…Through the virtue of training, Enlighten both body and soul — Morihei Sensei

Real tax burden

My bottom line on taxes is that we pay an exhorbitant amount of income tax from our paychecks here in the United States.  In fact, we pay one of the highest percentages of taxes in the world.  This is particularly so when you compare the political-economic structure of the countries whose percentages exceed ours, and layer on the fact they all have some sort of universal healthcare (read: tax-funded).  Specifically, these countries (largely) are openly socialist-influenced, and (largely) have single-payer tax-funded healthcare.

I maintain that the United States economic system has not been Capitialistic for a very long time (if ever).  This may sound extreme, but if our tax system is any indication, we are a long ways toward Socialist.  Here are the numbers:

We’re all in the 40% tax bracket.  An analysis of income tax brackets, including federal, state, payroll taxes, and deductions puts the average tax payer paying 40% of their income in taxes (pre take home).

We pay another 22% surcharge on what’s left.  Most first-world countries openly levy a VAT (value-added tax) on their citizens.  We don’t call it that, but we levy several layers of sales taxes on our citizens:  State sales taxes, consumption taxes (gasoline, tobacco, airlines, etc), highway tolls.  Additionally, the products we buy are produced by companies that pay these same consumption taxes (I’m not even talking about business income taxes).  These companies pass these taxes along to us in the price of the goods they sell.  Add it all up and find we pay 22% in these embedded taxes–this on after-tax income.

Wait, there’s more. . .We pay for our own healthcare.  Depending on your exact healthcare situation, employer paid benefit, self-insured, medical savings plan, traditional 80/20 health insurance, your actual annual cost will vary.  But when comparing national tax percentages, this must be accounted for as many (most) first world countries pay for their citizens’ healthcare from the taxes their citizens pay.  If we take the lower costs from employer-paid plans (remember this is money paid on your behalf by the company) we have average annual costs of $14,202 (premium, deductible, and other out-of-pockets) per family. (The Hidden costs of Health care)   The costs are even higher for smaller firms, and individually purchased plans.   This does not account for the medical cost (or lack thereof) for the uninsured, but at what cost and what risk?  There would be a good analysis:  The long term cost of foregoing medical treatment in terms of life expectancy versus the risk of financial ruin in the face of a catastrophic medical event.

Let’s run the numbers.  If we look at a family household income of $100,00 (not unreasonable ), and then an individual earning $45,000.

A family income ostensibly of $100,000. 

  • Take homepay (less 40%) $60,000.
  • Less Healthcare costs (the conservative numbers, and assuming a tax-deductible threshold) $45798.
  • Then the embedded taxes on after-tax income (money we use to buy stuff)
  • $35,722 left.
  • Real Tax Rate:  64.28%.

For an individual earning $45,000:

  • Less 40%:     $27,000
  • Less healthcare ($6191):     $20,809
  • Less embedded taxes:     $16,231
  • Real Tax Rate:     63.93%

Note:  Neither of these calculations account for the several other taxes and tax-like costs we incur:  e.g., ad valorem taxes, property taxes, public utility fees, universal coverage fees (i.e., in your phone & utility bills)

Discussions regarding what we actually pay in taxes in the United States are patently deceiving.  The tax code is so skewed.  The sheer number of different types of taxes we pay is staggering.  The different metrics we can use to describe taxes is mesmerizing.  Every one seems to be able to arrive at the conclusion they want through selective attention and willful ignorance.

Resources:  Some of these conclusions support mine, some don’t.  But none synthesize all the analyses which I’ve included above:


Please comment below.  What’s your take on this?

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3 responses

  1. It’s shocking really, the whole American revolution was because of unfair taxes and treatment of citizens. This is History repeating itself, let just hope that when (if it ever does) the revolution arises this time we fix the issues involved with the checks and balances of power and take in account the authority of businesses. We shouldn’t just write it off for future generations to deal with.

    Thu, 20 Oct 2011 at 1031

    • It is shocking. There is almost no comparison to the rates we pay now, and those that contributed to the American Revolution. First of all, there was no Income Tax, that in itself would have been utterly unbearable. The taxes of the time were various transaction taxes, tariffs, sales taxes, and varied greatly. To your larger point, the American Revolution was about the British crown overreaching its scope of power. You’re right, the balance of power between the government and the people, is terribly skewed, and won’t be corrected until the people first just pay attention.

      Thu, 20 Oct 2011 at 1059

  2. Valid points all round, I’m still dumbfounded to how it got this bad. I’ve heard some say it was Wilson who signed Americas’ soul to the banking devils. I hate to see this, it’s almost a type of slavery- keep the citizens in debt and they’ll be owned by someone. I’m not American, but i see the ramifications of this effecting the entire race, some solutions need to be created, and new checks and balances introduced. With education rates plummeting i doubt people will be able to see past their own consumerism. There needs to be a way to organize a government through a system which places the bright and compassionate at the commanding front; could be done with psychological testing. What’s even worse is the spiritual wasteland man is walking through, there is no more wisdom since it’s being drowned in a sea of irrelevance. Certainly is a Brave New World..

    Fri, 28 Oct 2011 at 1209

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