Is your wallet feeling a little lighter post-April 15? Everyone dreads tax day. We hate finding those receipts. We detest the forms. No one wants to revisit how they spent their
money last year. But the hardest part is
writing that check. On April 16 you feel
like having a party.
While we associate April 15 with taxes, people pay some sort of
tax almost every day. In addition to
income taxes there are sales taxes, property taxes, excise taxes, and estate
taxes.
Individuals and businesses pay income taxes to the federal
government based on wages and other income.
With the exception of Alaska, Florida, Nevada, South Dakota, Texas,
Nevada, South Dakota, Texas, Washington and Wyoming, states also collect some
form of income tax.
Californians are no strangers to sales taxes. Individuals pay sales taxes on goods and some
services. The sales tax is levied primarily to fund state and local government
services. Businesses collect the tax and
submit it to the state.
Business and residents who own property pay property taxes based
on the assessed value of the real estate.
The county usually collects the tax.
The process of dividing the tax varies by state. In California the tax is remitted to the
state which divides it among schools, counties and local governments based on a
complex formula established by Proposition 13 and its progeny.
Excise taxes are taxes on specific services and products. The
tax is included in the price rather than added at time of sale. Examples include gasoline, tobacco, gambling
winnings, and highway use fees paid by truckers.
The estate tax is based on the value of assets to be transferred
after death. In 2015, any estate with
gross assets under $5,430,000 is exempt from taxation. The portion of an estate that exceed this
amount is taxed by the federal government.
Benjamin Franklin told us, “Nothing can be said
to be certain except death and taxes.” While
we might not enjoy paying taxes, we understand why we pay taxes. We want highways, parks, schools, emergency
services and national defense to name a few benefits.
However, paying different taxes to different levels of
government at different times makes it difficult to understand exactly the
total amount of taxes we pay. The Tax
Foundation, a nonpartisan research group, has found a simple way to help
taxpayers understand their total tax burden.
By counting total income, based on the Department of Commerce’s
Bureau of Economic Analysis figures, then adding-up every payment to the
federal, state or local government that is considered a tax, the Tax Foundation
computes how many days a resident needs to work to pay their taxes for the
year. Count that number of days on a
calendar and the next day is Tax Freedom Day!
Since state and local taxes vary, the day varies by state.
Californians, our 2015 Tax Freedom Day is May 3, the day we will
have earned enough to pay our 2015 taxes. Does California have the latest Tax
Freedom day? No, that honor is reserved
for Connecticut (May 13), New Jersey (May 13), and New York (May 8). The earliest Tax Freedom Days are Mississippi
(April 4) and South Dakota (April 8).
No matter how you celebrated April 16, I think May 3 deserves a
celebration as well. That is the day you
start working for yourself.
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