8 votes

Old Math

What exactly does the government take from our paychecks? It's an interesting question. Most people answering this will say "10%, 15%, 28% or whatever your tax rate is." When pressed for more detail, they will usually include SSN, Medicare and the rest but that muddies the answer so I thought it would be interesting to do the math. The OLD way.

I searched a few places to get some average figures for these numbers. YMMV, but they are close enough to make the point. I found the national average wage to be around $43k so divided by 26 pay periods, that's $1653 every two weeks. Take home pay averages $1,000 and tax totals left is $653. At many companies, people get non-cash benefits and their hidden taxes paid as well. The 'rough average' (this is hard to find info on) for non-cash benefits that I used is $300 bi-weekly. All of this is for a ONE-WORKER, average family.

Over the course of one year:
$26,000 was deposited into the bank.
$16,978 was paid to the government.
$ 7,800 was paid on behalf of the worker to the government.

The worker received 51.2% and the government received 48.8%.

The it got interesting. Seeing this large amount ($24,778) stolen each year, I asked the question, "What if that was invested?"

Using a popular $7 online trading site, I calculated the balance with an annual return of 9% (after paying fees). $25,969

Using the average return of Prosper.com on slightly higher risk (14%), I found this amount grows nicely. $28,247

Going back to the online trade and looking at very small stock (pink sheet stuff), I found some of them that vary +/- 30% once a week all year. This . I believe this is closer to the return received by lending friends and neighbors money so I tried an automatic trade to capture this trend for a year. $29,033

While this may not be too realistic for long term investing, it illustrates something interesting.

I carried that last one out just one decade with no raises. It's the same as a LIFETIME OF WAGES for this average worker. $1,584,849

In short, without the government stealing our money and redirecting it to the big banks, we could retire ON AN AVERAGE WAGE in ten years with no other changes. I have to believe there would be so many other changes to further enhance this because savings multiply very well. We all know that the poor waste most of their money just trying to keep up, that being unprepared costs more and the buying quality kills planned obsolescence.

So my answer to the original question is that the government takes away all our opportunity to prosper.

Bonus question? What would the people allow the government to look like if they all KNEW they could really do this?



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Cyril's picture

BUMP. Very good post.

BUMP. Very good post.

Don't even try to share this with Keynesians.

You will waste your saliva, time, and thus, money:

they are not interested in Old Math.

They prefer B.S. Math**.

With money multipliers, the Cobb-Douglas function, etc.

Always impressive for the masses who think they EVER had "money" on their credit cards... Or even, on their today's checking account, for that matter. LOLOLOL, I know!

Thank you for sharing.

(** where "B.S." doesn't stand for "Bachelor of Science")

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

No.7's picture

bump. EVERYONE READ THIS

Holy cow!

The individual who refuses to defend his rights when called by his Government, deserves to be a slave, and must be punished as an enemy of his country and friend to her foe. - Andrew Jackson

ecorob's picture

Excellent synopsis...

You've done some fine work here, tamckissick!

its 'cos I owe ya, my young friend...
Rockin' the FREE world in Tennessee since 1957!
9/11 Truth.

It was meant as a discussion starter

to eventually find the group's consensus on what wages, prices and government costs SHOULD be today if we hadn't been co-opted by central banking a century ago.

I'm trying to find the numbers that people would respond to when telling them how rich they could be without the FRB.