What percentage of TOTAL tax do we pay in the US (both before we get our money, and as we spend it)?

Question

As we all know, we are taxed before we even see our money. Federal (IRS), Social Security, Medicare, State, Local and then once we get what's left - we are taxed again (sales tax, gasoline tax, tax on automobiles, property tax)

I was just wondering if anyone figured out how much of their money they pay out in taxes... it would be interesting to know since about 30% of most peoples income is taken out in taxes before they see it....

Answer 1

Wow, a really tough question, and no simple answer. Because it varies depending on income tax bracket, where the person lives, and there purchasing habits.
It is cheaper to live in some states then others. A few states like Texas still do not have a state income tax.
It is cheaper to live in a rural area than in a city--no city taxes.
Sales tax varies from state to state and often from city to city.
I had to modify your question a little to get some understanding of what is workable answer.
Consider the following cheapest rough estimate.
Assuming no state and local income taxes. And rounding to hole cents. Assuming a federal income tax of 15%.
You pay SS and medicare taxes on the dollar earned not the $0.85 left. So you receive $ 0.77. But you need more to purchase a dollar item. You need to earn $1.25.
You need not just $0.33 more, because of the sales tax. Assume you are paying $.10 sales tax. You need to earn about $1.33 to purchase it.
And if you had a state income tax of 3% you will need about $1.35 from your income to purchase a dollar item.
Or closer to your question, your tax to purchase a dollar item would be close to 35% with the above assumptions.(If my math is correct),
If you are in a higher tax bracket or your state has higher taxes you could easy see 55%.
Consider the fact all the other tax, except for property tax is hidden and appears at the time of purchase. In way what I am saying, except for the pass on tax, it does not affect how much you have to earn to purchase the item/service. You may be able to buy more without the hidden tax, or save more, but it does not affect your purchasing "dollar".
Oh, yes I need to add there are exceptions, before I receive a bunch of emails about them. Hotels, phone service, and etc.
I don't live in a cave and even I have been in hotels that the price I paid was actually twice the advertised base rate, because of entertainment tax, occupancy tax, sales tax, and etc.

Answer 2

That varies all over the place. Income taxes are based upon taxable income. Not all income is taxed, at the very least you get the standard deduction and personal exemption in most cases so for 2007 the first $8,750 isn't taxed at all except for SS and Medicare. State taxes follow a similar pattern; not all dollars earned are taxed. At the lower end of the income scale little if any income tax is paid and many actually get money at tax time as opposed to pay out.

On the other end, sales taxes vary widely from one jurisdiction to the next as does what is taxable. The more you spend the more you'll pay but at the lower end of the income scale you'll pay a much larger portion of your total income in sales taxes than someone with a high income since high-income folks tend to accumulate wealth as opposed to spend all of their income.

Other items are loosely related to total wealth as well. Property taxes are based upon value and the wealthy tend to buy more expenseive properties than the poor. Even the poor who don't pay property taxes directly certainly do pay them indirectly through the rent that they pay to their landlord unless they live in public housing. In that case, who to you assess the property taxes against in order to work out an "average" tax levy.

The point here is that it's really difficult, if not impossible, to say that Americans pay 'X' percent in total taxes. Any average percentage would be essentially meaningless. Even trying to tie it to income is almost impossible since various sources of income attract different tax rates.

Most of Warren Buffett's income is from capital gains which are subject to neither Social Security or Medicare taxes at all and are taxed at a much lower rate than earned income is resulting in an overtall tax rate closer to what someone earning closer to $125k would pay on earned income. He probably doesn't spend a lot for personal purchases so probably pays an extremely small percentage of his total income in sales and property taxes.

Last year I made a bit over $125k myself, due to some significant long term capital gains. When I finished up my taxes I figured out my total tax bite for the year. I had to estimate what sales taxes might have been but came up with a total tax levy of just under 23% of my gross income. That was everthing -- Fed and State income taxes, property taxes, sales taxes, gasoline taxes, and the odd taxes I was able to track down on utility and phone bills. I doubt that most taxpers pay even that much in the long run.

Americans like to compain that they're heavily taxed but compared to most major industrialized nations we are one of the least taxed nations among our peers. Gasoline taxes in Europe are around $4 per gallon resulting in pump prices of around $7 a gallon. And sales taxes on that side of the pond averge close to 20%. Income taxes are quite a bit higher as well.

Answer 3

Sit down for this one, Son! More than 55% our income in eventually absorbed by taxation of one form or another-remember, they go by other names......tarrifs, fees, surcharges, etc. , oh and I love the local school boards name for their extra school district they rammed down our throats while we weren't looking........The Sinking Fund!!!!!!!!