With it being tax season, my kiddos were watching me spread out all of our family tax paperwork across the kitchen table, and of course wanted to know more.

I didn’t think they were going to get much value from a line-by-line review of our tax return however 😛

Instead, we talked about the general topic of taxes. The different types of taxes we covered included:

• Federal income taxes to pay for “big” roads and our soldiers
• State income taxes to pay for state parks and state roads
• Medicare payroll taxes to help people like Grandma and Grandpa pay for their healthcare
• Social Security payroll taxes to help people like Grandma and Grandpa once they don’t have a job for money anymore
• Property taxes to pay for libraries, schools, city/town and county roads
• Use taxes on our cars
• Sales taxes when we spend money to buy things

Since they are little, we only covered things that were connected to areas they had an understanding of, we skipped other important taxes like capital gains tax.

Then it was time for a more specific example, with numbers. Things like property taxes and use taxes I left off of this part. I just covered what goes into every paycheck, plus what it costs to spend that money if we were to go to a store. I picked numbers for the spending power of an additional $100, to a married filing jointly couple earning $150k.

Of that $100:

• $22 goes to the federal government
• $6.80 to the state of Minnesota
• $6.20 to Social Security
• $1.45 to Medicare
• $8.13 for Olmsted County sales tax (I’m assuming that at that income level, you aren’t spending extra income on tax-free purchases such as groceries)
• Leaving: $55.13 for the family!

I then showed them what that looked like, because with kids even more so than adults, a picture goes a long way to abstract concepts.

But since obviously self-employment is of interest in our family, we also covered what that costs:

• $22 still goes to the federal government
• $6.80 still to the state of Minnesota
• $12.40 now goes to Social Security
• $2.90 now goes to Medicare
• $8.13 is still for Olmsted County sales tax
• Leaving: $47.78 for the family!

This lead to a great conversation with the kids about what a progressive tax system is, how to know when there is “enough”, and how if you want to have good family time together then we can’t also have ALL the money 😉

So if you’ve got other uses for your time (children, hobbies, spouse, friends), consider carefully what is the value of additional income once your basic needs are met. That’s not to say additional income can’t be worth it, just be sure to be making an informed decision that fits with your values.