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« Idea for Saving: Put Your Change in "Savings" Every Night | Main | One Year Ago This Week -- January 4 »

January 04, 2008

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Add sales tax and that 28% can quickly become upwards of 35%. Yikes.

I think more people should do the hour/dollar conversion. I think more people would stop to think if they had to spend 5 hours of their life to get something. I know that mode of thinking really changed my situation. Selling chunks of my time/life for various things.

I need to use these tips when considering a purchase. Sure puts things in perspective. I like both of these ideas. When using both ideas together, you figure a $100 item would take you 7 hours of work to earn enough to pay for it, if you earn $20 an hour ($100 times 1.4 divided by 20). That's almost a full work day for many people. Sure makes you think twice about how bad you want/need that item. Thanks for the tips!

This is always a good way to put the "fairtax" that was discussed on this blog previously, into perspective. For example, you have to earn $14,000 to pay for a $10,000 home theater under the current system, however under the fairtax you would have to earn $13,000 (It would cost $10,000 + 30% tax and you aren't taxed at all on your earnings).

Obviously a simplified example which doesn't factor in all the moving parts, but I just thought it was a good way to put the fairtax argument into perspective.

On the other hand, if it is something you would buy anyway, a necessity, a low bracket would be more appropriate, say 10-15%, or at most your gross rate, say 20%.

It does make you think about how much your time is worth. At what point is your time more valuable than what it might buy?

I use a straight 50% markup for tax; it's much easier to compute.

When I was in high school I had a lawn maintenance business with my brother, and before we would buy anything we'd always think about how many lawns we'd have to mow in order to pay for it.

Knowing this kept me from buying a lot of unnecessary things.

And, frankly, 35% is probably too low for most middle-class folks.

Here in Michigan, I just paid a 6% state tax on a new car. There are also titling fees (which are just fancy words for taxes).

So, even though I bought a frugal $3,500 car, I paid $210 in use taxes and $25 in licensing fees.

Since my income is taxed at 4.35% and I'm in the 28% bracket, my total upcharge was almost 40%.

What's amazing to me is (as a wise reader above noted) the hourly charge.

If I had bought a new vehicle (my boss encouraged me to do so), I would have paid about $26,000. At a reasonable rate of pay, that's 6 *months* of full-time work. Yikes.

the big question is how do i find a cpa. i could look in the telephone book but then they are all the same.

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