$7 Per Gallon Gas Coming Soon?

[xrayzebra]

yeah high gas prices it forces people to live a more modest life"

Correction, it forces EVERYONE to engineer oil products out of their lives.

It will take time (to replace gas-guzzlers), and it will be painful. Plus the cost of food up, people will have less discretionary funds (but USA household debt already exceeds household income by over 10%)

Do you have an alternative to oil conservation?

Spoken like a true socialist. Yeah I have an alternative to oil conservation. Drill more wells. Simple solution isn't it.

I love the way liberals do their thing. Take a plentiful supply of something and make it scarce. Like water in the Edwards. Electricity, when their is a plentiful supply of coal, natural gas and nuclean power.

Why, God only knows. Power, Global warming (already proven beyond a doubt as pure crap) I will take the first option. Power. Liberals take a little bite, then a little more and then take the whole. All in the name of nature, rights or whatever sounds good, at the time. You know like change and hope.

[RandomGuy]

Please note that these are estimates:

Family making $75,000 a year (we'll use that number for Obama's sake).

After taxes, they receive $56,250.
After insurance and retirement, they receive $51,000 per year.
That breaks down to $4,250 per month.

The following are bills:
Mortgage/Taxes/Insurance - $1,200 (This is definately a Texas number)
Phone/Cable/Internet - $150.00
Gas/Electric - $250
Water - $150
Student Loans - $400
Groceries - $250 (We'll say they don't have kids)
Vehicles - $600 (Probably on the low end)
Gas - $600 (as it stands today)

That totals up to $3,600 total. The lucky middle class folks that have "ran up credit card bills" as boutons states have about $650 disposable income as it stands right now.

Now, let's add another $500 to that gas total and the lucky middle class folks that have "ran up credit card bills" as boutons states have about $150 disposable income as it could stand then, plus, there is no credit card debt in there.

Better ing hope no one gets hurt or a car breaks down.

So as I said before to boutons, you, the American middle class hates you.

You vastly overestimated the income taxes. Instead of $18,750, your childless couple would only be paying about $7500 woth of income taxes to the federal government, probably less. $12,000 if you throw in what got taken out for SS and medicaid.
The first $17,500 worth of income is tax free for married couples, assuming no itemized deductions.

After that, you get the interest on the student loans AND the interest on the mortgage out of taxable income.

Leaving roughly $55,000 taxed at a 13.6% marginal rate.


But, your ultimate point is still pretty valid. Any increase in overall expenses is a "bottom line" dollar that takes away the stuff left over dollar for dollar.

[johnsmith]

You vastly overestimated the income taxes. Instead of $18,750, your childless couple would only be paying about $7500 woth of income taxes to the federal government, probably less. $12,000 if you throw in what got taken out for SS and medicaid.
The first $17,500 worth of income is tax free for married couples, assuming no itemized deductions.

After that, you get the interest on the student loans AND the interest on the mortgage out of taxable income.

Leaving roughly $55,000 taxed at a 13.6% marginal rate.


But, your ultimate point is still pretty valid. Any increase in overall expenses is a "bottom line" dollar that takes away the stuff left over dollar for dollar.

How do you figure? 7,500 is only 10% correct.

I'm not arguing here I'm asking.

[johnsmith]

Never mind, I just noticed the "hidden stuff.

But I'm still basing my estimates off month-to-month on what a married couple without kids would have.

[boutons_]

Quit yer in about the price of gas.

This is nothing but the "Free Market" working its "creative destruction" on personal wealth.

Who could possibly be against the Free ing Market?

The oilcos have flat out refused to drill on the leases they already have. They are "free" to game the "market" that way.

[johnsmith]

Quit yer in about the price of gas.

This is nothing but the "Free Market" working its "creative destruction" on personal wealth.

Who could possibly be against the Free ing Market?

The oilcos have flat out refused to drill on the leases they already have. They are "free" to game the "market" that way.

Enough Boutons, the grown ups are talking now.

