All Posts in "Personal Finance/Consumers"

Social Security tax heavier for lower wage earners

The Social Security Administration announced in January that the wage base for computing Social Security tax has increased to $147,000 for 2022 (up from $142,800 for 2021). Wages and self-employment income above this threshold aren’t subject to Social Security tax. That means that for wage earners making over $1 million this year, the payroll tax on their earnings became zero on Feb. 24, the date they reached the taxable income limit for 2022. It’s an example of how supporting Social Security is a heavier burden for workers who make much less than $147,000, according to Center for Economic and Policy Research, a Washington, D.C.-based, non-profit organization that researches economic and social issues.

“The current payroll tax is not even 1 percent of a millionaire’s wage income,” said Sarah Rawlins, a program associated for CEPR.

The limit, which the Social Security Administration calls the contribution and benefit base, generally increases a few hundred or a few thousand dollars each year. This year’s base is $4,200 higher than 2021’s.

Compare a millionaire’s effective tax rate of less than 1 percent “to the 6.2 percent that any worker making less than $147,000 pays, and it’s clear that paying for Social Security rests on those who make the least,” Rawlins said.

The Social Security Trust fund is projected to have a shortfall in the future, partly because of rising income equality, she said. In 1989, only 10 percent of wage income was over the tax cap. The number is expected to be 18 percent in the next 10 years.

“Scrapping the payroll tax cap to make every earner pay the same tax rate, along with modest changes to the program, could eliminate the shortfall and allow for crucial expansions to benefits,” Rawlins said.

 

srmedia by — April 21, 2022 in Personal Finance/Consumers

While real estate values have surged in Pierce County, statutory limits on property tax rates are holding tax increases to modest levels in 2022, according to the county’s tax man.

“In recent years, tax bills fluctuated due to the Legislature and local school districts responding to the McCleary court decision on school funding,” said Assessor-Treasurer Mike Lonergan. “Last year, taxes settled down in most areas, and this year we see moderate increases in most parts of Pierce County, even a decrease in one area.”

Property tax statements for 2022 were mailed the week of Feb. 14 to more than 180,000 owners of residential and commercial land and buildings in Pierce County. For homes where the tax is paid through an escrow account, statements were sent to the bank or mortgage company. Payment is due in two halves, by May 2 and Oct. 31.

Countywide, property taxes this year total $1.76 billion, a 5.3 percent increase over 2020. In addition to schools, the taxes pay for city and county government, fire districts, emergency medical services (EMS), parks, libraries, roads, Port of Tacoma, Sound Transit, and flood control.  Fees for the conservation district, noxious weed control and surface water are also included.

The state and local portions for schools add up to 60 percent of all property taxes in Pierce County. The cities and county, including the road district, comprise 20 percent, and fire and EMS districts equal 10.9 percent.

The annual tax is determined by multiplying property value (in thousands of dollars) by the combined rate of all taxing districts where the property is located.  Unless there is a vote of the people, most taxing districts are limited to receiving 101 percent of last year’s property tax revenue, plus the taxes resulting from new construction, Lonergan explained.

No new local school levies or bonds were approved by the voters in 2021, and school levies approved at the polls in February this year will take effect beginning next year.  Voters in five fire districts–East Pierce, Steilacoom, Key Peninsula, Ashford and Crystal Mountain–approved multi-year levy lid lifts or renewed EMS levies, resulting in small tax increases this year.

Combined property taxes rose the most this year in the Bethel and Franklin Pierce school districts, with the cost to the average homeowner increasing by 11 percent, or more than $450. The smallest tax increases were just over $100 for average-valued houses in Steilacoom, Milton and Buckley.

Tacoma, Puyallup, Edgewood and Eatonville tax bills went up about $300 for the average home, while homes in Lakewood and Sumner increased about $250. Gig Harbor, Fife and DuPont were up around $200 per home, Lonergan said.

Residents of the Orting School District fared best this year, with taxes on the average home reduced by $575, due to decreases in a school construction bond and fire district tax rates. But part of those savings are replaced by a new fire benefit charge which is calculated differently than taxes.

