T Nation

How Much Do We Really Pay in Taxes?

How much money does the average middle-class American ultimately lose to the government as a result of all forms of taxation and the various insideous wealth confiscation schemes in place? Currently most people pay a 25% income tax in addition to S.S. and Medicare. They’re also earning a smaller income as a result of the higer taxes on their employers, as well as paying more for goods and services as a result of sales tax, gas tax, property tax, tariffs, user fees, etc. To top it off all, the Federal Reserve devalues the currency, so you have less purchasing power with the money you have left over.

So how much money does the average person really lose to the government? It must approach 50%? I think it’s absolutely obscene that we could be working half as many hours for the same standard of living, or enjoying twice the standard of living for the same number of work hours, but instead we work like hampsters on wheels for the benefit of lawmakers spending their way to re-election. Government is truly destroying life on this Earth. Why don’t people realize this?

oh boy, this is going to get rough quickly.

what you suggest is oversimplified.

if you are merely suggesting that tax money can be spent much more efficiently, then of course this is true. this is obvious, and your only preaching to the choir.

you should be more charitable though in presenting your view . you come off as if your suggesting that we could do away with taxes completely, and that taxation is evil.

[quote]stokedporcupine wrote:

if you are merely suggesting that tax money can be spent much more efficiently, then of course this is true. this is obvious, and your only preaching to the choir.

[/quote]

As Milton Friedman has observed, if government was able to spend money efficiently we´d all be slaves.

[quote]belligerent wrote:
How much money does the average middle-class American ultimately lose to the government as a result of all forms of taxation and the various insideous wealth confiscation schemes in place? Currently most people pay a 25% income tax in addition to S.S. and Medicare. They’re also earning a smaller income as a result of the higer taxes on their employers, as well as paying more for goods and services as a result of sales tax, gas tax, property tax, tariffs, user fees, etc. To top it off all, the Federal Reserve devalues the currency, so you have less purchasing power with the money you have left over.

So how much money does the average person really lose to the government? It must approach 50%? I think it’s absolutely obscene that we could be working half as many hours for the same standard of living, or enjoying twice the standard of living for the same number of work hours, but instead we work like hampsters on wheels for the benefit of lawmakers spending their way to re-election. Government is truly destroying life on this Earth. Why don’t people realize this?[/quote]

While I am for limited government and lower taxes don’t pretend all your tax money is taken away and you get nothing in return (unless you live in the woods).

[quote]Zap Branigan wrote:

While I am for limited government and lower taxes don’t pretend all your tax money is taken away and you get nothing in return (unless you live in the woods).[/quote]

This is basically what I was going to write first, but, the OP does have a point: MOST of the money we pay into taxes we do NOT see. Most of the tax money that you actually see is local, not federal. Most federal tax money, which is almost everything that gets taken from your paycheck, does to social programs like Medicare and social security. maybe about a quarter goes to the military.

but so the point is… MOST of what an individual pays in taxes does not help that particular individual one bit.

Like i said though, the OP should be much more charitable in presenting his argument. MOST of that tax money, while the tax payer never sees it, does get spend on arguably worthy things (like helping secure retirement and health care for the poor and elderly). And, despite what some of you think, sometimes someone’s misfortune really isn’t their fault (though of course, this is a complicated issue). Moreover, these same programs would be there for you too if you need them.

but like i said, one could argue that the government’s mismanagement of tax money is so bad that in the end most of our tax money really does go to nothing.

[quote]orion wrote:
stokedporcupine wrote:

if you are merely suggesting that tax money can be spent much more efficiently, then of course this is true. this is obvious, and your only preaching to the choir.

As Milton Friedman has observed, if government was able to spend money efficiently we´d all be slaves. [/quote]

I heard that before but never understood it. Can you please explain what you think he meant?

[quote]lixy wrote:
orion wrote:
stokedporcupine wrote:

if you are merely suggesting that tax money can be spent much more efficiently, then of course this is true. this is obvious, and your only preaching to the choir.

As Milton Friedman has observed, if government was able to spend money efficiently we´d all be slaves.

I heard that before but never understood it. Can you please explain what you think he meant?[/quote]

Can a government enforce all its laws? Are they able to focus on one goal and stay on budget if their life’s depend on it?

Now imagine they actually got their act together, how much damage they could do, controlling 40%-50% of the GDP.