[RandomGuy]

How do you figure? 7,500 is only 10% correct.

I'm not arguing here I'm asking.

The ultimate tax bill is only 10% of total earnings, you are right in that regard.

Since the final, taxable income is about $55,000 you have to remember that the taxes are ins uted in a gradual way:

$0-15650= 10% is taxed PLUS

the next step up
15650-$63700 = 15% is taxed

So the marginal tax rate is something of a weighted average. 10% of the first 15,650, then 15% of next chunk up to 63,700, or in this case, 15% of 55,000-15650

It is detailed at the end of the tax tables. The tax tables are a quick reference guide calculated from this formula.

You also left out a few things in your budget, like clothes, and underestimate what two people would spend on grocercies ($2 per meal times 3 meals times 30 days is $180 each at a minimum). But I didn't want to point that out and sound too "know it all". Ultimately the point is the same.

[RandomGuy]

Quit yer in about the price of gas.

This is nothing but the "Free Market" working its "creative destruction" on personal wealth.

Who could possibly be against the Free ing Market?

The oilcos have flat out refused to drill on the leases they already have. They are "free" to game the "market" that way.

Actually they haven't refused. There is simply not enough equipment or trained people to drill at any price. That will change in a hurry though, with all the money to be made. Give it another few years.

[johnsmith]

The ultimate tax bill is only 10% of total earnings, you are right in that regard.

Since the final, taxable income is about $55,000 you have to remember that the taxes are ins uted in a gradual way:

$0-15650= 10% is taxed PLUS

the next step up
15650-$63700 = 15% is taxed

So the marginal tax rate is something of a weighted average. 10% of the first 15,650, then 15% of next chunk up to 63,700, or in this case, 15% of 55,000-15650

It is detailed at the end of the tax tables. The tax tables are a quick reference guide calculated from this formula.

You also left out a few things in your budget, like clothes, and underestimate what two people would spend on grocercies ($2 per meal times 3 meals times 30 days is $180 each at a minimum). But I didn't want to point that out and sound too "know it all". Ultimately the point is the same.

But this wouldn't change their monthly income would it? Isn't that money recovered around tax time because their paychecks affected by their gross income level and don't factor in marriage and total family income.

That was more of a question then a statement by the way.

[boutons_]

I know there is a drilling rig bottleneck, but I'm sure the US oilcos are complicit in that happy accident.

Even in a few years, when more domestic oil arrives, the oilcos will let the world price set their own price for their own oil.

[JoeChalupa]

I found gas during vacation for 3.75 and was foaming at the mouth.

[boutons_]

"With all this oil becoming available, the Aramco officials said they were baffled that the market seemed to be behaving as though there were a shortage."

Quote from a Saudi:

“We’ve asked all the international oil companies that buy from us if they want more oil,” Mr. Nasser said. “But we can’t find customers.”

http://www.nytimes.com/2008/07/01/wo...gewanted=print

Very strange. Are oilcos slowing oil's arrival to market to fabricate a shortage and increase their profits?

This confirms the idea of oil market analysts that the "market fundamentals" simply don't justify $140/barrel.

[RandomGuy]

But this wouldn't change their monthly income would it? Isn't that money recovered around tax time because their paychecks affected by their gross income level and don't factor in marriage and total family income.

That was more of a question then a statement by the way.

That depends on whether or not they chose to max out their withholding allowances or not.

The tax bill must be paid somehow. Either you can have a portion of the correct amount withheld from each paycheck, or set aside a good estimated amount per month so that when April 15th comes, you don't have a bill of $7k+ that you don't have the cash for.

It is better to set aside a certain amount in some kind of interest bearing savings account or CD, than to have it withheld by the government and let them have the money for free, of course.

Click here to see the IRS withholding allowance calculator.

7500/12= $625 per month 18000/12= $1500 per month

[johnsmith]

That depends on whether or not they chose to max out their withholding allowances or not.