Additional  information is available on the assessor-treasurer’s website and at 253-798-6111.

 

61-PLUS or DISABLED? YOU MIGHT BE EXEMPT FROM PROPERTY TAXES

Property tax exemptions for seniors and disabled persons for 2022 are available to citizens who were at least 61 by the end of 2021 or retired because of a disability, with an income of $45,708 or less. Exemptions must be renewed once every six years unless there is a change in status or income.

The exemption freezes the value of a home as of Jan. 1 of the initial application year, exempts the property from all excess levies, and may exempt a portion of regular levies. Taxes are calculated on the lesser of market value or frozen value.

Application forms and information is available at 253-798-6111 and piercecountywa.gov/assessor-treasurer for Pierce County landowners, and at assessor.info@kingcounty.gov, 206-296-7300, and kingcounty.gov for King County landowners.

srmedia by — March 30, 2022 in Personal Finance/Consumers
What to do about credit card debt

U.S. consumers have started to again pile up credit card debt, following a record-setting reduction in 2020 that continued into the first quarter of 2021.

During the third quarter of 2021, consumers added $23.6 billion to their tab, following an increase of $44.9 billion in the second quarter. Furthermore, it was expected that consumers would end the year with a net addition of $70 billion in credit card debt, far exceeding the 10-year average of $45.6 billion, according to WalletHub, a financial services website.

Basing its latest study of credit card debt on analysis of data from the Federal Reserve and U.S. Bureau of Labor Statistics, WalletHub reported the average American household’s credit card balance is $8,006. Ways to manage that debt include:

  • Make a budget and stick to It.Know your monthly spending and trim any fat.
  • Build an emergency fund.With a safety net of cash, you won’t be as likely to fall behind on your bills in the event of financial emergencies. Save about a year’s worth of after-tax income.
  • Improve your credit.Better credit can reduce the cost of your debt. You can check your latest credit score for free and get personalized credit-improvement tips on WalletHub.
  • Try the “island” approach. It involves using a collection of credit cards, with each serving a specific purpose. For example, transfer your existing debt to a zero-percent balance card to save on finance charges and get out of debt sooner. And you could use a rewards card or two – perhaps one with travel rewards and one with cash back, or maybe a store credit card – for purchases that you’ll be able to pay off by the end of the month.
  • Repay your most expensive debt first. Put the majority of your monthly debt payment toward the balance with the highest interest rate and make at least the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process until you’re debt-free.
  • Evaluate your job situation.In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may need to explore whether higher-paying opportunities exist for people with your background or consider acquiring some new skills to make yourself more marketable.
Consumers are again stressing over high credit card debt.
srmedia by — March 16, 2022 in Personal Finance/Consumers

Volunteer Income Tax Assistance (VITA) is offered by the IRS to the public for free help filing federal tax returns.

The service, available at locations in Pierce County and elsewhere through April 18 (the filing deadline), is for low-income to moderate-income individuals, persons with disabilities, the elderly, and limited-English speakers.

The Pierce locations, where in most cases appointments are necessary, include Tacoma Goodwill Milgard’s Work Opportunity Center (253-370-0626), Tacoma Housing Authority in Salishan (253-370-0626), Tacoma Public Library’s Moore Branch (no appointment needed), True Blessings in Spanaway (253-370-0626), Point Defiance-Ruston Senior Center (253-756-0601), Puyallup Activity Center (253-841-5555), Puyallup Elks Lodge (253-693-8731), Puyallup Public Library (253-841-5454), Sumner Senior Center (253-693-8731), and Buckley Senior Center (253-693-8731).

Information is also available by phone at 2-1-1 and online at irs.gov/vita.

Another free service for tax-filing assistance is Tax-Aide, sponsored by the AARP Foundation. More information, including a comprehensive list of documents to bring to the tax site, is available at www.aarpfoundation.org/taxhelp or 1-888-227-7669.

srmedia by — March 4, 2022 in Personal Finance/Consumers