Since nobody takes care of other peoples money as of his own and no program is implemented as intended and they all have unwanted side effects and there is always corruption and pork no government program will ever be efficient.

I’m going to go a little off-topic here, but let’s talk about the nature of limited government.

Of course, limited government is excellent when we are dealing with market economies, but when it comes to providing services (e.g. highways, roads, education) it is decidedly inferior. I think there is consensus on this point.

That said, the OP’s question: “How much money does the average middle-class American ultimately lose to the government as a result of all forms of taxation and the various insidious wealth confiscation schemes in place?” is more of an inquiry in to the declining economic power of the middle and lower classes.

Personally, I have strong feelings about this topic and believe that we can directly and indirectly trace the economic marginalization of the middle and lower classes as well as the exponential wealth of the upper classes to policies started with Reagan.

I don’t know how familiar any of you are with “Reaganomics”, but he presupposed a “trickle down” effect from cutting the taxes of the wealthiest classes. That is, he believed that if he could encourage investment of those most likely and able to invest, that there would be a concomitant increase in jobs and that the wealth created from these investments would “trickle down” to the middle and lower classes.

Well… that didn’t happen. While company profits increased exponentially, salaries increased only marginally (and were not commensurate with inflation increases), global contacts and investment gave way to outsourcing, and CEOs and hedgefund managers pocketed the rest.

So where has all the money gone? It was and is taken out of the hands of the middle and lower classes and placed directly in the hands of the increasingly small elite (trans national corporations, etc). Moreover, foreign investment had significant blow-back almost immediately; Reagan immediately began borrowing money and increased the national debt I believe from $700 billion to something like $3 trillion.

OK, now to wrap this up by answering the forum topic’s question, “How much do we really pay in taxes?” We pay the difference that exists between the needs of the middle and lower classes, and the wealth accumulated by the elite upper classes.

Think about it: health care, increasing costs of university tuitions, pork barreling…

This process, if any of you are interested, is commonly called “accumulation by dispossession”.

[quote]ovalpline wrote:
I’m going to go a little off-topic here, but let’s talk about the nature of limited government.

Of course, limited government is excellent when we are dealing with market economies, but when it comes to providing services (e.g. highways, roads, education) it is decidedly inferior. I think there is consensus on this point.

That said, the OP’s question: “How much money does the average middle-class American ultimately lose to the government as a result of all forms of taxation and the various insidious wealth confiscation schemes in place?” is more of an inquiry in to the declining economic power of the middle and lower classes.

Personally, I have strong feelings about this topic and believe that we can directly and indirectly trace the economic marginalization of the middle and lower classes as well as the exponential wealth of the upper classes to policies started with Reagan.

I don’t know how familiar any of you are with “Reaganomics”, but he presupposed a “trickle down” effect from cutting the taxes of the wealthiest classes. That is, he believed that if he could encourage investment of those most likely and able to invest, that there would be a concomitant increase in jobs and that the wealth created from these investments would “trickle down” to the middle and lower classes.

Well… that didn’t happen. While company profits increased exponentially, salaries increased only marginally (and were not commensurate with inflation increases), global contacts and investment gave way to outsourcing, and CEOs and hedgefund managers pocketed the rest.

So where has all the money gone? It was and is taken out of the hands of the middle and lower classes and placed directly in the hands of the increasingly small elite (trans national corporations, etc). Moreover, foreign investment had significant blow-back almost immediately; Reagan immediately began borrowing money and increased the national debt I believe from $700 billion to something like $3 trillion.

OK, now to wrap this up by answering the forum topic’s question, “How much do we really pay in taxes?” We pay the difference that exists between the needs of the middle and lower classes, and the wealth accumulated by the elite upper classes.

Think about it: health care, increasing costs of university tuitions, pork barreling…

This process, if any of you are interested, is commonly called “accumulation by dispossession”.[/quote]

The assumption that the “trickle down did not happen” is questionable.

The boom of the Clinton years may very likely have been the result of Reagonomics.

If you want to worry about redistribution from the poor to the rich, worry about inflation.

Then, you are mixing tax-cuts, outsourcing, public debt and globalization which means that all you have is an opinion, as in gut feeling. The fact that you have “strong feelings” about this does not change this.

[quote]orion wrote:
The assumption that the “trickle down did not happen” is questionable. [/quote]

Let me guess… republican? Kidding, kidding.

