Crushing the Dream

[Open Space]

+1 on the property tax envy!  I guess Texas is not the best choice for taxes after FIRE.  With no income tax, the property taxes are painful.  Also we have extra insurance for living in a county which borders the coast, so windstorm insurance for hurricane damage is more than the general home owners insurance.  We are at about $10k for taxes and insurance on a home assessed at $320k.  It's ok with 2 professional careers where the income taxes in many states would offset what we are paying now. 

[GetItRight]

I'll get ready for the flames, but I'm not exactly mustachian. Frugal in some areas but I spend a bit on the luxuries I enjoy (in my mind, cheap bastard according to everyone else). $28k sounds impossible and $40k very difficult.

On closer look I spent almost $38k, after subtracting $25k spent on student loans. This is in a HCOL very liberal/high tax area, once FI or at least well on the way I will relocate and probably spend about the same but have a waterfront home. I have some luxuries and expensive hobbies. I have a truck, a boat, a motorcycle. I wouldn't trade my time on the water for anything. This year I had a few expensive items that don't come up often but have come due this past year so higher than typical spending in the automotive and hobby area. Also included a stint of going out for dinner and drinks with the wife one or twice a week at about $100/night (me being frugal at 1/4 of that bill) but we stopped doing that the past few months. So for me it was a more expensive that normal year by a few grand and $40k would still leave a surplus. That's with 9% savings rate to my 401k as well. So after looking at that I think $40k would be a very comfortable retirement. $28k doable but I'll be a wage slave longer to have the type of ER that I will find fulfilling.

[Frugal D]

I live in a HCOL area, do tons of fuin shit including vacations and this year I am projected to spend ~$18,000 ALL IN.

Tell me more. What is considered HCOL? I presume your house is paid off?

[Frugal D]

I live in a HCOL area, do tons of fuin shit including vacations and this year I am projected to spend ~$18,000 ALL IN.

Tell me more. What is considered HCOL? I presume your house is paid off?

Oh, never mind. I just saw your breakdown. $550 in rent/utilities is not what I would consider HCOL unless you have 20 roommates or something.

[FuturePrimitive]

Oh, never mind. I just saw your breakdown. $550 in rent/utilities is not what I would consider HCOL unless you have 20 roommates or something.

Yea, my SIL was paying more than double that for a couch. Seriously, she had 5 roommates and slept on a couch for a year. Now THAT is HCOL! (And partly a function of being young.)

[2Birds1Stone]

I live in a HCOL area, do tons of fuin shit including vacations and this year I am projected to spend ~$18,000 ALL IN.

Tell me more. What is considered HCOL? I presume your house is paid off?

Oh, never mind. I just saw your breakdown. $550 in rent/utilities is not what I would consider HCOL unless you have 20 roommates or something.

I live on Long Island, NY. One of the most expensive areas in the northeast.

I am blessed to have found a 1 bedroom basement apartment I share with my SO for $1100/month.

[BTDretire]

Oh, never mind. I just saw your breakdown. $550 in rent/utilities is not what I would consider HCOL unless you have 20 roommates or something.

Yea, my SIL was paying more than double that for a couch. Seriously, she had 5 roommates and slept on a couch for a year. Now THAT is HCOL! (And partly a function of being young.)

Just after HS graduation, I moved into housing near the university for the summer.
I had 5 roommates in a big house.
We each paid $35 a month. Now the life lesson, at the end of the summer our month to month
lease jumped to $120 per month each. The students come back for the fall term and housing gets tight.
We all moved, but that was an exciting summer. (1973, nuff said :-)

[zephyr911]

We live on quite a bit more than $40,000 (funding GK's 529...)

You're not living on 529 contributions. You're saving them. Might want to recalculate.

  Let me add that my personal opinion is that Propery taxes are the worst tax there is.
Most people spend 30 years buying their home, their castle, and then they must continue
for the rest of there lives paying rent to the government to live in what they paid for.
If they don't pay, the government removes them from the property they bought.
 It's the worst.

