taxes as fees or service costs.  Do you have to register your dog in your location for $25 annually?  How about your fishing or hunting license?  Have you been pulled over for speeding, parking ticket, past due registration, etc…?

Phew, that is a lot to take in.  We do need taxes to help fund schools, emergency departments, defense, etc…, but we should still have our eyes open when we vote on budgets and for our political leaders.  When you begin working on your budget and counting every dollar you make and where it goes, you see the tax burden for what it really is.

Think about that median income family making around $50,000/year with both adults working.  Taxes are an incredible strain on families who do not make a lot of money, but are trying to own their home, commute to work and enjoy time with family.

Today’s post was meant as more of an eye opener and awareness builder.  When we have no payments at this point, but we still have bills from our taxes we need to pay, which we have found out in our house pretty quickly.  Being both self-employed and debt free, you are visibly writing those checks out!

Have a great weekend.

{ 2 comments… add one }
  • Lori Woodward June 3, 2016, 6:52 pm

    I just had a fun conversation with Kellie on Facebook. I’m an artist and arts writer who lives in New Hampshire, so our taxes are similar to yours. Kellie pointed me to your blog, and first off – I see you quoted Seth Godin, my favorite author.

    Kellie and I are in similar modes – married, debt-free, and living in New England. I’m rarely envious of what other folks have. I grew up with a single mom who raised 3 of us. She was a bookkeeper and her salary was usually under the poverty level, but we kids were resourceful.

    All of that adds up to the fact that even though it looks like we don’t have much, I feel like we have more than I ever dreamed of. The best part is having a reliable car, and sturdy house, and enough money to take long weekends away in New England.

    I’ll be back to your blog Larry. Thanks for writing about these things.

    • Larry Chasse June 4, 2016, 12:32 am

      Thank you so much for your thoughtful comment Lori. 🙂

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