Your real tax rate: 40%

[TTgirl]

[SIZE="4"]Your real tax rate: 40%[/SIZE]

[SIZE="1"]Income taxes, sales taxes, property taxes, Social Security and Medicare taxes, 'sin' taxes and the rest add up to a virtual flat tax nationwide.

By Scott Burns[/SIZE]

We have a national flat tax, albeit one with bumps and potholes.

The fact that the political parties won't acknowledge this is one reason they are doing a disservice to the voting public.

Instead, both parties have a vested interest in the theatrical possibilities created by the idea of graduated tax rates. Notice that I said "the idea of" graduated tax rates. That should not be confused with reality.

Democrats argue that taxes on the rich should be raised because others need the money. This wins votes from the legions of voters who aren't rich.

Republicans argue, with great piety, that high taxes crush incentives and should be reduced, and that only then will the American way see a new dawn.

Politicians talk this way because they generally talk about only one tax: the federal income tax, which offers graduated rates from 10% to 35%.

Politicians rarely talk about what real people experience: the true maze of taxes and government benefits. If someone put them all together, we could see what our actual tax burden was. We could see who pays at the highest or lowest rates. Discussions of tax policy wouldn't be a waste of time.

Well, two researchers did it.

In a study for the National Bureau of Economic Research, Boston University economists Laurence J. Kotlikoff and David Rapson have found that our all-in marginal tax rate is 40%, give or take a bit. Yes, you read that right: 40%.

Most workers will pay about that much on each dollar of income when all taxes -- federal and state income taxes, sales taxes, taxes for benefit programs, etc. -- are considered.

As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. There are some exceptions: A 30-year-old couple earning $50,000 a year, for instance, pays 24.4%, and a 60-year-old couple making $150,000 a year faces a tax rate of 47.7%.

The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.

That's not a big range, particularly when you notice that it covers an income rise of 2,500%.

So I have a modest proposal: Ask your senators or representative if they have a clue about this. If they don’t, regardless of party, they shouldn't be in office. Vote accordingly.

http://articles.moneycentral.msn.com...TaxRate40.aspx

[replicant_argent]

I personally don't believe the government needs that high a tax rate. I am all for a flat tax, but I believe all pork should be removed from our bloated bureaucracy first.

[TTgirl]

Amazing how all those little things add up, isn't it? That's what got me about the article.

And I think sending 40% of your income to the government (in any form) is way too much. How much is enough? Dunno, but I'd sure like to cut that contribution in half and see if our governmental institutions can find ways to stretch those dollars - just like we have to.

[Glacierman]

Does that study include such hidden taxes as fees charged by government: license fees, user fees, permit fees, registration fees, etc.? These are all taxes, regardless of the label. If it doesn't, then it isn't a complete study, and the final results would, no doubt, push it over 50%, on average.

[omowasu]

Originally Posted by Glacierman

Does that study include such hidden taxes as fees charged by government: license fees, user fees, permit fees, registration fees, etc.? These are all taxes, regardless of the label. If it doesn't, then it isn't a complete study, and the final results would, no doubt, push it over 50%, on average.

I had done a brief study on this for a university-level report several years ago, and the actual numbers ran near 50% if property taxes, booze, tobacco, gasoline, etc are all added in.

That is a lot of money. The rich truly do pay their share of taxes as well.

[Rploaded]

I make a dollar and keep 47 cents, Im done with it adios USA.

[Da Klugs]

Originally Posted by TTgirl

Amazing how all those little things add up, isn't it? That's what got me about the article.

And I think sending 40% of your income to the government (in any form) is way too much. How much is enough? Dunno, but I'd sure like to cut that contribution in half and see if our governmental institutions can find ways to stretch those dollars - just like we have to.

Income tax wise, remember they are talking about the "marginal tax rate" not your average actual tax paid. (Marginal being what is the tax on your next dollar earned). Most folks pay much less than 40% average overall income tax paid. Pull out your last paystub and do some quick math.

The working well off pay much more as they phase out your itemized deductions as your taxable income grows. Plus they have this wonderful thing called the Alternative Minimum Tax which is hitting more and more folks that it was not intended to. (AMT) Add in property taxes in my community they end up being 3% of the market value of your home.

I always wanted to do a study on the true cost of taxes. Many are built into things we buy. Gasoline, electricity, natural gas, telecommunications etc. When you add all this up you might get and interesting ormore likely depressing number.

[TTgirl]

Originally Posted by Da Klugs

I always wanted to do a study on the true cost of taxes. Many are built into things we buy. Gasoline, electricity, natural gas, telecommunications etc. When you add all this up you might get and interesting ormore likely depressing number.

I'd love to see what the actual numbers are after all those things are factored in. And don't forget to take into account what Glacierman mentioned - the fees, cost of permits, licenses, etc. on top of everything else. So you're probably right; the amount of income we actually do hand over to our good friends in the government is most likely more depressing than we think.

Just a side note... I walked into my county office a few weeks back to have my Notary paperwork finalized, and I noticed a sign on the front desk for county dog park fees. First dog $25, subsequent dogs $10. With a "Please note: NJ's new tax on services applies to these fees."

[Little Giant]

[SIZE="3"]Take a good close look at the Constitution of the U.S. and see what the federal govt. is authorized to spend money on. It doesn't include such things a Welfare, Health Care, Education, regulate business, etc., etc. If the Federal Govt. only provided those services that are authorized by the Constitution they could get by on a h@@l of a lot less. [/SIZE]

[par]

It's all in the details though, i wonder what the effective tax rate really looks like. Marginal taxes is interesting, but only marginally(!).

I think you may find forbes matrixed "misery index" enjoyable:
http://members.forbes.com/global/200...074chart1.html

note that in singapore (where i am now located) the top personal income tax is 17%. There is no capital gains tax here. But still, it's really, really expensive here...

[TTgirl]

Originally Posted by par

I think you may find forbes matrixed "misery index" enjoyable:
http://members.forbes.com/global/200...074chart1.html

Misery index - LOL! But it's interesting stuff. Thanks for the link!