Just in case you haven’t heard (since NBC, NY Times, etc. have been ignoring the story or playing it down) …
According to the WSJ: Today, American taxpayers in more than 300 locations in all 50 states will hold rallies — dubbed “tea parties” — to protest higher taxes and out-of-control government spending. Below is a map of planned rallies and a link to an interactive map with specific locations and times.
Why you should care
If you’re reading this, your tax burden is considerable — probably way more than you think. Consider a reasonably typical “professional” couple earning about $125,000 (maybe with both husband and wife working). Subtracting $10,900 for the standard deduction and $13,600 in personal exemptions (assume a husband, wife, and 2 kids @ $3,400 each) leaves $100,000 in taxable earnings. The Federal income taxes would be about about $15,000 … not bad, if that’s all there were. But they’re not.
Add to that total payroll taxes, which are payroll deducted at a rate of 7.65% based on gross earnings (called FICA earnings) not taxable income … that’s another $9,500. The couple is up to 24.5%.
Then, there are state income taxes. On average, state income taxes run about 5.5% of taxable income. That gets the couple up to 30%. Note: for specific state rates, see
http://www.taxfoundation.org/taxdata/show/228.html
Then there are sales taxes. The couple is left with $70,000 after income taxes. Assume that they spend about 75% of it on taxable goods and services at an average state sales tax rate of a little more than 5%. That’s another $3,000. They’re up to 1/3 of their taxable income going to taxes.
Finally, let’s assume that they own a modest house and pay $5,000 in local property taxes. Now, they’re approaching 40% … and that doesn’t include gas taxes, cell phone taxes, etc. … which gets the number into the 40s for sure, and maybe up to 1/2 of taxable income … for a couple that probably doesn’t consider themselves to be rich.
Think about it : half of what you make going to support about $4 trillion in annual government spending … much of it wasted. For details, see the just released “Pig Book” — the annual summary of government spending published by the Citizens Against Government Waste
http://www.cagw.org/site/DocServer/CAGW-Pig_Book_08.pdf?docID=3001
That’s why there are tea parties today …
Interactive map:
http://www.freedomworks.org/groups/19186
Related article:
http://online.wsj.com/article/SB123975867505519363.html#mod=djemEditorialPage
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The Homa Files 
April 15, 2009 at 5:46 pm |
I completely agree with the spirit of this article (though I find public tea parties totally passé). But after $30K in income taxes, I’d have expected the remaining amount to be $95K, not $70K. So I looked into this a bit, and it looks like the 50% of income-as-tax figure may be a bit inflated – by my numbers, the government is only free to fritter away about a third of this family’s income. Not that this gives me any great comfort, but at least it’s more reasonable.
Incidentally, 33% is about the same amount that a couple making half as much – $62.5K, which incidentally is the median family income in the US, based on the Census Bureau – would pay, so the vast majority of wage earners are sending 33 cents of every dollar they make to finance crapola. Which is atrocious… but 50%, it is not. (http://www.census.gov/prod/2008pubs/p60-235.pdf).
[Read on if you’re interested in the analysis I did to arrive at this.]
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First, I found out that the couple would fall into the 25% tax bracket (married filing jointly). The tax calculation is tiered – so you pay 10% on your first $16K, 15% on your income from $16K to $65K, 25% on your income from $65K to $131K, etc. (Also, the exemption in 2008 is $3500 per family member, resulting in a $14K deduction from Total Gross Income). So their Federal taxes would be just over $20K.
The Payroll tax breaks out into Medicare (1.45% of Total Gross Income) and Social Security (6.2% of Total Gross Income, up to $102K in 2008). So the couple’s liability here would be closer to $8K.
I wanted to see if the 75% consumer spending figure held up, so I checked. The U.S. government put Personal Consumption Expenditures as a percentage of Disposable Personal Income in 2008 much higher – at 95% (see below for link to Bureau of Economic Analysis stats on Personal Income and Its Disposition). So total sales tax in this example is just over $5K, using a state population-weighted national average sales tax of 5.5% applied to consumption of $92K. And as Prof. Homa noted, that doesn’t consider the higher taxes most states impose on alcohol, gasoline, etc. – all included in the government’s consumption figure. So let’s call it $6K for consumption-related tax.
Weighted for state populations, the average property tax paid nationwide in 2006 was about $2K.
Add in the $5.5K for State Income Tax – which I take on faith :) – and the total taxes paid by this family are $41.5K – which is roughly 33% of their Total Gross Income.
Running the numbers for the same family with a Total Gross Income of $62.5K results in a total tax burden of about $20.5K – again, roughly 33% of Total Gross Income.
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Link to link to Bureau of Economic Analysis stats on Personal Income and Its Disposition:
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=58&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=2006&LastYear=2008&3Place=N&Update=Update&JavaBox=no#Mid
February 20, 2010 at 12:10 pm |
The Payroll tax breaks out into Medicare (1.45% of Total Gross Income) and Social Security (6.2% of Total Gross Income, up to $102K in 2009), but. Yes there is a but in this. But; if you are self employed you must pay additional 6.2% along with another 1.45%. and you get to deduct this amount from gross… and yes there is taxes being paid on taxes. Therefore this amount is minimal. Speaking for property tax in most counties in Illinois, and based on a $150,000 home the taxes would be on average $4,250. Lets take property tax further, If you owned a small commercial building say valued at $75000 located in downtown Moline Illinois, which has a speical tax. also has a tiff tax, a speical district tax you would have to cough-up another $2,500. Don’t think about eating out, should you add 9.5% for taxes. Ok, what about a 5% added tax on none other than utilities, oh and a tax on rain water.. yes here in Moline, Illinois peole are taxed for water that runs off their roofs.
Ok, seems as everyone forgets about fees other than taxes that government intitution charge such as, license plate fee, auto registration, driver license. There are permits and license fees for nearly everything maginable, from dogs to donuts. If you buy a telephone in Moline Illinois ther is an additional 10% communications tax added to the sale, oh and sales tax too of 7.25%. With taxes and government fees it is closer to 53.3 % of you income going to support government spending.
February 22, 2010 at 5:56 pm |
It’s our tax structure, and the 171,000 pages of tax code at fault. We need to scrap the tax system we have, and replace it with a national sales tax.. no more or no less…. We need a national sales tax. I say that because we the people will have the power to decide what the government spends, and on what. We form the democracy for we the people and the Republic will head our call. We the peple will control government spending by our buying behavior and power. They spend too much, we simply stop spending.. Fear is their main objective in collection of this corrupted tax structure… We must fear government, and goverment has no fear of we the people… Sounds like other forms of governments, does it not?
February 26, 2010 at 11:04 am |
Government spending and stimulus money is out of control and is putting a massive debt burden on each of us. The debt burden per person is currently $40,000! There is a new grassroots movement at http://apennyforchange.org that is giving all Americans a voice to show that we are tired of wasteful government spending. Check it out!