The tax bill must be paid somehow. Either you can have a portion of the correct amount withheld from each paycheck, or set aside a good estimated amount per month so that when April 15th comes, you don't have a bill of $7k+ that you don't have the cash for.

It is better to set aside a certain amount in some kind of interest bearing savings account or CD, than to have it withheld by the government and let them have the money for free, of course.

Click here to see the IRS withholding allowance calculator.

7500/12= $625 per month 18000/12= $1500 per month

You're right, and my numbers were based on a couple claiming zero. Ok, so having said all that, either ing way, Boutons is wrong and the "average" middle class American doesn't need credit card debt to not be able to handle gas increases, they are already ed. So again, Boutons, the American middle class hates you.


RG, thank you for the analysis.

[RandomGuy]

Please note that these are estimates:

Family making $75,000 a year (we'll use that number for Obama's sake).

After taxes, they receive $56,250.
After insurance and retirement, they receive $51,000 per year.
That breaks down to $4,250 per month.

The following are bills:
Mortgage/Taxes/Insurance - $1,200 (This is definately a Texas number)
Phone/Cable/Internet - $150.00
Gas/Electric - $250
Water - $150
Student Loans - $400
Groceries - $250 (We'll say they don't have kids)
Vehicles - $600 (Probably on the low end)
Gas - $600 (as it stands today)

That totals up to $3,600 total. The lucky middle class folks that have "ran up credit card bills" as boutons states have about $650 disposable income as it stands right now.

Now, let's add another $500 to that gas total and the lucky middle class folks that have "ran up credit card bills" as boutons states have about $150 disposable income as it could stand then, plus, there is no credit card debt in there.

Better ing hope no one gets hurt or a car breaks down.

So as I said before to boutons, you, the American middle class hates you.

If I may:

Family making $75,000 a year, before any taxes
After federal income taxes taxes, social security, and medicare, they receive $63,000

63,000/12=
$5,250 monthly inflow

Retirement savings at $200 each =400
Health costs (insurance + co-pays etc) at $400 each = 800
credit card debt servicing, total out of the ass figure= $200 per month
(assumes approximately $6,000 in debt)
Morgage+ all housing costs= $1200
Two cell phones, internet service, and cable= $220
Utilities/trash/etc = $400
Groceries/food = $500
Vehicle payments = $600
Vehicle other = $200
(oil changes, tires, registration, insurance, etc)
Clothes = $75 (two work wardrobes, some dry cleaning)
Student loans = $400
(assumes $40000 total between couple)
Gasoline = $500
(two cars, 3100 total monthly miles at 25 mpg and $4.00/gallon)
Entertainment = $50 (probably understated)
Other = $200
(tv, stereos, music, hobbies, stuff that breaks, etc, etc, etc)

Total= $5745

Ouch. What to cut to make up the $495 difference? Retirement savings? Health insurance? Borrow more on credit cards?

There is some room for "give" in this budget, and it is certainly not all-inclusive, but ouch.

Analysis:
In this budget, the total "debt servicing" (interest+principle costs) for all debt is:
Mortgage= $800
vehicles= $600
credit =$400
student loans =$400

$2200 per month, or 39% of all outflows.

If gas goes up by another 50%, that is another $250 that cannot be spent elsewhere.

Replace vehicles with more fuel efficient, smaller cheaper ones could save $200 per month in payments, $40 per month in "vehicle other", and about $125 in gasoline for a total savings of $365.

That right there is probably the easiest/biggest single thing to do to boost cash flow, followed by cutting out retirement savings, and paying off credit cards, and giving up health insurance, in that order.

There are lots of other options, of course, such as work a bit more, land line instead of cell phones, etc.

[RandomGuy]

RG, thank you for the analysis.

You're welcome.

[Wild Cobra]

Now I may be wrong, but won't the 25% tax break include those $75k families when the tax cuts expire?