I concur. School taxes especially.  We don't have any kids yet are expected to pay school taxes while people who are renting can shit out kids(when they can't even feed/house themselves) like there is no tomorrow. If anyone says this is not a fair system all you here is "but who will think of the poor children?" make people pay for the amount of kids they put in the system then maybe these irresponsible people will be forced to think "maybe we should have that 8th kid we can't afford" but things will NEVER change or get better until personal accountability come into play and that will NEVER happen because people will keep saying "but who will think of the poor children".

Oh for fuck's sake, call the waambulance. This whining is pathetic. Renters DO pay property taxes, by paying enough rent for the landlord to make a profit after taxes and all other costs. Otherwise, nobody would be a landlord.

I pay a shit-ton of property taxes as a childless landlord and it has never occurred to me to cry about it. I welcome the increase in tax that will come with my growing portfolio. I like knowing that people in my area grow up with a certain educational baseline, increasing the average quality of available labor. I like having basic county services like law enforcement and firefighters on standby if the shit hits the fan and I need their help. I love my miniscule odds of dying of third-world causes like building collapses or infrastructure failures, because of code inspectors and road crews. You name it, if property taxes pay for it, I benefit in some way. And so do you.

Unless, of course, you live in a remote wilderness where you grow your own food, make your own goods, live in a house you built, ship nothing in or out, connect to the Internet through a homemade device, and expect absolutely no assistance from anyone in any kind of situation.

Pay your taxes and get on with life.

[cautiouspessimist]

We live on quite a bit more than $40,000 (funding GK's 529...)

You're not living on 529 contributions. You're saving them. Might want to recalculate.

  Let me add that my personal opinion is that Propery taxes are the worst tax there is.
Most people spend 30 years buying their home, their castle, and then they must continue
for the rest of there lives paying rent to the government to live in what they paid for.
If they don't pay, the government removes them from the property they bought.
 It's the worst.

I concur. School taxes especially.  We don't have any kids yet are expected to pay school taxes while people who are renting can shit out kids(when they can't even feed/house themselves) like there is no tomorrow. If anyone says this is not a fair system all you here is "but who will think of the poor children?" make people pay for the amount of kids they put in the system then maybe these irresponsible people will be forced to think "maybe we should have that 8th kid we can't afford" but things will NEVER change or get better until personal accountability come into play and that will NEVER happen because people will keep saying "but who will think of the poor children".

Oh for fuck's sake, call the waambulance. This whining is pathetic. Renters DO pay property taxes, by paying enough rent for the landlord to make a profit after taxes and all other costs. Otherwise, nobody would be a landlord.

I pay a shit-ton of property taxes as a childless landlord and it has never occurred to me to cry about it. I welcome the increase in tax that will come with my growing portfolio. I like knowing that people in my area grow up with a certain educational baseline, increasing the average quality of available labor. I like having basic county services like law enforcement and firefighters on standby if the shit hits the fan and I need their help. I love my miniscule odds of dying of third-world causes like building collapses or infrastructure failures, because of code inspectors and road crews. You name it, if property taxes pay for it, I benefit in some way. And so do you.

Unless, of course, you live in a remote wilderness where you grow your own food, make your own goods, live in a house you built, ship nothing in or out, connect to the Internet through a homemade device, and expect absolutely no assistance from anyone in any kind of situation.

Pay your taxes and get on with life.

My take on paying taxes for other kids to get educated is that I don't want to live in a society with a bunch of (even more so) uneducated people.

[zephyr911]

My take on paying taxes for other kids to get educated is that I don't want to live in a society with a bunch of (even more so) uneducated people.

It's bad enough already, innit? Hell, I wish they'd raise my property taxes! I'll work till 41 instead of 40 if it'll get us back into the top 10 in science.

I just can't figure out how people get this mentality that if something doesn't literally put food in my mouth right now, it's not doing me any good. We're all interconnected. Everything we do affects each other. Isolationist fantasies were workable in our hunter-gatherer days. If you're on the Internet having this conversation, you not only can afford property taxes, you should want to.

[cautiouspessimist]

My take on paying taxes for other kids to get educated is that I don't want to live in a society with a bunch of (even more so) uneducated people.

