I was trying to find a link or reference that shows the
Earned income
= about
Gross income (interest, dividends, cap gains/losses)
when you add it up for every citizen.
Can anyone help me? It is not easy.
I was responding to all that Blinkingduck said, not a specific post.
That’s why I used the word “all”.
Let’s define “tax” as anything we pay to the government, without a choice, to get a benefit. Even if we enjoy the benefit or activity or process or object.
If 1/2 of all the people pay little tax, then the other half must pay about $32,000/yr to pay for government spending in 2007, which is about $16k per capita. Assuming no borrowing. Big assumption, which of course is wrong. 1st grade math.
@Quercus- Some of the things on your list are too small, as a percentage, to bother considering. What are the big ones we should question?
Thanks!
However, to be clear, I was not being facetious about saying I wasn’t complaining and was admiring…I really mean it.
Think about it. The government (all levels, not a monolithic agency) is ingenious about taxing all parts of life. You are poor but working? Social security, sales and property taxes for you. Middle class…get hit by all but not very hard though property taxes bite more maybe. Higher income? Income tax.
People who have savings regardless of income? Inflation and taxing losses as gains.
People of all incomes and savings really are hit about the same percentage-wise methinks. It is a marvel.
I think you’re making up your own tax code. For a single person, the IRS does not tax you on the first $250,000 of capital gain on a home sale. It’s doubled for married couples.
He’s simplifying to make it easy to understand. Sometimes we do this incorrectly. What about the second time? What about if there’s time between the sale and purchase? Maybe a year. I think you get his point.
Heaven forbid that you read every word or extrapolate from an example!
@Blinkingduck- Your theory might make my number easier to calculate. If it’s roughly the same for everyone. I wish we knew the answer. I think you’re right about the distribution! An excellent way to maximize returns. It’s a beautiful scam.
This made me laugh; “OK your cite talks about taxes, but what about “taxes”?” This is just silly.
The Tax Freedom day cite was also interesting if you look at the chart of tax Freedom days since 1900. Except for two years (2009, 2010),you’d have to go all the way back to 1960 to get a “better” or earlier tax freedom day (and that only by one whole day!). You have to go all the way back to 1950 to get any significantly better (ie lower) amount of total taxes.
And of course, the US seems to have the 2nd least amount of total taxes paid by people (2nd to India)
So why do people continue to bitch about how much they pay in taxes in the United States? This is the continuing mystery to me.
Because they can spend hundreds of hours studying this and still not know a damn thing.
I’m not bitching. I’m trying to understand. 3% or even 9% is just plain wrong. 28% does not include all the payments we make to the government. 24% is the total FEDERAL income tax / total earned income. Why is the total tax, not just income tax, such a secret? Anyone? If this forum can’t answer it, nobody can…
What bothers me is that most people think it’s so low. One of the lowest countries. 2nd lowest beside India. Lowest since 1950.
3%???
It’s simply not true. We’re not taking into account the other taxes. Or payments made to the government. They are as big as income tax, which is close to, approximately 24% for most people I know. Then add 15% for SS if you pay it. Depending on how you look at that.
Every case is complicated in some way. It’s why I have a job.
The best answers you can get for an “average” case have already been provided by other posters in their links.
A couple clarifications:
There is no corporate income tax in my scenario. My company is an S Corporation, so income flows through to my personal return and I pay tax on it there; you can’t separate my personal tax from the company’s tax. My state also has no income tax because of the B&O (a gross receipts tax)
Earned income, as defined by the IRS is unequivocally $52,000. I gave you some other numbers because I don’t think the IRS’s definition is what you really wanted.
I do have employees and the company’s share of payroll tax is in the business taxes. I did a return for one of them (part-time help), and their annual tax burden (from all tax sources) would have been about -4% (yes, that’s negative 4 percent) after Earned Income Credits and Child Tax Credits.
