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Thursday, April 19, 2012

Taxes

UGH...sore subject!!  Even more sore (sorer?) this year for me.  

After being laid off 3 times in a row back in the US of A, I got fed up with the system, the government, out-sourcing of millions of jobs overseas, and the downward spiral of the culture and society there and decided to get the hell out.  After my second layoff due to the collapse of Washington Mutual Bank (WaMu) and the subsequent takeover by Chase Bank....I looked for a job for 18 months!   Unemployment ran out, medical ran out, and my savings was getting sucked dry to cover living expenses including a hefty mortgage.  Being single, there was no one else to 'carry me'.

Then, I got a job!!   But, 3 months later they laid me (and others) off.   Geez, you'd THINK they would've seen the train coming at the time they hired me??

That was IT.  I needed to preserve what savings I had left.  I had already worked for 40 years (I started when I was 6....cough, cough!!) and I was worn out.  Yes, I could've tried to find another job and work for another decade to the 'accepted' age of retirement but who could tell whether finances would hold up and I could actually AFFORD to retire then?   It wasn't a gamble I was willing to take.

So, I looked at what I had accumulated and looked around for viable places to 'retire'.  The House Hunters International television show opened my eyes to the possibilities that existed elsewhere in the world.  No, my retirement choices did not need to be limited to Arizona, Mexico, or Florida!!!  

Fast forward.   I took a trip to Panama to see what I could see.   I cut the trip short because it was too freaking hot and humid.  I was soaking wet all the time.  I like hot, but humidity turns me into a hatchet murderer.  

A few months later, I came to Ecuador on a two-week exploratory trip.   I confirmed Cuenca was a good fit.   Inexpensive (my money goes a lot further here), clean, friendly, dollar is the currency, pretty, NOT humid, not too big, not too small.  The 'glass slipper' fit.   Three months later, I moved.  Uh river dare chee USA!!!  Hello South America!!   SOUTH AMERICA.....who would've thunk????

What the heck does this have to do with the title (Taxes) of this entry Dan?  C'mon....get on track!!!

I'm getting there!   I'M GETTING THERE!!  (geez, so impatient!!!)

As they say, there are only two things certain in life...death and taxes.   I don't know about other countries, but if you are born in the USA, you are doomed to pay taxes for the rest of your life (and even at death) whether you like it or not....whether you live there or not....whether you utilize anything that the taxes pay for or not.  I didn't CHOOSE to be born in the USA, but the USA has chosen for me that I must pay taxes to them forever.

I just filed my 2011 tax return.  I owe $40,000!!  (insert muffled screams)  The reason I owe so much is because I took MY money out of MY retirement accounts before the US government said I could.  It is the source of money I needed to live on down here, and to buy my house.  With the penalty and the income tax rate, they took approximately one-third for themselves.    Thanks Dano!!   We'll spend it wisely!!!  Yeah, right....on wars the USA is perpetually involved in and bailing everyone else out but the very people who gave them their money in the first place...US Citizens.

In addition to those taxes, I also pay over $5,000 a year in property taxes.  Of that amount, $120 a MONTH goes to the local schools of the town where my US house is....even though I'm single, never had children (that I know of), blah blah.   Why so much?  Because I HAPPEN to have a nice waterfront house!  Doesn't matter HOW I got it, or how much I MAKE...they just presume I'm made of $$$ because I have that house.   If you lifted up that house and plunked it down in a different neighborhood and put a family of 6 in it, they would pay less taxes than me because the value of the house is less (different location)...even though 4 kids would be using schools,  SIX people would be utilizing services such as fire/police, paved streets, lights, infrastructure, etc....versus ONE.   Makes sense donut??

Yes, I tried to sell my house.   Believe me, I wanted to get rid of that thing BADLY.   But, after reducing my price $100,000 from what it was valued before the collapse, and reducing it three more times during the course of the 6-month listing, there were no bites.  My tenant bailed on me after only 6 months of a 1 year lease.   During the 6-month listing, the house was empty...hemorrhaging my savings even more.   After I took it off the market, it took 3 months to find a renter.   My savings continues to bleed, albeit slower, because I still carry a negative.