It's bad enough already, innit? Hell, I wish they'd raise my property taxes! I'll work till 41 instead of 40 if it'll get us back into the top 10 in science.

I just can't figure out how people get this mentality that if something doesn't literally put food in my mouth right now, it's not doing me any good. We're all interconnected. Everything we do affects each other. Isolationist fantasies were workable in our hunter-gatherer days. If you're on the Internet having this conversation, you not only can afford property taxes, you should want to.

That's exactly it. Though, to be honest, it wasn't until someone else pointed it out that I started to view it that way.

[BTDretire]

It's not the tax to educate our children, it's the fact that the largest purchase, the greatest asset most Americans
will ever have, the item they spent 30 years to own free and clear, is now an item that will be subject to the government
sucking money from you every year for the rest of your life.
 How's that for a compound sentence.

[Frugal D]

It's not the tax to educate our children, it's the fact that the largest purchase, the greatest asset most Americans
will ever have, the item they spent 30 years to own free and clear, is now an item that will be subject to the government
sucking money from you every year for the rest of your life.
 How's that for a compound sentence.

Taxes are the price we pay to live in a civilized society. Though, shootings like the one in Virginia today are making it less and less civilized...

[MoonShadow]

It's not the tax to educate our children, it's the fact that the largest purchase, the greatest asset most Americans
will ever have, the item they spent 30 years to own free and clear, is now an item that will be subject to the government
sucking money from you every year for the rest of your life.
 How's that for a compound sentence.

Taxes are the price we pay to live in a civilized society. Though, shootings like the one in Virginia today are making it less and less civilized...

No, taxes are the price that you pay to live in a civilized society.  Not everyone pays taxes anymore, and it's starting to show.

[Frugal D]

Taxes are the price we pay to live in a civilized society. Though, shootings like the one in Virginia today are making it less and less civilized...

No, taxes are the price that you pay to live in a civilized society.  Not everyone pays taxes anymore, and it's starting to show.

Go on...

[MoonShadow]

Taxes are the price we pay to live in a civilized society. Though, shootings like the one in Virginia today are making it less and less civilized...

No, taxes are the price that you pay to live in a civilized society.  Not everyone pays taxes anymore, and it's starting to show.

Go on...

What?  No text over a cutsie Willy Wonka pic?

[clarkfan1979]

Lake County Property taxes are really bad (north suburbs of Chicago). My dad bought a house in 1987 for 145K on a lake. He probably spend 50K on fixing it up over the next 20 years. He is handy. I don't know what the original taxes were, but he had to move when the property taxes were 12,000/year. The house was appraised at 600,000, but when he sold he only got 450,000. Yes, it was probably a bubble, but Lake County taxes assess every year and ride the bubbles. However, when the market crashes, you have to wait 2-3 year for your taxes to decrease.

I bought a house in Colorado for 182K in 2007. A buddy bought a condo in Lake County, IL in 2007 for 180k. My original taxes were 1500/year and they are 1530/year today. My house is probably worth 300k. My buddies taxes stared at 4500/year and they are now 5500/year. Instead of 180K, his condo is probably worth 170K today.

[EngineerMum]

Speaking as someone who lives in a state where our equivalent of property tax is extremely minimal, (example, on a $1.2M property rates were about $1600p.a. In different council areas they might have been as high at $6k on a similar value house), I think higher property taxes would be great. Instead we have stamp duty on housing, something ridiculous like 8% when you buy. Which means that it's very expensive to make a housing transaction, so people stay put. And there is no incentive for older people to downsize once the kids move out - so you have family homes (3 - 5 bedroom McMansions in suburbs ideal for commuting and near good schools) with 2 occupants who don't work and don't have kids, and families get pushed out to the boondocks or into teeny townhouses and apartments. Oh, and pensions (you don't pay into them here, you are eligible if you are old enough and have low enough assets) don't consider the family home in the assets test - even if it's worth millions. Not saying empty nesters should all be forced into retirement homes, but some sort of market signal that living in the best homes in the best suburbs is something that has value.

[Potterquilter]

Zephyr, you are right, we are not living on GK's 529 however that is no longer money in our accounts.