In all seriousness though, can you explain to me how it is questionable?

While this is true, the truth lies in that Bill was negating a negative. Let me clarify, his increases of taxes on the wealthiest brackets and tax deductions on small businesses was in direct opposition to Reagan’s policies. As such, the boom of which you speak was the result of a reversal of Reagan’s policies.

Again, I would love to hear any commentary on why this might not be true.

This confuses the point. Inflation is not a cause, it is an effect. Inflation is the result of rising relative prices and a corresponding decrease in purchasing power, right? Well, in economics this is called the Income Effect.

Moreover, policies that grant large corporations selectively advantageous tax cuts creates barriers to entry in the market. This creates a monopoly. And what do we know about monopolies? They’re price SETTERS. This also contributes to a rise in relative prices and a corresponding decrease in purchasing power. Again, inflation is the RESULT, not the CAUSE.

Since it wasn’t clear, allow me to put “strong feelings” in context. In the context of which I wrote, “strong feelings” meant “strong inference” and this “strong inference” stems from tracing money and policy trails. Of course I cannot PROVE it! But if we look at simple principles of economics and political theory, the pieces “unstrugglingly” (yes, I know this is not a word lol) fit.

That said, I would love to hear your thoughts on the matter.

I’m in the 30% tax bracket (in Australia). That is the middle tax bracket.

There is a 40 and 45% bracket above me and a 15% and zero tax bracket below me. We have a tiered bracket system.

Plus I have to repay a goverment loan for my university education at a rate of 8% of my gross income on top of my tax.

So I’m at 38% of my income with that.

Plus I pay 10% GST (same shit as VAT) on almost everything including food, petrol, clothes, etc. Plus, stamp duties on car registration. Plus, fees to use public roads, etc.

Easily half of my personally producded wealth is handed over to the government.

I do not see value for money. I HAVE TO PERSONALLY CONTRIBUTE EXTRA TO RECIEVE AND EDUCATION FOR FUCKS SAKE.

Oh shit, yeah there is also a compulsory 1% extra income tax for medicare.

Oh yeah I also have to pay an extra 1.5% income tax on top of that if I do not have personal health insurance.

So that 40.5% for an average guy earning an average wage.

Disgusting.

USA being a larger country you do get taxed less at an indivudal level than smaller countries I think.

The worst tax of all is inflation, which many people don’t understand. A dollar earned in 1970 is worth far less today, for example. Inflation is a way of stealing wealth by government spending freshly printed money before the money works its way through the system and decreases the value of the pre-existing money. Most get robbed and don’t even know it.

Folks like Zap call it ‘entropy’ or some other bizarre concept. But its really a tax.

Of course, you’re supposed to invest to ‘beat inflation’. Few people do. Here’s why: suppose you earn 9% per year in investments, on average. These gains are taxed eventually so let’s say your ‘real’ gain is 6%. Now imagine the inflation rate is a paltry 5% (yeah, right). You gained a whopping one percent per year! You’ll double your wealth in…72 years.

Of course, the purpose in all this is to prevent the bulk of the people from becoming very well off. Wealthy and independent middle classes are harder to rule. But that’s another thread… :slight_smile:

[quote]stokedporcupine wrote:
oh boy, this is going to get rough quickly.

what you suggest is oversimplified.

if you are merely suggesting that tax money can be spent much more efficiently, then of course this is true. this is obvious, and your only preaching to the choir.

you should be more charitable though in presenting your view . you come off as if your suggesting that we could do away with taxes completely, and that taxation is evil. [/quote]

We had no personal income tax in this country until FDR.

[quote]Headhunter wrote:
The worst tax of all is inflation, which many people don’t understand. A dollar earned in 1970 is worth far less today, for example. Inflation is a way of stealing wealth by government spending freshly printed money before the money works its way through the system and decreases the value of the pre-existing money. Most get robbed and don’t even know it.

Folks like Zap call it ‘entropy’ or some other bizarre concept. But its really a tax.

Of course, you’re supposed to invest to ‘beat inflation’. Few people do. Here’s why: suppose you earn 9% per year in investments, on average. These gains are taxed eventually so let’s say your ‘real’ gain is 6%. Now imagine the inflation rate is a paltry 5% (yeah, right). You gained a whopping one percent per year! You’ll double your wealth in…72 years.

