Recently, I heard someone say in reference to the election: “I wish everything [voting decisions] did not have to be about money”. I find this to be an interesting statement and I plan to write about how virtually all the freedoms that we enjoy as Americans are affected by our financial freedom. I specifically want to show how the gradual creep of socialism in the United States is eroding all of our various “unalienable rights” and freedoms everyday.

I hope you will follow along.

• Family of four (two dependents)
• Single income of $50,000 annually
• Homeowner

My family and I recently moved to Colorado, but I decided to set our profile in Wisconsin since I still own a home there and because I am more familiar with their tax code. Recognize that there a many variables when figuring tax rates between countries – the biggest lie in the area of health care. The UK has a nationalized system of healthcare that increases a person’s tax rate, however a person will arguably spend less on healthcare during the year. Another difference is the complexity of the United States tax code. I am using a very basic profile here, so the taxes are pretty straight-forward. The reality is that there are many ways to avoid certain taxes. If you want to hire a tax attorney or start a home business, you can greatly reduce your tax liablity. I read once that forty different US tax preparers were give the same profile and each one of them came up with a different tax liability. A flat tax with no deductions would be a great thing for this country. . .

But I digress – back to our family of four with an annual income of $50,000. In the course of the year, they will pay the following taxes:

• $2,369 in state taxes
• $3,000 in property taxes. This is probably a low estimate, but I don’t want to be accused of exaggeration. Property tax rates in Wisconsin are among the worst in the United States. The taxes on our two-bedroom home with 1240 square feet were $1,980 annually.
• $1,981 in federal taxes. This amount was reduced by $2,000 after subtracting the child tax credit.
• $3,100 in social security taxes. . . too bad this money is not being invested.
• $725 in Medicare taxes.
• Most municipalities and counties do not have payroll taxes in Wisconsin.
• Phone/internet/tv taxes are usually around $150 annually depending on what services you decide to purchase.
• The last time I registered my car in Wisconsin, the fee was $58.
• The Wisconsin effective sales tax rate is 5.5% in most counties with 5% going to the state and .5% to the county. I estimated that this family will spend around $20,000 per year on items subject to sales tax. There is no sales tax on groceries in Wisconsin, but taxes on gasoline and eating out are often taxed higher than 5.5% depending on the municipality. To be conservative, I will estimate that this family will pay $1,000 in sales tax.

So, in summary, a family of four, making $50,000 per year will pay $12,383 in taxes. Their effective tax rate is 24%. Remember that this is a bare-bones example. The family could greatly reduce their tax liability easily in three ways: give money to charity, start a home business or begin to contribute pre-tax dollars to an IRA account.

How does our fictional family compare with Plonkee’s example?

Actually, since I am a glutton for punishment, I will be keeping track of our gas mileage this trip. My main purpose is to find out if there is a MPG difference between regular unleaded and the mid-grade unleaded. I’ll let you know how that goes.

I also plan to practice my hypermiling skills and introduce my wife to that fine art.

I am considering the purchase of a MPG Meter . . . I’m a sucker for gadgets.

The reality is that the only way we are really saving any cash is with a cash back gas credit card. Our cash back card of choice is the Chase Freedom Card, but I am considering a switch to the Chase Perfect Mastercard.

See you in Wisconsin!

Enjoy!

Editor’s Picks:

Adam Beck wrote a thought provoking article entitled, The Could Samaritan. I think the underlying question is why are you building wealth? To what purpose? To what end?

Kevin from the Red Stapler asks, Do we need a salary camp for CEO’s? His answer is “yes” and he gives a plan to do it. I could not disagree with Kevin more and his proposal made me check his About page to see if the “red” in Red Stapler was a communistic allusion. I hope he realizes that both John McCain and Barak Obama earned more than the average CEO last year. Furthermore, Obama is a trial lawyer – trial lawyers are also awash in cash – I wonder why he has not proposed to cap their income?

Jim at Blueprint for Financial Prosperity posts that a study of the wealthy confirms a classic joke. I had never heard the joke before. BFP is one of my favorite blogs, but I think it is important to point out that if everyone followed the example of the fisherman, our world would be in sorrier shape than it already is. No one cured a disease, freed a people, cared for his family longterm or invented the light bulb by sitting on the beach. I think it all goes back to the question, “Why do you want to be rich?” The pursuit of wealth motivates people to take risks that often result in great benefit to society. What if Henry Ford had never set out to efficiently build and automobile? We would be living in a country where the poor ride donkeys and the rich would still be driving cars.