[BlueMR2]

EDIT:Just realized this post was a little misleading. The tax rate can change (especially school taxes) based on budget votes however the assessed value of a property doesn't change until it changes hands. Generally speaking though, tax rates are fairly static around here.

Around here they are required to re-assess values every 3 years (rolling, so not everyone's changes at the same time).  I'm really not sure how they come up with the values as they don't match up with what properties are really selling for (runs right about 2/3 what the actual sales prices are).

[coppertop]

It's not the tax to educate our children, it's the fact that the largest purchase, the greatest asset most Americans
will ever have, the item they spent 30 years to own free and clear, is now an item that will be subject to the government
sucking money from you every year for the rest of your life.
 How's that for a compound sentence.

I have to agree.  One's homestead, if you will, should not be taxed.  Go ahead and tax that vacation home, that business building, that investment real estate.  But leave people's homes alone.  Taxes should be on income and ability to pay only.  No elderly people should ever be in danger of losing their homes because the property taxes become too high. 

[zephyr911]

No, taxes are the price that you pay to live in a civilized society.  Not everyone pays taxes anymore, and it's starting to show.

You mean the people who are too poor to have a meaningful tax burden? Waaaah! Waaaah! Seriously...

If you want more people to pay taxes, tell the Republican Congress to stop gutting the IRS so they can properly staff their audit division and hold evaders in compliance. The ROI of funding those positions is immense.

[zephyr911]

Zephyr, you are right, we are not living on GK's 529 however that is no longer money in our accounts.

It's no longer money in your cash accounts. It is still yours, albeit with restricted access, correct?

[MoonShadow]

No, taxes are the price that you pay to live in a civilized society.  Not everyone pays taxes anymore, and it's starting to show.

You mean the people who are too poor to have a meaningful tax burden? Waaaah! Waaaah! Seriously...

No, I don't.  There are plenty of very wealthy people who don't pay taxes, and staffing the IRS would have no effect, because they do so entirely within the tax code.  I know first hand, because I use many of the same tricks, and haven't paid any income taxes (other than FICA) in three years, and vanishingly little before that. 

[Frugal D]

No, taxes are the price that you pay to live in a civilized society.  Not everyone pays taxes anymore, and it's starting to show.

You mean the people who are too poor to have a meaningful tax burden? Waaaah! Waaaah! Seriously...

No, I don't.  There are plenty of very wealthy people who don't pay taxes, and staffing the IRS would have no effect, because they do so entirely within the tax code.  I know first hand, because I use many of the same tricks, and haven't paid any income taxes (other than FICA) in three years, and vanishingly little before that.

Please share your strategy. I would also like to pay zero taxes where possible.

[MoonShadow]

No, taxes are the price that you pay to live in a civilized society.  Not everyone pays taxes anymore, and it's starting to show.

You mean the people who are too poor to have a meaningful tax burden? Waaaah! Waaaah! Seriously...

No, I don't.  There are plenty of very wealthy people who don't pay taxes, and staffing the IRS would have no effect, because they do so entirely within the tax code.  I know first hand, because I use many of the same tricks, and haven't paid any income taxes (other than FICA) in three years, and vanishingly little before that.

Please share your strategy. I would also like to pay zero taxes where possible.

It's quite complex, and has taken years to get this far.  It's partially due to my military veteran status, and substantially due to the fact that I'm been a foster father, and have adopted foster children.  The tax breaks for adopting actual Americans is larger than one would expect.   It was only partially on purpose, because I wasn't aware of most of these tax breaks before becoming a foster father.

[zephyr911]

No, I don't.  There are plenty of very wealthy people who don't pay taxes, and staffing the IRS would have no effect, because they do so entirely within the tax code.  I know first hand, because I use many of the same tricks, and haven't paid any income taxes (other than FICA) in three years, and vanishingly little before that.

Forgive my assumption. Structural issues are indeed a contributor, and I wouldn't dream of denying it. Coincidentally, I just projected our effective personal income tax rate for 2015 at <2K on 135K in wages.

