Colman: BLOODY BROKE ON $200,000 A YEAR

In California “earning” $200,000 a year in most parts of the State makes you middle class, not rich, between the taxes, high energy, gas and water costs—then the cost of housing and vehicles, you barely have enough for a taco at the end of the day.  Want to send your kids to college—that is a $200,000 deal, if you are lucky.

Taking Jack’s annual income of $100,000 (after taxes) and subtracting $28,000 for raising children and subtracting another $60,000 for bills like the mortgage, food, gasoline, and other costs, Jack is left with $12,000 at the end of the year. 

The $12,000 left over should be saved for two major expenses:  a university education for Jack’s children and for Jack’s and Cheryl’s retirement.”

What, $100,000 in taxes?  Property tax, income tax, utility tax, alcohol tax, use taxes, utility taxes and surcharges—it add up,  Remember you are paying State and Federal tax—and if you smoke in San Fran you are also paying sixty cents a pack for a “litter tax”.  Buy a refrigerator, tires, cell phone, computer and you pay a recycling “fee” (tax).

Maybe it is better to earn minimum wage and let government pay your bills?

Photo courtesy of kenteegardin, flickr

Photo courtesy of kenteegardin, flickr

BLOODY BROKE ON $200,000 A YEAR

By Richard Colman, California Political News and Views,  1/13/17

Jack Green, a mythical figure, earns $200,000 a year.  Yet, he’s broke.

Jack lives in Walnut Creek, California, a pleasant suburb 25 miles east of San Francisco.  In Walnut Creek, the schools are reasonably good, crime is low, and the neighbors are friendly.

But Jack is broke.  He cannot save any money.

 How can someone earning $200,000 a year, about three times what the average American earns, be broke?

Jack, an insurance broker, has a wife and two young children.  Jack’s wife, Cheryl, stays home to take care of the children, Jack should be living the so-called the American Dream.  Yet, he has no money at the end of the year.  What is going on?

Let’s look at taxes.  When one considers taxes of all kinds, Jack’s income of $200,000 a year is closer to $100,000.

Taxes on Jack, include — but are not limited to — the federal income tax, the state income tax, sales taxes, property taxes, payroll taxes (Social Security and Medicare) utility taxes, capital gains taxes, gasoline taxes, and perhaps more.

According to an article by the Associated Press (January 9, 2017), raising a child costs $233,000 over 17 years (or $14,000 a year).  Thus, raising two children can cost $28,000 annually.

And there are other costs, like the monthly mortgage, car payments, food, gasoline, utilities, repairs, and insurance.  These costs can easily reach $60,000 a year.

Taking Jack’s annual income of $100,000 (after taxes) and subtracting $28,000 for raising children and subtracting another $60,000 for bills like the mortgage, food, gasoline, and other costs, Jack is left with $12,000 at the end of the year.

The $12,000 left over should be saved for two major expenses:  a university education for Jack’s children and for Jack’s and Cheryl’s retirement.

Today, the cost of one year at a state university, like a campus of the University of California, can run $50,000 a year.  (A private university like Stanford can cost $100,000 a year.)

Thus, four years at a state university can cost $200,000 (at today’s prices).  With two children, the cost would be double:  $400,000.

If Jack has $12,000 left over each year, he would have, after 17 years, $204,000 (assuming no inflation, a dangerous assumption).  For his two children, Jack would need $408,000.

Without student loans or scholarships for his children, Jack would not be able to save enough money to educate his two children.

What about Jack’s retirement?  Simply put, Jack has no money left to contribute to his retirement.

Jack could obtain some financial assistance if his wife found a job.  Even so, Jack would not have much, if any, money left over for retirement.

If Jack’s parents needed some assistance, there would not be any money for them.

 Something is really wrong in America if a household earning $200,000 a year, cannot save enough money for a university education for the children, retirement, and perhaps some help for mom and dad.

And remember, Jack lives in a nice suburb and earns much more than the average American.

It’s no wonder that America’s middle class is angry — and broke.

 

 

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.