12.5% of Gross Earnings
That's the amount of money the federal government took from my wife and I last year that is not considered income tax. It is not money "saved" for me in the Social Security Trust Fund. It is the FICA and Medicare TAX we paid that goes into that account and is used to pay current benefits of the Social Security program. Our percentage is higher than the average person's because I have self-employment income on which I pay the full percentage of the tax. For all of you employed by someone else your employer pays half the tax and the other half is deducted from your paycheck.
Of course you all knew about this even before I said anything. So why mention it? Because if you added what you paid last year in FICA and Medicare taxes to what you paid in income taxes I think a lot of folks would be shocked to discover what their actual federal tax rate is. If you think you're only paying 15% or less because of your nominal tax bracket, think again. And if you were feeling generous towards your Congressional representation after you saw how small your adjusted gross income was compared to your actual gross income, and thought how wonderful that you were only paying this nice low percentage on the adjusted amount, think again. I'm pretty sure that if you worked the numbers you'd discover that the total income tax you paid was at least the same percentage of your gross income as your nominal rate, if not higher.
Now do this: add what you actually paid in income taxes to what you actually paid in FICA and Medicare taxes. That's your actual federal tax liability. Now divide that by your total gross income. That's your actual federal tax rate. Still feeling generous?
Unless you are a high earner with significant income above the cap on FICA and Medicare taxation I would expect your total tax liability to hit 20% or more of your income. That means 1 in every 5 dollars you earned went to the federal treasury. Now add what you paid in state taxes -- don't forget all those sale tax dollars! Add in your local property taxes, users fees and other governmental assessments. Doesn't leave a large percentage of your income at your disposal does it?
My dad while alive was a strong proponent of a flat tax on all income with no deductions. There is much to be said against such a simple idea and all the problems inherent in such a system. But one thing would be true. The amount we pay in taxes would be transparent. That's what bothers me the most. Our current system with all its convoluted deductions, credits, and taxes that are not called taxes obscures from view the real cost of our government. Government and the utilities -- neither one will give you a straight answer on what something costs. Our tax bills are just like the cable or mobile phone bill, full of "fees" or other misnamed additions that take extra dollars from our pockets. And the assumption is that we aren't paying attention so they can get away with doing it. Anyone else actually notice? Anyone else bothered by it?
Of course you all knew about this even before I said anything. So why mention it? Because if you added what you paid last year in FICA and Medicare taxes to what you paid in income taxes I think a lot of folks would be shocked to discover what their actual federal tax rate is. If you think you're only paying 15% or less because of your nominal tax bracket, think again. And if you were feeling generous towards your Congressional representation after you saw how small your adjusted gross income was compared to your actual gross income, and thought how wonderful that you were only paying this nice low percentage on the adjusted amount, think again. I'm pretty sure that if you worked the numbers you'd discover that the total income tax you paid was at least the same percentage of your gross income as your nominal rate, if not higher.
Now do this: add what you actually paid in income taxes to what you actually paid in FICA and Medicare taxes. That's your actual federal tax liability. Now divide that by your total gross income. That's your actual federal tax rate. Still feeling generous?
Unless you are a high earner with significant income above the cap on FICA and Medicare taxation I would expect your total tax liability to hit 20% or more of your income. That means 1 in every 5 dollars you earned went to the federal treasury. Now add what you paid in state taxes -- don't forget all those sale tax dollars! Add in your local property taxes, users fees and other governmental assessments. Doesn't leave a large percentage of your income at your disposal does it?
My dad while alive was a strong proponent of a flat tax on all income with no deductions. There is much to be said against such a simple idea and all the problems inherent in such a system. But one thing would be true. The amount we pay in taxes would be transparent. That's what bothers me the most. Our current system with all its convoluted deductions, credits, and taxes that are not called taxes obscures from view the real cost of our government. Government and the utilities -- neither one will give you a straight answer on what something costs. Our tax bills are just like the cable or mobile phone bill, full of "fees" or other misnamed additions that take extra dollars from our pockets. And the assumption is that we aren't paying attention so they can get away with doing it. Anyone else actually notice? Anyone else bothered by it?
Labels: social security, tax brackets, tax rates, taxes
posted by Wake of the Flood at 3:02 PM
3 Comments:
now you know why i wasn't unhappy to give up being my own boss!
and like the seasons of professional sports that extend beyond their normal times, the date of the average worker being "tax free" is getting deeper and deeper into May.
At least when you were self-employed the IRS classified you as self-employed for both Social Security and income taxes. What stinks is that the gummint says I'm self-employed when it comes to payroll taxes, but that I'm an employee when it comes to income taxes. Which means that housing and any other unearned income is counted towards my payroll taxes, but expenses are not allowed to be deducted from what is counted as my income subject to the income tax. Nothing like disincentives for working. If they didn't put a limit on how long you can stay in campgrounds I'd just go live in a tent and forage and panhandle for food...
there's a limit on campgrounds? someone might ought to let the snowbirds know about that down in the Rio Grande Valley and southern AZ. There are plenty of 5th wheelers down there occupied by farmers from Iowa who no longer plant winter crops due to disincentives from the farm bureau. They would lose their corn subsidies.
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