However, people in our income range are largely unwilling to take the steps we did - they're out trying to buy bigger houses "for the deduction" instead of maxing out tax-deferred savings and buying rentals. From a macro view, I still understand tax evasion and fraud as larger contributors.

[MoonShadow]

However, people in our income range are largely unwilling to take the steps we did - they're out trying to buy bigger houses "for the deduction" instead of maxing out tax-deferred savings and buying rentals.

But the advantages are available for anyone who would choose to structure their lives to that end.  I suppose we should thank the normal people for paying taxes so that we don't have too.  Just today, I was conversing with a single co-worker about our company restricting our 401k deductions.  We have the same job title, and earn roughly the same amount per hour, but I work more overtime than him (by his own choices, not the company's) and we couldn't figure out why they did it in the middle of the year; because while I'm a highly-compensated-employee under IRS rules, he admits that he would not be.  He was kinda shocked to hear what I made last year, so I couldn't resist after the look on his face, so I followed it up with, "and don't forget, Ben, I paid exactly ZERO in income taxes last year!"  Which prompted an immediate response of, "you're a cocksucker, you know that right?!"

 From a macro view, I still understand tax evasion and fraud as larger contributors.

Maybe, but how would you really know?  The tax code is so very complex, that I'm pretty sure that some people get away with a great deal of evasion and/or fraud; but then it's also so complex, that there are so many methods of reducing one's "fair share" to really low levels.  At best, the estimates you hear are educated guesses from think tanks; every one with their own agenda.  I tend to dismiss such published statistics as noise.

[2lazy2retire]

Living near the coast will kill you in taxes though.

This seems to apply everywhere. My parents live on Lake Ontario (technically it's the coast :D) and their taxes get a 50% surcharge because of it.

Delaware with a fair few beach towns has low property tax

[BTDretire]

Please share your strategy. I would also like to pay zero taxes where possible.

  I don't pay zero, but I've been between 1-1/2% and 3% for many years.
I fully fund two SEP ira's, about $15k and my HSA account, about $7.5k,
4 exemptions about $16k, Standard deduction about 11K.
Let's see, that's  about $50K in deductions.
If I had $75k  income minus $50K in deductions leaves $25k to pay taxes on.
The taxes due on $25k is $2,825. $75,000/$2,825  = 3.8% in taxes.
I had some additional college expense deductions or credits and I probably
missed some deductions.
 What hurts me is the SS and medicare taxes , I'm self employed and pay both halves,
15.3%, not many deductuctions to get away from that.
 I'll be paying more this year, college is over the kids are on there own.
                                         Mikek

[Bucksandreds]

Property Taxes suck when you move into a neighborhood for the schools.  We bought into maybe the best school district in Ohio and we are paying more than double in property taxes than what we would in an average neighborhood.  Knowing how most from my hometown turned out and compare that to the average adult from where I live now and you would know why thousands of dollars more in expenses per year can be well worth it.  If you choose to have kids then your choices better be what's best for them. They didn't choose to be born.

[zephyr911]

"you're a cocksucker, you know that right?!"

Because they're so unwilling to replicate it that they may as well be incapable of it, in their own eyes.

Maybe, but how would you really know?  The tax code is so very complex, that I'm pretty sure that some people get away with a great deal of evasion and/or fraud; but then it's also so complex, that there are so many methods of reducing one's "fair share" to really low levels.  At best, the estimates you hear are educated guesses from think tanks; every one with their own agenda.  I tend to dismiss such published statistics as noise.

I can't really say I "know", but research does indicate that the majority of allowable tax-deferred contributions are not made, and that a substantial percentage of business income is not reported.
Also, to look at it another way, if we're trying to determine which one hurts the system more - you and me piling up funds for the future is good for the economy and also good for the taxpayer, because it not only increases investment and creates jobs, but it ensures we won't become wards of the state in the future. Conversely, black-market sales and cash wages reduce revenue, hinder regulatory programs geared toward safety and consumer choice, and also reduce legitimate retirement benefits for workers. But I realize these are soft arguments compared to the actual math that I haven't done, and that I'm sort of shifting the goalposts too. So, grain of salt and all.

