I hear this every year how the American worker has to work further and further into the calendar year before netting a cent. They claim we’re paying Uncle Sam until May before we net a penny! I can’t believe this. Even if I lump in state/local income and property taxes, things just aren’t that bad!!! Are they exaggerating, or trying to lump in sales tax???
What gives? Or, should I recheck my math?
Yes they are exaggerating, but only slightly.
Also tax rates have dropped.
The old high federal income tax rate was 28%. Your portion of social security tax is about 6% [assumes your employer pays the rest].
So over 33.333% in income and social security taxes.
12 month per year, four months [1/3 of the year], January through April, of your yearly income goes to taxes. You don’t make net money until May. But by this basis, after May it is all net income.
This is exaggerated since it does not account for standard deductions. Also, more than half the people are taxed at less than the 28% rate.
It doesn’t take much for it to be true. I work for a large company, have been here a while, am salaried, I work for others, no one works for me; and yes, I pay a little less than 1/3 of my income in federal taxes. Then I pay sales and local taxes.
Last year I has Uncle Sam paid off by late February (just counting federal tax here). It then took me another 3½ weeks to pay my local (DC) taxes. One month after that, and Social Security & Medicare were satisfied. So that brings me to late March. By the time April rolls around, I am making money for myself.
To be fair, we should be looking at our AGI and not our pay stubs. We’ve no right to complain about low net pay if we’re overpaying our bi-weekly taxes.
Last year my State/Federal/FICA taxes were almost exactly 30% of my gross salary. That would bring me to about mid April. I haven’t calculated this year yet.
Of course my sales/property/fuel/cat taxes came out of the remaining 70%.
I don’t know what country starfish lives in, but the old top income tax rate was 39.6%. It will be going down to 35% by tax year 2006.
According to the CBO, the effective total federal tax rate was about 25% in 1997 (for the individual income tax, it was about 12.5%). Throw in your state and local income, sales and property taxes, and you’re up around 35% - 45%. Meaning May is certainly reasonable.
The US Statistical Abstract also has some tables on this, by state, I believe.
The date as calculated by the Tax Foundation is May 3rd for 2001. This includes Federal, State and Local Taxes. It also adds in days for sales and excise taxes as well as other indirect pass through taxes.
Fot their complete report http://www.taxfoundation.org/taxfreedomday.html
I think I overlooked the obvious - I forgot to account for FICA.
FICA or social security and medicare are 7.65% of the first $80,400. medicare continues at 1.45% for earnings above $80,400. So that is January 28th to pay that off.
I’ve jiggled the URL so that the column width isn’t all screwey… I hope. – Dex
[Edited by C K Dexter Haven on 07-31-2001 at 01:43 PM]