Don't Spend That Tax Money Yet {If You Live In Cook Co. Illinois}

So like I'm sure a lot of you I've been listening to the relentless back and forth on what the passage of the tax bill means for the average American and the economy.  I think only time is going to tell whether this is a great stimulative shot in the arm for the nation as the Republicans proclaim or the Christmas gift to billionaires as the Democrats shout in protest.   What this will do for stocks in the coming year is anybody's guess as well.  It seems realistic to think that some of the run-up in prices this fall have been in anticipation of the tax bill.  It's too early to speculate on what this might do next year.

I've taken a look at some of the numbers on what people might save in taxes next year.  Some of them I've received from here.  If the reductions pan out then it seems fodder for both sides to continue to scream and shout at each other.  For example and according to what I've read for a single payor, somebody earning around $32,000 a year currently pays about $2,735 in Federal taxes once all deductions etc are figured in.  Under the new plan they'll pay a currently estimated $2,178.  That's around a 20% tax cut.  An impressive statistic but on a real basis a projected savings of $557 a year or about $46.50 a month.  That doesn't seem to be quite the boost to the wallet the touters of the plan are proclaiming.

Finding examples of the actual savings for married couples filing jointly right now is a bit harder.  From what I can tell, a couple in this category making $100,000 will save anywhere from $1,200 to possibly $1,800 next year.  Again on the surface that sounds like a nice bit of change until you consider that on a money basis.  Again $100-$150 may not put a lot extra in the wallet, especially if that couple has children.

What's not in the tax bill though is a lower cap on social security taxes.  That's the 6.2% deducted from your paycheck each month.  This year you don't max out on that until you've made $127,200.  Next year you don't max out until you've made $128,700.  For those who have to worry about such things, it seems you'll pay another $93.00 in social security taxes in 2018.  What's also not in that bill is a way to lower health care costs for the average American.  I'll guess most folks will pay 4-8% more all in by the time we tally up the end of 2018.  

Then there's the special presents you get if you live in a high tax area like Cook County, Il.  I'll use where I live because I see the statistics here.  Living in states like New York or Connecticut will have similar issues but I'm not familiar with their numbers.  I know what's going on here.  The combined sales tax rate for Chicago, IL is 10.25%. This is the total of state, county and city sales tax rates. The Illinois state sales tax rate is currently 6.25%. The Cook County sales tax rate is 1.75%.  We saw an increase from 9.25% last year.  Giving us then the highest sales tax in the nation.  I'm not certain we still hold that dubious distinction.  If you own property in Cook County you will see over the course of the next two years substantial property tax increases as a result of most homes being assessed much higher than the last time the surveyors came around.  In my case, I'm looking at a likely 10-15% increase.  Those landowners in the city of Chicago were hit with a 10% increase by the city back in June.  Oh and if you live in this area you're being hit or will soon be hit by substantial increases in water rates {30% increase phased in over five years} and transportation.  None of this by-the-way does much to address the chronic underfunding of most pension systems up here or addresses the issue of the State of Illinois being broke.  The state added its own present earlier in the year by increasing the income tax rate 32% from 3.75% to 4.95%.  

Forgive me for throwing some coal in your stocking but when I take a look at the numbers it's hard for me to see from a back of the envelope calculation how the average person's going to have anything extra a year for now unless they get a raise at work.  My casual look at the numbers shows that what the "Feds" may be giving out is mostly going to be soaked up at the state and local levels, at least in these parts.  Maybe we'll delve a bit more into these numbers after the new years.  President Trump may have intended to play Santa but the locals sure seem to want to be the Grinch.