[2lazy2retire]

Property Taxes suck when you move into a neighborhood for the schools.  We bought into maybe the best school district in Ohio and we are paying more than double in property taxes than what we would in an average neighborhood.  Knowing how most from my hometown turned out and compare that to the average adult from where I live now and you would know why thousands of dollars more in expenses per year can be well worth it.  If you choose to have kids then your choices better be what's best for them. They didn't choose to be born.

We see the opposite here, at least in terms of taxes as a percentage of property value. A recent study showed that one school district had 1M in property value per child in the system, while a close by district had only 132k per student. So the poorer districts are forced to have higher taxes even accounting for state top up subsidy.

[MoonShadow]

But I realize these are soft arguments compared to the actual math that I haven't done, and that I'm sort of shifting the goalposts too. So, grain of salt and all.

Yes, grain of salt for both sides of this one, but I don't think that anyone can really 'do the math', because I don't believe that anyone actually has access to the real data here.  People who cheat are motivated to keep that hidden, but people who don't are also motivated to keep their financial details private for legit reasons, so simply hiding details isn't cause to assume that someone is cheating.  So how do you estimate the number of people who cheat a little, a lot, or never?  It's an unknowable unknown, in my opinion.

[Bucksandreds]

Property Taxes suck when you move into a neighborhood for the schools.  We bought into maybe the best school district in Ohio and we are paying more than double in property taxes than what we would in an average neighborhood.  Knowing how most from my hometown turned out and compare that to the average adult from where I live now and you would know why thousands of dollars more in expenses per year can be well worth it.  If you choose to have kids then your choices better be what's best for them. They didn't choose to be born.

We see the opposite here, at least in terms of taxes as a percentage of property value. A recent study showed that one school district had 1M in property value per child in the system, while a close by district had only 132k per student. So the poorer districts are forced to have higher taxes even accounting for state top up subsidy.

People move to where I live for the schools so 80% of households have kids compared to half that in the worse areas.  They leave once the kids are grown to avoid the taxes.
Olentangy school district in Ohio takes around 1.8% of my houses value alone. My total tax bill is about 2.2% of my property value. My same house in a typical Ohio town would cost 35-40% less and my tax bill would be around 1.5- 1.8% of my property value. In a lower end town my same house would cost me about 1/3 of my current bill. It's totally worth it when you look at heroin hell cities vs where I live. Ohio has very very few $1 million homes. I paid $360,000 for a brand new 3000 sq foot home in one of the most expensive suburbs in the state with hardwood and granite throughout. I pay over $8000 in property taxes but my children will more than double their odds of not being drug addicts compared to where I come from.

[TomTX]

I live in a HCOL area, do tons of fuin shit including vacations and this year I am projected to spend ~$18,000 ALL IN.

Tell me more. What is considered HCOL? I presume your house is paid off?

Oh, never mind. I just saw your breakdown. $550 in rent/utilities is not what I would consider HCOL unless you have 20 roommates or something.

I live on Long Island, NY. One of the most expensive areas in the northeast.

I am blessed to have found a 1 bedroom basement apartment I share with my SO for $1100/month.

Yeah, we need to be careful to do apples-to-apples comparison.

OP (like me) is talking about an FI stash/expenditures for 2-3 people.

2Bird is talking about a stash/expenditures just for 1 person, where he shares a 1-bedroom with an SO, yet splits the rent (and presumably other costs.)

MMM typically spends $25k/year for 3 people, but that's with a paid-off house in an area with (relatively) low property tax and insurance costs.

The details matter.

[Cougar]

 imo, you need to change your mindset; i'd recommend reading early retirement extreme.

 you can live on that easily if you are willing to make changes, i'm over that amount; but i keep my budget around 2k monthly so when i pull the cord; its no problem and much more imporatant; i have no desire to much of the mass consumer culture anymore. i see new car ads and just see a whole lot of debt, not a shiny new car; same with the latest iphone(my iphone 4 works fine even as a new one comes out today).

 give me a guitar and a 10 year old car and paid off house and i could probaly live on $1,000 a month and travel all over the usa and canada.