What It Costs to Live Well: Northeast
Forbes has an article that tells you.
We tabulated the annual costs for a family of four [the “Fictionals”]with one child in a private college and one in eighth grade and attending a private school. If your kids aren’t college-age yet, this gives you a chance to plan ahead. Our fictional clan has two houses–one in a nice neighborhood and one in the country or at the beach.
The chose Englewood NJ for their comparison. Their numbers may be a little off here in Princeton. Not to feel sorry for anyone, but that family’s going to need more than $338,800, mostly because of local and state taxes.
Let’s look at the numbers.
If, and only if, the employer’s paying at least half of the medical coverage premiums and the family of four uses only those medical care providers fully covered by their plan, they don’t have to cover a deductible (which usually runs $500/per person per year, for a total of $2,500/family), coinsurance and/or copays, then I can see their spending only $4,400/yr on health care; but you’d have to add to that the cost of eyeglasses (which most plans don’t cover) if they need them, which can easily be $300-$400 per person — as long as you don’t get fancy. However, if they’re self-employed, the medical insurance premiums alone will cost over $1,000/month, $12,000/yr at a minimum, plus deductibles/coinsurance/copays. For people over 50, the premiums are higher.
The Forbes article shows a measly 14.7%/yr in local taxes, including “various types of property, income, sales and auto taxes”. A family living in a $2,200,000 house in either the Borough or the Township will be paying at least $50,000/yr in local real estate and school taxes. Since that’s 14.7% of the family’s estimated $338,000/yr income (and it doesn’t count the taxes on the $1,200,000 Cape May vacation house), it looks like the folks at Forbes forgot to add the 8.97% state income tax. $338,000 x .0897 = $30,318.60
Since the Forbes tax amounts include “include various types of property, income, sales and auto taxes”, and I’m only looking at real estate taxes on their primary home and state income tax, their numbers in this category are woefully short. Their tax bill would be closer to $100,000/yr, nearly a third of their annual income, not including federal taxes. At their income level they’d be likely subject to the dreaded Alternate Minimum Tax (correct me if I’m wrong), and can’t use the usual real estate interest deductions on their Federal returns.
The Forbes study assumes the family of four has “one child in a private college and one in eighth grade and attending a private school.” Looking at tuitions, the Englewood amount shown is $23,000; locally, the average private school tuition for 8th grade is closer to $18,000-$20,000. The Forbes study shows $30,300 for college, but if you look at Princeton University, that’s $41,000/yr.
The Fictionals, as Forbes calls their family, at the very least would need to forgo the annual weekend trip to Paris and the new Beemer. They would be well advised to sell the Cape May vacation house. As the Forbes article puts it, “We are not talking about great riches”.
Update While on the subject of taxation, Deroy Murdock proposes a The H.O.T. Tax, or Higher-rate Optional Tax.