I figure I give roughly 30% off the top in federal income tax/social security. I don’t know how much for state, maybe another 10%? Not to mention sales taxes and whatever assorted taxes I’m semi-secretly charged on my mortgage, car note, savings accounts, investments, and/or utilities. Every time I want to sell or even transfer something of value to another person, some government official wants a cut. I can’t think of everything, but people always like to complain about how the same dollar gets taxed over and over again in several different ways.
So how much, percentage-wise, of my money do I actually get to keep and use to purchase valuable goods and services of my own choosing?
Edit: I mean, of course, “I, the average American wage-earner/consumer”. No need to audit my personal records, please.
You do realize you don’t pay taxes on your mortgage, don’t you? In fact, there can be a tax advantage in deducting home interest.
Similarly, you pay taxes on the cost of your vehicle, but not on the loan or on the interest. As to your bank accounts, you pay tax on the interest, but not on the amount in the account. For investments, you may pay less on the income from those if some are capital gains.
Keep in mind that you can deduct your property taxes plus your state and local income taxes or your sales taxes from your Federal income taxes, so you cannot simply think that you can add up marginal rates of taxation to form any kind of realistic measure of your tax burden.
According to the Congressional Budget Office, the average American with 1.3 children and 3.9 limbs and a pre-tax income of $58,000 paid 14.2% of his 2005 income in all sources of Federal taxes (income, payroll, and excise). See page 6 in this PDF. This is after considering all deductions and credits that people actually take (interest paid, state taxes, installing energy efficient windows, etc). Obviously, this figure does not (and cannot) account for all the various taxes paid at the state and local level.
If you make more than $1.5 million per year, you’d pay about 31% of your income to Uncle Sam, and if you made $15 grand, about 4% would go to the Feds.
Canadians can use the Tax Freedom Day calculator to determine what portion of the year they work for the gummint, and what portion for themselves. There may be something similar for the US.
Basic rate tax here is 22%, plus 10% National Insurance for 32%, plus VAT at 17.5% on most purchases (out of net income), plus a huge amount of petrol duty (ditto), less a tax-free allowance. Then there are the petty taxes like car tax, TV license etc. So it’s approx 60%+ of taxed income. For a typical taxpayer call it half of gross income.