I love lists and that is why I love the Silicon Valley Blogger – in a platonic way, of course – both of us are happily (at least I am) married and not to each other. By the way, the word “silicon” is a reference to this. (I know what you were thinking) Anyway, she gives a great list of ways to save money by paying bills. I am doing most of them already, but there might be a suggestion that will work for you on the list.

Wide Open Wallet likes high gas prices. Good for her, I wonder if she would love to pay $10 a gallon. If that is the case, she could send $5 a gallon my way every time she fills up. That would solve a lot of problems for me. Turns out that she does not commute to work . . . We love you, Ashley, but just because high gas prices work for your situation does not mean that it is a good idea for everyone else. What if you were a single mom who could only find a job that was 20 miles away? You now have to drop your children off at a daycare, drive to work, drive back to the day care and drive home every day. High gas prices infringe on our freedom to make choices about what is best for us. High gas prices allow us to be controlled by an elite few who don’t think anyone needs and SUV. High energy costs are a hardship for those least able to pay. Sounds like I have a post here. . .

Anand Dillon gives us 25 ways to create more value. It is a good article and if you are looking to invent something or change career paths, read his list.

And all the rest:

Budgets are Sexy asks, “Would you rather have $500K right now, or $1M in ten years?“. He does not give the answer, so leave a comment and solve the dilemma for him.

Money Blue Book is starting to rethink his slavish devotion to shopping online.

Another article on CEO compensation posted at Can I get rich on a salary? Yes, some people are dumb and some people are over-compensated, but let’s not put the government in charge of determining who is smart and who is wealthy, okay?

The DINK at Living Almost Large admits to not being perfect. I admit no such thing about myself.

The Frugal Homesteading Blog asks if the Debt snowball really works, but doesn’t really answer the question. No matter, the positive evidence seems incontrovertible. I think it is interesting that her children are aware of and participating in the debt reduction. My family never really talked about money “in front of the kids”.

Personal Finance Analyst recommends that you purchase Savings Bonds. I have no opinion on the matter. Read the article.

Passive Family Income is blogging about the places that only accept cash (no credit cards, no debit cards). There aren’t too many of those left and it usually means that I don’t shop at them. I do find it annoying that vending machines don’t accept cards.

Jonathan from The Limelight posts about his 6 month journey to debt freedom. Kudos to him, but can we really call 6 months a journey?

My Retirement Blog mentions a Traditional IRA to Roth IRA conversion loophole. I love tax loopholes.

If you invest in stocks, you may want to check out Daily Money Hacks and his article on Excess Capital Loss rules. I’m sure he did a great job of explaining the details, but most of that kind of stuff is over my head. I guess I would care more if I had any capital to lose.

Personal Finance Basics wants you to invest in the stock market. Sure glad that I didn’t follow that advice twelve months ago.

Young with Bux tells us that headhunting one’s friends and relatives can be tricky.

The Shark Investor discusses how do-it-yourself projects are sometimes a good idea and sometimes a bad idea.

Potential to Success helps you learn how to network like a pro. Lot’s of good ideas and suggestions.

Master Your Card ( the owner of the Finance Fiesta) article is entitled with a Shakespearean, “To Cosign or Not to Cosign“. He leaves the question open-ended, but if my opinion is worth anything: don’t do it!

The question at Debt Smackdown: “Is debt just a fact of life for the current generation?“. The practice of targeting college students for credit cards is deplorable, but I don’t think that calling on the schools themselves to start teaching responsible use of money and credit is going to happen. What would happen to enrollment if every student refused to pay for tuition with credit?

Broke Grad Student posted a list of 8 Cheap Summer Fun Ideas. There are some good suggestions in the post and pretty much all of the Rocket household leisure activities are on the list.

KClau want’s to know “Do you have the assets to pay for your liabilities?” In a word, no.

Carpooling is the subject of an article at Increase Revenue, Decrease Costs. We are looking for our kindergardener to carpool this fall. Anyone interested?

Funny about Money asks a questions that no one wants to think about: What happens if next payday does not come? It is a good article if you can bear to think about losing your job.

ChristianPF teaches us how to make the best of car depreciation. Lots of good info in this article. You really have no reason to buy a new car, do you?

Credit Card delinquencies are increasing. Tell us something we don’t know.

That’s it, that’s the list. Thanks to all the authors for their hard work on the articles and for taking the time to submit. I enjoyed reading all of them and trying to think of ways to make snide comments about them.

Enjoy your 4th of July weekend and don’t blow any fingers off!

Photo by jmbead.