Life and taxes

Law-abiding reader, they say there are only two inevitable things in life: death and taxes. This week I've had an exciting brush with the second of those, and our second COVID vaccinations on Monday will hopefully help us avoid the clutches of the former for perhaps a little while longer.

Yes, this week was tax week. The US tax system has many notable differences to that in the UK, and like many bureaucratic institutions in these parts, it aims to make up for a lack of quality with quantity. My tax return here last year ran to over 150 pages, whereas in the UK I can't remember filling in more than 8.

The first difference is one of timing. For reasons lost in the mists of time, the UK tax year runs from April to April. Here in the US, somewhat more sanely, the tax year aligns with the calendar year. In the UK, you file your return, someone at the Inland Revenue checks it, and later there's a payment deadline if you owe anything. Here in the US, the deadline for filing and paying are on the same day.

That deadline is normally April the 15th, but this year, like last year, the lovely folks at the Inland Revenue Service have extended it. So, this year's deadline falls on Monday, the 17th of May.

Another remarkable difference is in how you pay throughout the year. In the UK we have a system of tax codes and pay-as-you-earn; you end up paying the same amount of tax each month and so your takehome pay is predictable. Here, the equivalent system is called withholding and seems somewhat random; rather than try to predict your blended tax rate over the year and have you pay that, it seems like each month they pay the precise tax rate applying to the amount you've earned so far this year. This means the amount of tax you're paying increases at seemingly random intervals and it's not obvious why.

Finally, there's Federal tax, and then there's state tax. As well as paying income tax to Joe Biden's Federal government, states can optionally levy an income tax as well. So California, which is considered to be a high tax state, has an 11% income tax on top of Federal taxation. Compare that with, say, Washington - my colleagues in Seattle don't pay state income tax and thus are immediately 11% better off. But hey, it rains a lot up there :-).

So this week I had the somewhat stressful experience of getting my draft tax return from the accountant I'm paying to do this (I don't trust myself to get it right), then having to work out how to pay before the deadline. You can either mail a check to Kentucky (yes, honestly in the 21st Century this is still a thing, and in fact last year as a first-time tax payer with no history this was the only payment method available to me), or perhaps equally scarily, give the Feds your bank details and let them work it out. Despite my bank trying very hard to stop me spending money on almost anything for fear of fraud, apparently paying a 5-figure sum to either the Federal or the State government doesn't need a lot of authentication. Ho hum.

Even though the UK has a reputation for having hefty taxes, we don't actually pay that much less tax here than back home, especially when you factor in that you have to separately pay for medical insurance anyway. I don't begrudge paying taxes at all - as someone that's lucky enough to have a decent job that pays pretty well, I'd happily pay more if I thought it would address poverty or universal healthcare or gun control or anything else that would improve life for those that aren't as fortunate. In the UK I'm pretty happy that our taxes go on "schoolbooks, beds in hospitals, and peace in our time" as per Billy Bragg, but over here... well I guess it goes on the military, which to put it mildly I'm not particularly comfortable with.

This week, I've also tried pretty hard to buy a car. Our car is leased, and as we've been here nearly two years, the lease is almost up. At the end, I can either trade it in and lease another one, or pay off the balance and own the car. I really want to do the latter, but clearly Toyota would rather I did one of the other things... so far this has involved 3 calls to Toyota and 2 calls to the dealership, without too much progress being made. At one point I was shouting "BUT I JUST WANT TO GIVE YOU MONEY" at yet another automated telephony menu, but to be honest this didn't seem to have too much effect. Maybe I should have done the easy thing and just bought the car in the first place.

Anyway, to end on a happier note, this week, neighbouring San Mateo county progressed into the Yellow Tier as the COVID case rates here continue to fall. We have our second vaccination on Monday - looking forward to those side-effects!