FYI:

For future calculations rather than 2007 numbers, 2008 tax rates:

Tax Rate Schedules for Individuals and Trusts--2008

Single Taxpayers--2008

______Taxable income:__________________ Tax:
__Over___But not over________ Tax______ +%__ On amount over____________

$______0 _____$ 8,025________$____0.00__ 10______ $______0
___8,025 _____ 32,550__________ 802.50__ 15__________8,025
__32,550 _____ 78,850________ 4,481.25__ 25________ 32,550
__78,850 ____ 164,550________16,056.25__ 28________ 78,850
_164,550 ____ 357,700________40,052.25__ 33________164,550
_357,700______.......______ 103,791.75__ 35________357,700
__


Married Individuals Filing Joint and Surviving Spouses--2008

______Taxable income:__________________ Tax:
__Over____ But not over________ Tax______ +%__ On amount over____________

$______0____ $ 16,050________$____ 0.00__10______ $______0
__16,050______ 65,100__________1,605.00__15________ 16,050
__65,100______131,450__________8,962.50__25_______ _ 65,100
131,450______200,300________ 25,550.00__28________131,450
200,300______357,700________ 44,828.00__33________200,300
357,700______.......________ 96,770.00__35________357,700


Married Individuals Filing Separate--2008

______Taxable income:__________________ Tax:
__Over____ But not over________ Tax______ +%__ On amount over____________

$______0____ $__8,025________$____0.00__ 10______ $______0
__ 8,025______ 32,550__________ 802.50__ 15__________8,025
__32,550______ 65,725________ 4,481.25__ 25________ 32,550
__65,725______100,150________12,775.00__ 28________ 65,725
100,150______178,850________22,414.00__ 33________100,150
178,850______.......________48,385.00__ 35________178,850



Heads Of Households--2008

______Taxable income:__________________ Tax:
__Over____ But not over________ Tax______ +%__ On amount over____________

$______0____ $ 11,450________$____0.00__ 10______ $______0
__11,450______ 43,650________ 1,145.00__ 15________ 11,450
__43,650______112,650________ 5,975.00__ 25________ 43,650
112,650______182,400________23,225.00__ 28________112,650
182,400______357,700________42,755.00__ 33________182,400
357,700______.......______ 100,604.00__ 35________357,700


Standard Deduction--2008

Filing Status______________________ Standard Deduction

Married filing joint and
surviving spouses______________________ $10,900

Heads of Household________________________8,000
__
Single individuals________________________5,450

Married, filing separate__________________5,450

Personal Exemption--2008

Amount--$3,500

The SS and Medicare are still at 6.2% and 1.45% for a 7.45% of applicable income. Keep in mind many middle class are self employed and pay both ends of that for 14.9%!
4.9%!

[Nbadan]

Retirement savings at $200 each =400
Health costs (insurance + co-pays etc) at $400 each = 800
credit card debt servicing, total out of the ass figure= $200 per month
(assumes approximately $6,000 in debt)
Morgage+ all housing costs= $1200
Two cell phones, internet service, and cable= $220
Utilities/trash/etc = $400
Groceries/food = $500
Vehicle payments = $600
Vehicle other = $200
(oil changes, tires, registration, insurance, etc)
Clothes = $75 (two work wardrobes, some dry cleaning)
Student loans = $400
(assumes $40000 total between couple)
Gasoline = $500
(two cars, 3100 total monthly miles at 25 mpg and $4.00/gallon)
Entertainment = $50 (probably understated)
Other = $200
(tv, stereos, music, hobbies, stuff that breaks, etc, etc, etc)

In most cases retirement savings are taken out of pre-tax income and if your paying $800 per month in insurance, and your company isn't paying diddly....it's time to move on...

[BRHornet45]

sons I CANNOT WAIT for gas to get that high! it will be a wonderful moment in America.

[RandomGuy]

In most cases retirement savings are taken out of pre-tax income and if your paying $800 per month in insurance, and your company isn't paying diddly....it's time to move on...

That depends on whether you are contributing to a Roth IRA, or a conventional IRA.

