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Inflation and taxes battering middle-class families

Bermuda islanders have been and are still seriously challenged by global inflationary forces beyond our control, as are communities in our neighbouring countries coping with highest inflation in decades.

Economic sages have predicted that inflation will begin to fall as control strategies filter through central banks into everyday commerce, but that takes time.

Squeezed wallets: Bermudians are feeling cost-of-living pressures from inflation and taxes (Image by Steve Buissinne/Pixabay)

Such news will not dramatically decrease costs for Bermuda family wallets. We’ve always lived with and somehow managed the inflation of really high cost of living forever.

So the last thing Bermudian households need now is an increase in taxes. In 2017, I wrote an article that received significant attention, headlined “Nothing zero about tax in Bermuda”.

New taxes then being considered by the Tax Reform Commission included tax on dividends, general and managed services, notional new salaries, Airbnb, etc. along with a host of increases on existing tax categories. Some of them, like the sugar tax, were implemented, some of them were not.

There will be eager interest in next month’s Budget Statement, due to be delivered on February 17 by David Burt, the Premier and Minister of Finance.

While the payroll tax changes proposed in December’s Pre-Budget Report would eliminate all employee payroll tax for earnings up to $48,000, they would also increase rates for all bands higher than $48,000. This brings another factor into cost-of-living challenges for families, particularly those in the middle-class $48,000 - $96,000 income band.

How do we quantify the impact on middle-income families’ finances, the class that seems to bear the greatest percentage tax burden, not only here but across civilised countries?

Consider the impact on:

• Working parents with childcare, education, and larger food costs — ever try to feed teenagers consuming 4,000 calories a day on a budget?

• Those renting a studio or other for extra income and/or to help in mortgage financing?

• Local businesses: retailers, restaurants, entertainment, etc. as households further curtail spending?

One not only has to consider the tax affect on employees, but also the impact on employers and companies in the upper income bands, always focused on cost efficiencies, who will freeze salaries, target redundancies, trim benefits, negotiate lease reductions, and pull back from charitable community contributions, just to name a few.

Introducing our hypothetical Bermuda island family, to attempt to better understand inflation and tax impacts.

Two wage earners, two children (ages 2 and 7), one home, mortgaged to the hilt, a family car, bike.

Parents earning $50,000 and $80,000 ($130,000 combined) are not taking home anywhere near their computed gross income. The deductions below significantly reduce their net income before computing inflation impact on every-day living costs.

Deductions for both include payroll tax, national pension, contributory pension and employee share of health insurance (reportedly being increased in 2023).

The lower income is little affected by the new tax scheme, while higher earners will face significantly higher rates of payroll tax. The broader question – what is the overall impact of all taxes and inflation now?

Inflation impact

CNBC reported in late October 2022, that the typical US household (estimated two adults, 1.95 children, birth rate dropping) is spending $445 more per month due to inflation.

Bermuda cost-of-living is generally reckoned at three times the US average, so does that mean typical Bermuda families are now spending an estimated $1,300 to $1,500, or even more, just to stay afloat, disrupting any planned family budget.

What is the estimated complete family budget picture?

Today, I’m putting together a preliminary (not final) spreadsheet analysis of the hidden (consumption) and stated open taxes on middle-class Bermuda families (excluding the civil service) and the impact on family budgets.

Readers, I am asking you to help me with these estimates, to build this model together. Please feel free to share with me your estimated cost-of-living expenses.

I will state as always that any information received from readers is kept strictly confidential; names, contact information, etc. are never released, unless permission is granted.

Estimated results will be reported in Moneywise, on Saturday, February 11. It will hopefully give us a good financial composite of families in this income bracket, if I can obtain decent estimates of our hypothetical household’s current costs.

Monthly costs categories





•Internet, phone

•Day care


•Land tax

•Property Insurance


What have I missed? Think there is anything left over to save?

We shall find out.

Readers, let’s hear from you! I will estimate numbers if I cannot get sufficient confirmation from reliable sources and as always, I so appreciate your input.

Martha Harris Myron is a native Bermuda islander with US connections, a former international financial planner, a Google News Contributor, author of the Bermuda Bermy Island Finance Blog info@marthamyron.com Contact martha.myron@gmail.com

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Published January 28, 2023 at 7:59 am (Updated January 28, 2023 at 8:02 am)

Inflation and taxes battering middle-class families

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