Assignment:
You just received a job offer for your "dream company" based in Cleveland, Ohio. They have offered you a salary of $47,000 a year, along with several other fringe benefits. Although you are very excited about the job, you must develop an appropriate budget. Using the following expenses as your guide, calculate the following questions based on a $47,000 gross salary:
Annual gross Salary $49,000/year
Pre-tax expenses:
401-k contribution- $4,900/year
Parking - $250/year
Health ins. Premium - $1,875/year
Taxes
Federal Income Tax 10% of first $9,525
12% on income from $9,526 to 38,700
22% on income from $38,701 to $82,500
Ohio State Income tax
$40,001 - $80,000 $1,112.50 (takes care of all state income tax up to $40,000)+ 4.327% of excess over $40,000
Payroll Taxes
City of Cleveland Income Tax is 2%
Social Security tax is 6.2%
Medicare Tax is 1.45%
1. What is your taxable income in this scenario?
2. What is your income tax obligation to the U.S.?
3. What is your income tax obligation to the State of Ohio?
4. What is your income tax obligation to the city of Cleveland?
5. What is your income tax obligation to social security system?
6. What is your income tax obligation to Medicare/Medicaid?
7. What is the SUM of your taxes: Federal income taxes, State income taxes, City of paycheck?
8. What is your yearly net (take home) pay?
9. What is your monthly net (take home) pay?
10. As a general rule of thumb, you should spend no more than 30% of your monthly gross (actual salary) pay on housing. Given your gross salary, what is the maximum amount you can afford to pay per month in rent or to mortgage payment?
TOTAL TAXATION SHORT ANSWER:
It is often said that we don't pay nearly as much taxes in the U.D. as people in other parts of the world (such as Europe). However, let us assume that you not only pay the income taxes above, but you also must pay property taxes (on the house you bought in Cleveland), consumption taxes (sales taxes on all of the products you need and want to buy), and capital gains taxes.
Property Taxes - Assume that you bought a house in the Cleveland, Ohio area and your property taxes are a flat $4,200 per year on the house you purchased after receiving your "dream job offer" in Cleveland, Ohio
Capital Gains Taxes - Assume that you were a very astute investor and two years ago you invested $1,000 in a growth stock and then sold that stock for $4,000 before the end of the year, as you believed that price speculation made the share price unsustainable. Capital gains (the difference between what you invested and what you sold the stock for) are taxed at 15%
Sales taxes on consumer products - Assume that in the course of the year, you spent $8,000 on food, clothing, etc. that were all taxed at the 7.75% sales tax rate imposed in Cleveland, OH
Sales taxes on new ear - Assume that you have to pay a one-time Sales tax on the New Honda Civic you purchased to replace your "jalopy" college car. The sales tax was also 8.00% and the purchase price was $22,500.
11. Adding all previous taxes (your answer to question 7), plus the property taxes, capital gains taxes, sales taxes on consumer products, and sales taxes on the new car above, what is the total dollar amount you pay in taxes each year?
12. What is the percentage of your gross salary ($49.000) that is spent on taxes of all levels (all) of payroll, sales tax, capital gains tax, property tax) this year?
13. Given your high tax load in this scenario, I might try Househacking. What is Househacking?
Multiple choice questions:
1. All of the following are political/legal forces that pose major risks in International business:
a. Differences and fluctuations in currency values
b. Government instability
c. Conflict or war
d. Conflicting and diverse legal authorities
2. All of the following are committees utilized and stifled by boards of directors. Except:
a. Audit
b. TQM
c. Finance
d. Compensation
3. What are the two duties of a board of director member?
a. Duty of Compassion/Fiduciary Duty
b. Duty of Loyalty/Duty of excellence
c. Duty of Care/Duty of Loyalty
d. Duty of Agency/Duty of Scholarship
4. All of the following are reasons for corporate governance mechanisms to exist except:
a. To determine and control strategic direction.
b. To reduce the power of institutional investors.
c. To reduce opportunism in the firm.
d. To manage stakeholder relationships
5. When considering investment sold by any type of entity, one of the things you should do is:
a. Consider the bias of the person/entity selling you the product
b. Always buy the lowest price product
c. Be optimistic that all investments will always go up in value
d. Don't invest in anything, ever, because of uncertain systemic risk.
6. Sources of disposable income in Retirement could come from all of the following instruments except:
a. 401 -k
b. Roth IRA
c. Social security payments
d. Flexible spending accounts