Go for a Roth that draws from post tax-income, because it shields you from the very high risk of future taxe increases.

$800 per month for two people includes all the happy-fun copays, prescription costs, deductibles, dental, and the host of other "holes" in health insurance that exist, in addition to the out-of-pocket premiums.

I also mentally lumped in stuff like life insurance, disability insurance, etc. into that cost.

Given the rate at which employers are dropping paid health insurance, or requiring employees to pony up part of the cost, it seems fairly reasonable, but it might be a bit overstated, as you suggest.

$75,000 for a two income family means $38k each, and that is somewhat on the low end for professional, college educated jobs. I assumed they were relatively junior employees who tend to have less paid for by their employers.

I know my bad habit of overly long posts, so I tried to keep it short and not say all of this stuff explicitly, because it detracted from the simple point I was trying to make.

[johnsmith]

That depends on whether you are contributing to a Roth IRA, or a conventional IRA.

Go for a Roth that draws from post tax-income, because it shields you from the very high risk of future taxe increases.

$800 per month for two people includes all the happy-fun copays, prescription costs, deductibles, dental, and the host of other "holes" in health insurance that exist, in addition to the out-of-pocket premiums.

I also mentally lumped in stuff like life insurance, disability insurance, etc. into that cost.

Given the rate at which employers are dropping paid health insurance, or requiring employees to pony up part of the cost, it seems fairly reasonable, but it might be a bit overstated, as you suggest.

$75,000 for a two income family means $38k each, and that is somewhat on the low end for professional, college educated jobs. I assumed they were relatively junior employees who tend to have less paid for by their employers.

I know my bad habit of overly long posts, so I tried to keep it short and not say all of this stuff explicitly, because it detracted from the simple point I was trying to make.

The only reason I picked $75,000 was because that's what the mesia......errrr.....Obama always throws around.

[RandomGuy]

Now I may be wrong, but won't the 25% tax break include those $75k families when the tax cuts expire?

FYI:

For future calculations rather than 2007 numbers, 2008 tax rates:

Tax Rate Schedules for Individuals and Trusts--2008The SS and Medicare are still at 6.2% and 1.45% for a 7.45% of applicable income. Keep in mind many middle class are self employed and pay both ends of that for 14.9%!
4.9%!

"25% Tax break"? You will have to be a bit more clear about what exactly you are talking about for me to address it.

I did indeed use 2007 tax tables and figures. Had I used 2008 tax tables and figures, the ending income tax would have been less, probably by about 2 to 4 percent less.

People who aren't self-employed still pay the extra SS and Medicare, they just don't quite see it. That extra money is paid by the employer and is therefore not available to be paid to the employee. Kinduva weird system, but that is what it is.

[RandomGuy]

The only reason I picked $75,000 was because that's what the mesia......errrr.....Obama always throws around.

That is about right for a two income household.

The median US income is about $38k if I remember correctly.

The funny thing about that is that with the US dollar at record lows against the Euro, you could probably earn more, on average, by working in Europe.

"but their taxes are higher than ours"

Not really. All of their taxes tend to be federal, with no city or state taxes, so it looks like more.

Economists have studied the total % of income paid for all levels of gov't in the US, and it ends up being pretty close to that of Europe. I can probably find the link to this if asked.

[boutons_]

"their taxes are higher than ours"

but their health care costs are MUCH lower, and everybody's covered, the doctors are providing care rather than fighting with private insurance companies about which treatments they can do, and which will be covered. the "free market" at work. Private insurance companies deciding on your treatments so they maximize their proftis, not maximize your health.

[RandomGuy]

"their taxes are higher than ours"

but their health care costs are MUCH lower, and everybody's covered, the doctors are providing care rather than fighting with private insurance companies about which treatments they can do, and which will be covered. the "free market" at work. Private insurance companies deciding on your treatments so they maximize their proftis, not maximize your health.

German doctors spend 50% less on administrative costs than US doctors do. Puts some teeth behind the efficiency arguments for a single-payor system.