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On preview, Ravenman Ninjad me.
ETA: Actually, this was going to be my link from The Tax Fondation. Look at Figure 2.
OK, here are some numbers, then (from memory, but I’m a CPA and know some of these pretty precisely):
Personal earned income (per IRS definition): $52,000
Total Gross Income (per IRS definition): $84,000
Total AGI (per IRS definition): $56,000
Taxable income (per IRS definition): $26,000
Personal taxes:
Federal Income Tax: $3,000.
Property Tax: $3,200
Payroll Tax Withheld: $3,672
Sales Tax: $1,800 (per IRS table)
Car Tabs: $50
Gas Tax: $180
King County Restaurant Tax: $50
FAA Excise Tax: $75
State Utility Taxes: $40
Vice Taxes: $50. (Very rough estimate, which is complicated by the fact that my state owns the liquor stores and so all profit on liquor could be called a tax. I don’t buy that much anyway.)
Fortunately, I don’t use ferries, toll roads or public transportation. I didn’t use any hotels last year.
Total Personal Taxes: $12,117.
That’s between 15% and 23% depending on what measure of income you use.
But I own my own business, so let’s add:
B&O and Use Tax: $1,980*
Sales Tax: $4,000
Payroll Taxes (Company Portion): $5,404 (includes state-run worker’s comp)
City and State Licensing: $119
Professional Licensing: $710
Property Tax: $80 (including the property tax portion of triple-net)
Total Business Taxes: 12,293
This is about 10% of total business revenue, and about 50% of business net income. It’s again between 15% and 23% of my income, when you figure that anything I didn’t pay in taxes would have been my income.
*Actually, we should revisit this. Since WA state has no income tax, we rely on a Business & Occupation tax. Therefore, every time I buy something in state, the seller is paying between 0.5% and 1.8% in tax on the gross receipts. Unless they’re a small business with a state tax credit. It can’t be passed on the customer or itemized on a receipt like sales tax is… but businesses do build it into their prices. But that’s where we come back to issues of definition. I’ve left it out of the personal side.
And, of course, my business is paying for retirement expenses in payroll, and also health insurance. In many countries, these would be paid for as part of taxes but in America, we pay them directly and then compare apples and oranges when we talk about those other countries.
It’s helpful if you hit the quote button because that automatically not only includes the post but a link back to that post. If you want to quote several posts, click on the smaller button next to the quote button for each and then hit the quote button. You can intersperse your answers just by moving the cursor.
We can’t agree that earned income is most of our personal income. Capital gains income is significant, and especially so for corporations. If you’re going to include the corporate match of social security taxes then you also have to include capital gains taxes, but then you move the other side of the equation because you have to include all corporate income. Once you do that, the total tax percentage reduces again.
If you like charts, here are a couple that look at federal taxes compared to GDP and break down sources.
Tax revenue as a fraction of GDP
The problem with coming up with one number for all Americans is that the number would be meaningless. Why do it? What would you get if you did?
@Ravenman- But it does not include:
Which is nearly as big as income tax in the mid 20’s%.
Ad valorum taxes in the US are “mainly real property tax and sales taxes.” So, if I’m reading the linked article correctly, they are included.
Your pie charts illustrate my viewpoint:
http://www.taxfoundation.org/taxfreedomday/
@Exapno- OK maybe you’re right. Let’s do it for a group of people instead. At least we’ll start with that group. Let’s say the 1/5th by income who went to college. 60-80%. They drink alcohol, smoke, buy gas an average amount. Property tax. Sales tax. They spend most of their money. Would that be more meaningful to calculate?
@leaffen- They are included in the 28%? Link please.
The 28% number in the Wikipedia page comes from The Tax Foundation. Both links have been provided. In Figure 2 from one of my previous links at The Tax Foundation, Sales and Excise taxes, and Property Taxes are included.
This is getting a little tiring. How about you create an Excel spreadsheet and post it on your Facebook page or something?
No, the tax was on the $10 gain. Yes, this gain lost some purchasing power because of inflation, but so did the original $1000 if it was never invested. If you’re advocating no taxes on any investment that returns less than the rate of inflation that’d be daffy. Instead of investing $1000 in your example suppose it was $1,000,000. Then the gain would be $10,000, not $10. You’re saying this $10,000 should be tax-free? Nuts. True losses are not taxed because there’s no gain to tax. Now, if the argument is about double taxation of dividends paid out to investors then I’m with you.
@dracoi- Interesting! As a whole corporate income tax is about 1/3 personal. Or 1/4 the total of the 2. Do you have employees? Not everyone has their own business. You’re paying about 24k? You’re doing more than your share of paying what the government spent in 2007 at least. From reading your Post I cannot tell what your earned income was. Including your business? You said personal earned income is $52k. It’s complicated. I’m afraid most people are complicated. I wish we could look at a simpler case.
I haven’t seen where you did this at all. But if you do decide to add in payroll taxes, remember that the 15% includes the employer contributions in addition to the employee contributions. So if you believe that the employer contribution should be counted as a tax against that employee, then the employer contribution should also be counted as an income for the employee. In other words, it’s like the employer virtually “gave” it to the employee but the government took it away before it hit the paycheck.