Various cites have been provided, such as the Tax Freedom Day website which pegs the number at about 28% and which says, “Tax Freedom Day is calculated by dividing the official government tally of all taxes collected in each year by the official government tally of all income earned in each year.” The fact that you don’t believe these numbers does not mean that they are incorrect. I’m not sure why this thread remains open or in GQ.
You seem to be confused about the total taxes that the average person pays, vs. the amount of federal taxes that the people you know pay. Or you’re confused with the concept of marginal tax rates or deductions.
And what is the 3% you keep talking about? Nobody thinks that 3% is the amount of total Federal, state, local and sales tax the average person pays. Nobody.
The Tax Freedom day cite mentioned earlier puts the current amount at 28.0% on average. This includes local, state and federal taxes. And this figure is historically low. And it is low compared to most other countries.
I don’t know what you mean by “taxes” that are not included when we talk about taxes. You need to specify exactly what “taxes” we’re missing. Why exactly is that cite above wrong? What taxes are they not including? And do you think they included them in previous years or for other countries, rendering the comparison useless?
@dracoi- 24/52= 46%?
@dewey- 28 cannot possibly be correct because 24% is the federal tax rate on average calculated like this:
Federal income tax rate = Total federal income tax collected / Total Earned income
Including the other taxes will about double the income tax (including state income taxes).
@euph- Correct. 3% is the amount in the Washing Post article for federal income tax 40-60th percentile average. The other taxes including state tax are much less than 3%. Ridiculous. It also says 46% of filers pay NOTHING.
I linked to the taxes that were not included. It’s hard to be specific when the Tax Freedom site doesn’t specify what is included. I will dig further.
I do not think you understand tax rates, or what this article in the Washington Post says (link?)
The tax freedom link (in Wikipedia) says it included all Federal, State and local taxes. Which “taxes” do you think they failed to include?
Again, NOBODY thinks that 3% is the average federal, state and local taxes paid.
sbright33 – the main problem here is that you are asking a half-dozen questions, getting factual responses, and then not understanding what answers go with which of your questions. Let’s take this one step at a time.
The Washington Post has an article that correctly states that 20% of all taxpayers, who happen to be right in the middle of median income of all workers, pay 3% of their income in Federal income taxes. This 3% does not represent all the taxes they pay. Those very same taxpayers pay 9.4% of their income in social insurance taxes, and their total Federal tax bill amounts to 14.2% of their income (once all other Federal taxes are added in). For these taxpayers, who have an average income of roughly $60,000, we don’t have reliable numbers about how much they pay in state and local taxes because it varies too much.
Overall, for all Americans, rich or poor, paid an average of 20.7% of their income in Federal taxes. This is all Federal taxes. Nothing is left out. My cite for all the preceding claims is on the first page, with the Congressional Budget Office.
I do not believe one can accurately calculate the average tax burden on Americans by taking the amount of revenue and dividing it by an estimate of total income, for a few reasons. One is that some Americans essentially get a “negative income tax” because of the earned income tax credit. Instead of paying Federal income taxes, they get “tax refunds” because of the EITC. In fact, the lowest 20% of income earners get 6.6% of their income from the EITC.
Long story short: you can’t simply divide tax revenue with income and get an accurate number. Experts have produced data on how much taxes people pay, so listen to the experts (like the Congressional Budget Office) as opposed to doing your own arithmetic.
Next point: several people have pointed to a fairly reputable thinktank that has estimated the average total Federal, state, and local tax burden on Americans. Their methodology is listed on the website, which has been linked to a couple times. If you read the methodology, you will understand that they are not hiding certain taxes, double-counting other taxes, or playing other such games. They estimate that roughly 28% of one’s paycheck goes to all taxes, but of course individual cases will vary widely: richer people will pay more, poorer people will pay less.
All of this is very clear if you carefully look at the cites that have been provided several times now. Take a careful look at the CBO citation on Federal taxes, the Tax Foundation’s methodology. It is all very clear if you read the citations.