4 votes

Tax Day ask DP: who has tried to calculate their total annual tax burden?

Its complicated (not a lump sum) for a reason...

What about the tax burden for the average middle class american?

I have a friend who complained today about their income tax. I was trying to convince them that the income tax constitutes a portion of their total annual tax burden. I found a thread with a list of taxes. Help me roughly quantify:

Right now I have 6-8% sales tax on just about every purchase. Ss and medicare + employers contribution 8%. 2% per year on all valuable property. Gas tax ~10% in my state. Inflation tax ?%

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Taxes can be calculated but who really wants the numbers?

Overall tax burden for working people (an important circumstance) can be proven conceptually with the mathematical precision.

Let's model a simplified situation. Let's say, we have following inputs:
- my household makes $50K per year, gross, for an infinite number of years, for the sake of the argument. Amount resembles artificial average household income in USA.
- every year our household saves 4.3%, an average US savings rate, of revenue per year, or $2,600 per year, on average, for an infinite number of years.

The rest of 95.7% is spend to the economy, which includes government revenues of all kind paid (also called taxes), all of them: federal, stated, municipal, excise, SS, Medicaid, Medicare, Property and so on and so on.

Since we have intentionally picked numbers representing official statistics, then we can with a high degree of certainty state that 95.7% is the real effective tax rate imposed by various parts of the government.

There are many ways to improve this model.

For example, we can adjust the savings rate of 4.3% by average inflation, of, say 2% (which is a number on the lower side of the estimate). That leaves 2.3% effective tax rate.

We are working with the statistical average households. Let's continue: historically, in the past many families in the united states had land in the possession of their family. And, on average, people had more children. In modern days, the land is concentrated in much smaller number of the landowners and the relative wealth of the families gets distributed to ever decreasing number of offsprings which is a reflection of a long term effective tax rate of more than 100% towards some of the families.

The real taxation levels can actually very easily proven, however such theorist would become an "economist-non-grata" by all of the world governments worldwide. Sort of antagonist of Krugman. Such person would never get a tenure in university alive. Forget about funding for research about the government.

I know I am making leaps in a thought train, but according to governmental own statistics you can safely argue 98% tax rate on society.

Government has enough data to impose one simple flat deduction from salary on everyone, but they do not want to do that the same way restaurant owner is flashing you $9.99 steak, while in reality you will leave $50-$55 for a modest dinner for two (which includes tax, drinks, deserts, extra sides, coffee and tips).

Anyone is interested in writing and article?

Engage in Secure Exchange

No, that doesnt make any

No, that doesnt make any sense, because you forgot you need to buy food and such. If you were actually paying taxes that high, you wouldnt be spending money to actually live.

To climb the mountain, you must believe you can.

Change the paradigm. It is government statistic interpretation.

As, I have said, the model is grossly simplified. However using our own Government statistic data you can prove 98% tax rate.

Just think about it: if you are paying someone for food, there will be taxes and salaries involved, salary for a chief and money for the farmer. Chief's salaries will be taxed and any earnings will again will be spent to the rest of the economy. The Farmer's income will be taxed and will be spent fuel (further taxed), equipment (taxed), property taxes (yes, taxes) and other taxable salaries. That is a thinking on microeconomic scale.

Paradigm changes if you look at economy as a whole. On a Macroeconomic level, average savings ratio is a good approximate indicator of what people are saving. Because the rest of it, on average, is government redistribution ... statistically speaking.

Since the model is applied to average statistical family, we do not recognize. We should keep in mind that for every working family, will be a family which is not working (but getting money from the government via Social security, medicaid medicare, obamacare etc.) Please also keep in mind that, on the other side of the spectrum, you have very rich households that save much much more than 2%, because they employ various tax effective vehicles built for wealth preservation.

Please just do not discount the model if you do cannot think about economy as whole.

Engage in Secure Exchange

What you are basically saying

What you are basically saying is that everyone gets 2% of their income to spend on food etc. This is just not correct because of simple math. You might be trying to use a simplified model, but those numbers arnt anywhere in the ballpark. Had you said something like 60%, now that I might believe.
Yes, most things in a supply chain are taxed, but by you saying that 98% goes to taxes means the government is getting something like 98% of all money and we know that isnt true. Just look at GDP compared to government tax income.

To climb the mountain, you must believe you can.

I pay about $35K in direct taxes

including Federal, FICA, sales, property, etc.

Tu ne cede malis.

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I think the real major one is

I think the real major one is the invisible taxes built into the price of all the products you buy. Producers and all members of the supply chain have to charge higher prices because of their own burdens of taxes, licensing and regulation, so effectively just about every type of business tax everywhere is paid for by consumers and passed up the supply chain for each member to pay to the IRS and other govt agencies.

I don't know how to even guess the cumulative taxes built into the prices of products I buy, but I've heard it's like 40% for cars, and I wouldn't be surprised if that level is pretty common across the board, including food, gas ("gas tax" is just the overt tax), and others.

And you have to consider that even once the miners, producers, distributors and retailers all pay their taxes, there really are more taxes. Their employees have to pay taxes again on their income, and again when they buy anything, etc, etc. It's a recursive taxing process that hides the vast majority of our real tax burdens. I can barely believe the system hasn't completely sucked us dry in a matter of a few years. But it's trying to. Maybe it has. You start adding it up and the percent of primary, secondary, etc, taxes you're really paying for starts rising close to 100% of your income really quickly, and 100% of your saved wealth as well. It's becoming an unusual person nowadays who manages to produce so much wealth that they stay ahead of the taxing process without going into negative net worth.

If we were allowed to keep what we earn, the amount of wealth we would create in a short time would be mind blowing. The known history of the world has never had potential like this, with the internet and technology that can be leveraged in every industry. The elite are keeping the economy cold purposely to prevent that from happening.

excellent point

This topic alone is enough for an economics thesis (if not already)

I say it allll the time....

Read...

Income Tax: Shattering the Myths by David Champion

www.incometaxtruth.com

ONLY BOOK that I know of that details the ENTIRE PROPER application of the Income tax and who it actually applies to. (Hint: It's not the average guy)

Great great read and excellent reference guide as well.

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Faith in God will prevail all things!

scawarren's picture

No because I'm trying to stay

No because I'm trying to stay calm :/

It is easier to fool people than to convince them that they have been fooled. – Mark Twain

Im a net tax recipiant

Although I haven't figured for the unseen cost of living in this fascist state.

Séamusín

are you a Rothschild?

This is "unpossibleh"... do you purchase food? do you have utilities? You pay for some form of internet access to post here, right?

At their inceptions, the #Liberty, #OccupyWallStreet and #TeaParty movements all had the same basic goal... What happened?

how do yoy manage that?

?

You left off the margarine tax

http://mentalfloss.com/article/25638/surprisingly-interestin...

"When the power of love overcomes the love of power, the world will know Peace." - Jimi Hendrix