When I filed my 2011 taxes, there was not one IOTA of relief provided for those who had to prematurely dip into their retirement accounts to keep afloat.   People have lost their jobs.  Their unemployment has run out.   They can't afford the insane cost of medical coverage.  They've depleted their savings to keep their homes out of foreclosure.  They dip into their last source of money to keep things going.   The government doesn't give a rip...they still want 'their share' and slap you with a penalty on top if it just to add a little extra sting to your already sore wound.

If I were to work here in Ecuador, or anywhere else for that matter, the US government will demand its cut.  I could live in Outer Mongolia, be a cobbler making shoes, not set foot in the USA for ten years and it will still demand I fork over part of my Mongolian income to 'pay my fair share' of the USA machine.

Ok, so this blog is supposed to be about my life here in Ecuador, not bitching about back home stuff.  Ok, here's where I make the connection.

I just paid my Ecuador property taxes for 2011.   Here, they become due at the beginnig of the year and you have ALL YEAR to pay them before being considered delinquent.  The government even has a discount program to reward those who pay them early.  For example, they will give you XX% off your taxes if you pay them by the end of February, or X% if you pay them by the end of March...the discount decreasing as more time elapses.   How much was my property tax bill for 2011 you ask?

$154

On the matter of other taxes, the IVA (sales) tax is 12%.  It is the same across the country, none of this 9.8% if you're in Cuenca, 10.2% if you're in Quito, or 6.7% if you live in the jungles.  It is the same for everyone, everywhere.    98% of the time, the 12% IVA tax is included in the price of whatever you buy so you don't have to mentally add it to the price to figure out how much it is really going to cost you.  If laundry detergent is $7.63, that's what you'll pay....$7.63.   Even big-ticket items, such as a car, the IVA is included.  That $10,000 purchase price on the sign?   That's what you pay....not $11,200 (after tax added).

Most restaurants include the IVA tax and a 10% service charge in their menu prices, but not always.  You have to read the disclosure line at the bottom of the menu to know.  Tipping is almost non-existent here because of the included 10% service charge.   If a person tips, it's just the extra change leftover, or maybe a buck or two depending on how many people were served.  No tipping taxis.  No tipping the cashier at the mini-mart because he/she gave you the correct change for your toilet paper purchase.  No tipping the person that correctly gave you the 2 scoops of ice cream flavors you asked for.   We don't have Starbucks or coffee carts here, so that's another big savings from not having to tip.   But, yes, there is tipping for people who handle your luggage, or wash your car extra good, or the young person who carries your groceries to your car, or the furniture delivery guy who carried that heavy couch up three floors into your apartment because few buildings have elevators.

Well, that's it for this week.  Sorry, no purty photos....just a lotta bitchin.   I mean, what photos would I post that correlates with the story?  A photo of my tax return?   Of my property tax bill?    Of my blood pressure read-out while I was filing my taxes online?   Of me after drinking that bottle of scotch after I filed my taxes?

Nah...boring.

Dano

15 comments:

  1. Great blog. Let's meet for coffee sometime to further the discussion.

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  2. You forgot the new FATCO. :(

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  3. Dano, it's just the beginning. Wait till June of next year. If your looking for other possible choices, go to South of Zero under more helpful websites for Sovereign Man. We haven't joined yet but receive a daily newsletter. I think you'll find the reading quite enlighting. Steve from South of Zero

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    1. I have joined. It's definitely worth it.
      Ken

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  4. As a former barista, I can say that those tips often added up to a buck fitty over my criminally low wages.

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  5. Too bad depreciation on your home rental didn't help to offset your tax bill. I managed an H & R Block office during this tax season and believe me, you aren't the only one who cashed out an IRA or 401K early and had a whopping tax bill. You can offset the penalty for COBRA premiums or for qualified education credits or to buy a first time home...but not to pay rent or utilities, and I think that is just not right. Had a couple of clients who had to cash it out to just pay rent after being out of work for a long time. And this year, the IRS taxed unemployment benefits! unreal and outragious. Meanwhile, the Obamas paid 20% effective tax and his secretary, 28%.