Of course, the purpose in all this is to prevent the bulk of the people from becoming very well off. Wealthy and independent middle classes are harder to rule. But that’s another thread… :)[/quote]

HH you scare me. I’m just starting out in the world and you make me feel hopeless. Thanks a million asshole.

[quote]Spry wrote:
So that 40.5% for an average guy earning an average wage.

Disgusting.

USA being a larger country you do get taxed less at an indivudal level than smaller countries I think.[/quote]

Perhaps but most here pay state income taxes along with federal taxes and, if self-employed, both halves of our social security & medicare taxes as well. Consider, for example, a single self-employed person in the US earning $100,000/year:

Federal tax bracket = 28% (about $24,000 in federal income taxes due on $100k income due to lower brackets below the $100k level)

FICA = 15.3% (7.65% employee’s share of SS & MC tax + 7.65% employer’s share SS & MC tax on first $97,500 then 2.9% on everything on up or around $15,000 tax due on $100k earned income)

State income tax = 7% (where I live, this will vary from 0, which is rare, to 10% or more, ~$7,000 tax due on $100k)

So on $100,000 in earned income the initial tax bite is about $46,000 but we’re not finished yet:

Sales tax is collected by most states, counties, and some cities and varies widely, here it’s around 7% on every purchse.

Upstream taxation of businesses that produce, transport, and sell goods is rolled into the cost of the goods themselves. We here in the US enjoy the highest corporate tax rates in the developed world and thus have a very high tax basis added invisibly to all goods sold here. Estimates are necessarily complex but typically fall in the 20-30% range, call it 25% for the sake of argument.

Property taxes on homes are collected locally and will run minimum $2k-ish on a typical middle class house but double (or far more) that in some areas.

Those are probably the biggest hitters so let’s review my hypothetical single self-employed individual’s $100k income:

$24,000 - federal income tax
$15,000 - federal SS & MC tax
$7,000 - state income tax
$2,000 - local property tax on home

$48,000 in relatively unavoidable taxation which leaves $52,000 in available income for consumption.

Assuming, as is typically the case, that our $100k earner consumes 100% of her remaining $52,000 she’ll also pay:

$3,500 - state & local sales taxes
$13,000 - corporate & other taxes embedded in the cost of goods & services purchased

So of a $100k self-employment income in the US the earner will end up being able to secure about $35,500 worth of goods and services making the taxpayer’s net tax rate 64.5%.

Yes, clearly we’re undertaxed here in the US.

To really bake your noodle, consider that some economists estimate that the cost of government regulation of business exceeds the cost of government taxation of business in the US. Thus, if 25% of the cost of our goods and services is attributable to embedded taxation passed on to consumers at minimum another 25% is attirbutable to the cost of government regulation of businesses. Here we’d subtract another $13,000 as a conservative estimate of the cost of government regulation passed on to our hypothetical earner so instead of having purchased $35,500 worth of goods and services she would only have been able to purchase $22,500 worth of goods and services for a total tax / cost of government burden just short of 78% of her total earnings.

Clearly we need a lefty tax-hiker in the Oval Office about as much as we need holes in our heads. And people wonder why the middle class is struggling? LOL

[quote]Headhunter wrote:
The worst tax of all is inflation, which many people don’t understand. A dollar earned in 1970 is worth far less today, for example. Inflation is a way of stealing wealth by government spending freshly printed money before the money works its way through the system and decreases the value of the pre-existing money. Most get robbed and don’t even know it.

Folks like Zap call it ‘entropy’ or some other bizarre concept. But its really a tax.

Of course, you’re supposed to invest to ‘beat inflation’. Few people do. Here’s why: suppose you earn 9% per year in investments, on average. These gains are taxed eventually so let’s say your ‘real’ gain is 6%. Now imagine the inflation rate is a paltry 5% (yeah, right). You gained a whopping one percent per year! You’ll double your wealth in…72 years.

Of course, the purpose in all this is to prevent the bulk of the people from becoming very well off. Wealthy and independent middle classes are harder to rule. But that’s another thread… :)[/quote]

You do realize it is impossible for everyone to be wealthy don’t you? This is not a grand conspiracy, it is reality.

If you’re being taxed over 50% doesn’t that mean your not working for yourself anymore since the majority of the money goes to the government.

Anyway I pay 56% not include 8.5% sales tax for stuff I need like food and shelter since I can’t figure how to total that accurately. I also live in the overprice dump that is NYC.