So if an employee had an income of only $10,000, their payroll tax if you count only the employee portion is around %7.5 . But if you count the employer contribution, his tax burden from payroll tax is not %15, because his income doesn’t include the employer contribution. Instead, once you count his employer contribution as income, his total income becomes $10,750 for a total payroll tax burden of 13.9%.
This will also impact the apparent burden from income taxes and other taxes since the income base is higher to begin with.
Ooh, this is a fun game . “Let’s come up with things that may or may not be taxes depending on how you choose to define the word ‘tax’!”
Social Security is an easy first one, as it’s supposed to balance out on average, but that’s been noted.
Permit and license fees are a good one, starting with nigh-compulsory ones (drivers license renewal fee), and on to more optional ones (fishing license fee).
Tolls are great, because sometimes they are supposed to only exactly recoup the cost of the road/bridge, and sometimes they don’t cover anywhere near the cost, and sometimes they’ve paid of the original bridge/road and are now paying for other transportation actions. Does a toll become a tax the instant the original costs of the bridge/road are paid off? (Wait, what about maintenance?)
I suppose public transit fares are pretty similar. Though we don’t have to worry about whether they’re paying for something else; they almost never cover the entire cost of public transit (before you get outraged, does the street you live on charge tolls to cover its cost or is it *more *subsidized than public transit?).
How about things like airport landing fees, you know the weird little charges always added to your plane tickets?
Some places have municipally owned utilities, such as drinking water, or even broadband in a few places. Are the bills from the utility taxes? And financially some towns treat storm drains much like toilet sewers, and charge a fee for anyone hooked up, rather than paying for maintenance out of general revenues. Is the storm drain fee a tax?
Are parking and speeding tickets taxes? Does it matter whether the town is really trying to increase safety/available parking, or is just running a speed trap to get revenue?
I’m pretty sure nobody really thinks overdue book fees are taxes, but you know, there are people who might make that argument…
One thing that I think is pretty clearly a tax, but often neglected is import tariffs and the like.
Here’s one: the time a person spends filling out their income tax return. It’s not optional, but there’s no clear monetary value.
Some people argue that the cost of complying with, say, an EPA permit is a tax. Does that mean that the cost of fixing my car so it passes safety inspection is a tax? Or what about the cost of clothing so I can comply with public decency laws, is that then also a tax?
@leaffen- I see your pie chart. But something doesn’t add up. Income tax is about 50% of federal revenue, not including SS. I’ve seen this number 50% elsewhere, let me find a link. SS tax in your chart is 15% or 7.5 depending on your point of view. So (28-7.5)/2 is about 10% income tax. That is how much we’re paying? That is nowhere near the 24% we calculated by dividing the total FEDERAL taxes/ total income. What about state income tax? Something is wrong with 28%. Ideas? I’m not trying to push my agenda on anyone. I want us to think together.
@ludovic- You’re right our answer could be off by 7.5% because we didn’t count that as income. 7.5% of 28 =~2 or whatever the answer is. That’s why I wanted to keep it separate. Still I wanted to compare the taxes to our declared income on our paycheck. For a simple wage earner. Not all the other incomes we might have. I realize it’s not correct to oversimplify. I’ve defined “income” for this question. How can we define “taxes”?
Again, I don’t think you understand the genius.
The person doesn’t HAVE $1000 anymore. He has $980. This loss is REAL. It is not fake in anyway. He made $10 in interest so his worth is about $990. He has lost $10. Again…very real. To then say he ‘made’ $10 and tax it…
GENIUS!
Maybe it is because we are talking about low numbers here. Say inflation was 50%…and that the guy makes 20% interest.
So he starts with $1000 and now has $1200. However, it is only worth $600 now. The government says…hey you ‘made $200’ lets tax it…say take $40…the poor guy now has about $580. If you don’t think that is real…then assume his rent is $1000 a month. A year later his rent is $2000. The loss is very real.
It is a marvel.
I agree with you about the double hit of dividends being stupid…and not stupid in a ‘GENIUS!’ way either.
Maybe a house example would work.
Say you bought a house for $100,000. Inflation runs 10% a year but your house increases in value the same amount.
So you have your house for 7 years or so…enough for inflation to make your house $200,000.
You need to move …so you want to buy a house across town that now costs…$200,000. Basically the same house you have now.
You sell…and are taxed on your $100,000 ‘gains’…say at 20%.
You now have $180,000 which is not enough to get your house.
The government just taxed you on…nothing.
GENIUS!
I know they now except homes from this…but probably only because it is so blatently obvious what is happening on such an infrequent and large purchase.
According to this:
http://www.cbo.gov/ftpdocs/108xx/doc10871/Chapter4.shtml
Individual income tax is about 1/2 including SS/FICA of 15%.
But this totally confuses the issue because it is Federal only.
Ad valorem is mostly not Federal. It’s not simple to calculate!
@Blinkingduck - I agree with all that! If I WAS trying to make a point, you have made it for me very succinctly.
sbright: Please, as a favor to everyone reading. When you respond to a specific point or specific post, please hit the little QUOTE button in the lower right corner of that post. That will copy and quote the material, so we know what you’re responding to without having to scroll back.
That’s what I did, I hit the QUOTE button on your last post, and see how it copies and quotes? Makes it easier for others.
43% of all tax filers pay no income tax?!?!?