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  6. Great Post, Dan. I hope you're reading "This Old Man's House" blog as well, particularly the last two posts on economics. Like Mike Grimm, if no objecition, I'd like to join the two of you for further discussion over a cup of coffee if you should get together. Jim Mola (jmola2000@yahoo.com)

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  7. Thanks, Dan, for this post. I think you were very smart to move to Ecuador! I hope to do something similar someday. Unfortunately the U.S. government hasn't been able to provide the kind of relief necessary to help people out of this recession and your story is a good example of stuff that doesn't make any sense. I thought Obama would fix a lot of these kinds of things. So much for that. The IVA that is like a sales tax in many countries makes a lot more sense than the U.S. sales tax system, because it is only taxing the added value that you as the end consumer are paying for vs. the U.S. sales tax where we pay tax on the total cumulative value of that product even though it has already been taxed 2 or 3 times already.

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  8. I am retiring early too because if I don't I will be bankrupt. Your story is so familiar. It is taking me about a year to sell everything but then I will be in Cuenca. It takes forever to sell anything for half what it is worth but what the heck. Be well, wish I were there in Cuenca right now...

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    1. Dano (David of the E&D show), having and still working since 1960. I appreciate your story/loss+taxes, etc, as we have similar stories ... however, I look at it a bit differently ... when we eventually get to the Big Retirement Spot in a differnet world where you now live, we will have enough monies to live comfortably ... if we rent vs buy ... if we keep US assets to next to nothing ... but, as you point out, new stuff (new taxes) happen which isn't fair (the current political folks believe they can make up the trillions they gave away by having some of us pay more ... ain't right, ain't American ... or "isn't") ...

      So we live day to day and experience as much as possible (which may mean some days on the beach with a tropical drink of some sort) ... my point is I can do nothing about the taxes at home (will vote for the person who doesn't want to raise them but that is about it) ... we got rid of our house at great loss but maintained a home (which is where we hang our collective hat) ... I am with the Army in Germany (ahh, US Army) and watch many young folk deploy, some who don't make it back home ... so the "Live for Today" ... yes, sounds like a soap thing ... is something we do well ... taxes? We will pay them but will limit the amount of things they can tax us for ...

      Line below the proverbial Bottom Line: Life is short, too short to worry about more than "What's for dinner, honey?" ... obiviously I don't do the cooking but I do enjoy eating ... and taking each beautiful day for what it is ... R, David

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  9. Ken and I are members of Sovereign Man Confidential, on our second year subscription. It's loaded with info, not just reprinted crap. The HIRE and FAFTA is scary. Get out ($$$/house- wise) while you can. We are hoping our houses sell before the end of the year, to fund our move.......it's scary here in the US.

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  10. Dana I love reading your posts just can't get enough of them. It brings back lots of memories for me as I visited Cuenca many years ago - many times- and it was the happiest time of my life.

    I laugh when I hear of your frustrating (I mean challenging) moments and I think back to my initial reactions to many things there. After a few trips I realized that I was the arrogant one and they were the most pleasant people in the world. I cried many times as I miss the place so much.

    After my partner passed away there, I never went back but have always longed to. I am not sure how to get ahold of you as I would like to ask a few questions that would not be appropriate on the blog. So if you are so inclinded, plese email me.... and again Thanks so much for your wonderful blog.

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    1. Sorry Dano I mis-spelt your name... guess that is what i get for typing in the dark... :-)

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  11. People just think It's nuts to think about moving out of the Country....Midwest mentality? All I know is that we can't afford this Country. Recently the cost (I saw on T.V.) for an appendectomy ranged from $1500.00 to $183,000.00 with it being very difficult to get price info prior to the operation, convenient! We also got rid of our 401K and had to pay $45,000 between state and federal....I truly don't believe my hubby will ever get over having to do it,it changed him.....we also have a lake home that won't sell and the taxes are $7,300 and going up, and although it's less then 10years old, it's not at all fancy. My hubby thinks he can sell the home and then get rid of his stuff and decide where to move...arghhh! One of the hard things is just feel'n in limbo. Anyway we got our passports updated and need to visit and see if Ec may be a good fit. Patti(with the cats)

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About Me

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Cuenca, Azuay, Ecuador
This is all about my transition from an American lifestyle and culture to my newest adventure, life in Cuenca and greater Ecuador. I'll be recapping some of my day-to-day experiences (and mishaps) to highlight what it's like to live here.

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