Taxes wouldn’t piss me off so much if they would just stop taxing investments and gifts. Especially investments the stock market helps move the economy it’s already a risk putting money in it to a degree. Any investment really is for that manner.

Gifts/prizes just doesn’t make sense how they can tax something that was awarded to you but thats just me I guess. I remember reading Oprah gave some people free cars and they all had to return the cars because they couldn’t afford the tax on them.

[quote]Blacken wrote:
If you’re being taxed over 50% doesn’t that mean your not working for yourself anymore since the majority of the money goes to the government.

Anyway I pay 56% not include 8.5% sales tax for stuff I need like food and shelter since I can’t figure how to total that accurately. I also live in the overprice dump that is NYC.

Taxes wouldn’t piss me off so much if they would just stop taxing investments and gifts. Especially investments the stock market helps move the economy it’s already a risk putting money in it to a degree. Any investment really is for that manner.

Gifts/prizes just doesn’t make sense how they can tax something that was awarded to you but thats just me I guess. I remember reading Oprah gave some people free cars and they all had to return the cars because they couldn’t afford the tax on them.[/quote]

As I understand it, gifts are not subject to tax as long as the donor receives nothing in exchange from the recipient.

The worst tax as I see it is taxing money that is bequeathed posthumously. It has already been taxed, damn it!

Hmmm. I think I see a pattern here.

Developed nations take more than half of what their citizens produce regarding income.

Are we not then a socialist state rather than a captialist one with such control over the distribution of profit?

Argghh! We’ve become what we hate without even realising it!

[quote]ovalpline wrote:
orion wrote:
The assumption that the “trickle down did not happen” is questionable.

Let me guess… republican? Kidding, kidding.

In all seriousness though, can you explain to me how it is questionable?

The boom of the Clinton years may very likely have been the result of Reagonomics.

While this is true, the truth lies in that Bill was negating a negative. Let me clarify, his increases of taxes on the wealthiest brackets and tax deductions on small businesses was in direct opposition to Reagan’s policies. As such, the boom of which you speak was the result of a reversal of Reagan’s policies.

Again, I would love to hear any commentary on why this might not be true.

If you want to worry about redistribution from the poor to the rich, worry about inflation.

This confuses the point. Inflation is not a cause, it is an effect. Inflation is the result of rising relative prices and a corresponding decrease in purchasing power, right? Well, in economics this is called the Income Effect.

Moreover, policies that grant large corporations selectively advantageous tax cuts creates barriers to entry in the market. This creates a monopoly. And what do we know about monopolies? They’re price SETTERS. This also contributes to a rise in relative prices and a corresponding decrease in purchasing power. Again, inflation is the RESULT, not the CAUSE.

Then, you are mixing tax-cuts, outsourcing, public debt and globalization which means that all you have is an opinion, as in gut feeling. The fact that you have “strong feelings” about this does not change this.

Since it wasn’t clear, allow me to put “strong feelings” in context. In the context of which I wrote, “strong feelings” meant “strong inference” and this “strong inference” stems from tracing money and policy trails. Of course I cannot PROVE it! But if we look at simple principles of economics and political theory, the pieces “unstrugglingly” (yes, I know this is not a word lol) fit.

That said, I would love to hear your thoughts on the matter.[/quote]

A. You assume that economic measures like raisng or lowering taxes take effect asap- That is unrealistic.

I assume that deregulations and tax decreases take some time to work, f.E. because there must be enough accumulated savings to make riskier investments.

So, Reagans politics consequences became apparent during Clinton´s term. Clinton reaped what Reagan sow.

B. Inflation is the result of the government inflating the supply of paper money. That is why prices rise, not the other way around. Were the money supply held constant prices would slowly drop, which would be a mild deflation.

While it is true that some things still might raise the price of one particular good (f.e the destruction of refineries in New Orleans) overall inflation is not caused by this because other prices correspondingly drop.

C. True, most monopolies or oligopolies are protected by the government, otherwise they would not exist. That however does not lead to an inflation IF the money supply is held constant.

The FED, another government monopoly makes sure that it doesn´t.

Anyway, protection rackets, big government in cahoots with big business is not really republican and is as despisable as big government in cahoots with big union, like teacher unions.

That such companies are plundering consumers is undoubtedly true, but I think it is obvious that the problem is government intervention and can hardly be more government intervention.