It’s working folks who pay taxes and each year there are life lessons learned through this necessary intrusion.
We fund our government and help produce income that proceeds obviously and directly to the richest people on the planet. We make a life for ourselves while doing so.
As businesses have driven out operating expenses over my lifetime, the notion of security escaped into the ether. Everyone is affected, although there is a tremendous advantage to those whole own capital. When a person has capital, there is less worry about security from anything except populist uprisings.
For the rest of us, to sustain a life one must embrace living without security. It’s likely been that way for most people.
Our tax rate is 20 percent this year, including federal and state income tax and local property tax. It seems high and it was hard to come up with the cash despite a frugal lifestyle. As a result of hard work lasting decades, the checks are written except to the state where the filing deadline is April 30. I’ll likely pay that soon so the bill is not hanging over the household for another month.
This year’s tax cycle brought some learning.
Hidden from the analysis is the cost of health insurance. Because of our projected 2014 income level, we were eligible for a tax credit to subsidize our policy payments. Including the tax credit and what we paid, the premiums for a policy were $13,756 for 2014. Luckily I made more money in 2014 than projected. Unluckily we had to pay back part of the tax credit because of our success, creating a cash flow issue.
According to Medicare.gov, Medicare covered 48.7 million people in 2011 at a cost of $549.1 billion. Do the math and the annual cost per person was $11,275. Assuming health insurance providers have a better ability to manage their business, and the cost to provide care is substantially lower than what Medicare pays, the gross margin of providing health insurance must be about 20 percent or more. That is way better than being in the transportation and logistics business as I was for 25 years.
The numbers don’t include the billions of dollars being taken out of the health care system by the reforms of the Patient Protection and Affordable Care Act. The ACA should have reduced costs for health insurance providers. It is fair to say health insurance companies were handed an opportunity to do very well under the ACA, especially those that held firm on initial premium rates.
The other learning has to do with the life I led that year. At one point I worked eight part time jobs. In the end they did not produce enough income to make ends meet, which favors working less jobs that each pay more if that’s possible.
It felt unjust that for those that generated a 1099 I had to pay a flat self-employment tax, while those that paid me as a contractor but didn’t generate the form were taxed at a lower rate. Operationally there was no difference, but tax-wise, it was better when I didn’t receive a 1099.
Bottom line: more is not always better when it comes to working multiple jobs.
I like the ownership brought by contributing to society in the form of paying taxes. What I didn’t expect was that providing health security would be such a large part of our budget, or that compensation for doing the same work would be so uneven. As they say, live and learn.
I predict there will be more lessons as we sustain our lives in a turbulent world.