Ten Things to Stop Doing in 2006

[Gone4Good]

You need to include taxes your employers pays on your behalf... another 7.65%, as this money would go to you if your employer didn't have to pay the feds or this money would be returned in the form of lower prices overall.  Also be sure to include property taxes, gas taxes, landline and cellphone telephone taxes, electricity taxes, alcohol taxes, toll road expenses, vehicle registration taxes, homeowners insurance surcharges and taxes, water and sewer taxes, cable TV taxes and the like.  Health insurance premiums really should be included as well if you are comparing the US tax burden to another industralized country.  You should also consider the expenses you incur in the production of income that are not deductible.  Anyone with a job has them.  It's an expense that wouldn't be there if you weren't working (ie - a second car, lunches out, dry cleaning, extra haircuts, etc)... making it essentially function as a de facto tax.  The rate is 50-60% for most.

Dude, most of this stuff is trivial in the US . . . certainly not enough to drive the 18% rate I calculated to 60%.  Do you really think the average family pays $20K on miscellaneous charges like vehicle registration taxes?  Do you really think any of this stuff is lower overseas with an 18%+ VAT and gasoline taxes that push the cost of petrol to something like $5 per liter?  

And as far as the 50% of FICA and health insurance that companies pay, you can just as easily look at that as income.

Do people overseas not have expenses incurred in the production of income?  

I know you are trying to make your point but you are really stretching with a lot of this stuff.  

 

[Mr._johngalt]

  No one has a right to benefit from the fruits of one's labor more than the laborer himself. 

Jeez, just when you had me supporting some of your arguments, you came up with this. Have you heard of capitalism? This statement is just flat out
false. Was this a CHP??

JG

JG

 

[REWahoo]

REWahoo, I sure hope not. They are both a little young to tell right now, but they show a lot of promise. I just want to make sure that every opportunity is afforded to them that is rightfully theirs. Labor and working seem to be taxed more and more as the years go by. It's probably going to get worse with the baby boomers entering retirement. No one has a right to benefit from the fruits of one's labor more than the laborer himself....

For a second there I was sure your next sentence was going to contain the phrase "dictatorship of the proletariat". My apologies for making such an inappropriate assumption.

BTW, some of us old leeches boomers, even those of us with outdated respect for concepts like honor and integrity, have children and grandchildren and share you concern for the tax burden on future generations.

 

[Mr._johngalt]

Thanks Ha.  I don't mind the jabs and punches when I post something like this.  Saying something about the USA that is different than what is reported on the rah-rah! nightly news always generates a stir.  It's great though when someone wakes up and some of this stuff I ramble on about starts making some sense to them.

I'm writing a book about government, capitalism and how these two powerful forces impact each and every American and how these forces actually help those who can make it to FIRE.  I got motivated to write it when they arrested my Libertarian presidential candidate, on the ballot in all 50 states, for showing up at the Presidential debates (not to create a stir, but just to debate with Bush and Kerry).  He tried for months to be included and was repeatedly rejected. 

I have 30 pages so far.   Maybe that will bring me a couple years closer to FIRE if I can find a publisher with the guts to print it.

I wish you luck with the book idea, truly. I don't detect any particularly
impressive writing skills, but many many people get published without
any, so it could happen.

JG

 

[preben]

I am a European living in Asia and taxes for sure are on the rise in EU. Asia will follow. Our governemnts (Incl. the US) will continually increase taxes until revolution/riots overturn the governments and we start all over again. History has shown us multiple times. Typically it has been due to the governemts spending too much on war-fare but I guess no governemt these says would be that silly... :

The "curse " of democracy is that the politicians need VOTES - and will promise ANYTHING and spend ANYTHING to get those. New programmes/support/pension schemes or whatever (blind flat-footed puppy dog support center anyone? ) are created, and old ones rarely closed (bad for those VOTES) until the governemts spend so much that the worker-bees says STOP (while carrying tourches and looking very angry).

It COULD be different this time... Cheers!

 

[justin]

Perhaps when we get a week off from sending money to Washington, such a fantasy would be possible.

One possible solution would be to completely withdraw from society. Be self-sufficient, survive from the sweat of your own brow. Then, you'll start to realize the benefits of living in a civilized country with a government.

 

[SteveR]

One possible solution would be to completely withdraw from society.  Be self-sufficient, survive from the sweat of your own brow.  Then, you'll start to realize the benefits of living in a civilized country with a government. 

Sort of like the Unibomber lifestyle? We all know how that ended up.

 

[justin]

Sort of like the Unibomber lifestyle? We all know how that ended up.

That's why I personally prefer living in a civilized country with a government with other civilized people willing to share in burden of civilized life.

 

[Gone4Good]

It absolutely is.  If you don't want to take a detailed look at your personal situation, there are numerous examples on the internet.  You can start with taxfoundation.org.

O.K. I'll do that. And according to taxfoundation.org:

Tax Freedom Day is calculated by dividing the official government tally of all taxes collected in each year by the official government tally of all income earned in each year. Governments — federal, state and local — took 30.3% of income in 1980; 30.5% in 1990; 33.6% in 2000; and so on.

Far cry from 60%.

 

[Gone4Good]

And almost double your estimate.  They don't take into account many other taxes that are built in that I listed earlier (telephone taxes, utility taxes, toll roads, employer portion of FICA, etc.).  The Tax Foundation is relatively conservative in their estimates choosing only 'hard' numbers in their calculation.

Wow. The 18.6% calculation was an esitmate for what one four person family making $50,000 and living in NY would pay. Did you not also see the calculation for the guy making $200,000 with a tax burden around 40%? Considering how the wealthy pay most of the taxes in the US it is not surprising that the average tax burden for all tax payers leans toward the rate paid by higher income individuals. But I still haven't seen any evidence that supports your claim of 60% - even using the references you provide.

Importantly, the average tax burden calculation of ~30% is not reflective of what most people pay because of our progressive tax system - most people will pay less, and in some cases far less, then the average.

 

[Gone4Good]

The middle class is stuck with the 50-60% that I speak of.

I'm done with this discussion until you provide some evidence that supports this claim. Just because you keep saying it doesn't make it so.

 

[Gone4Good]

See reply number 73 from yesterday... I don't know what else to say.  At least you're not throwing out that 18% number anymore. 

Show me the calculation or stop the nonsense.

The 18% reflects an individual situation and is completely appropriate and accurate.  If you want to add taxes to it, go ahead and show me how you get to 60% of his income.  I'll start you off:

Telephone taxes                              106.08  ($8.84 from the latest bill)
Vehichle registration                          81.00
Toll roads                                          100.00  (2005 e-z pass bill)*
Cable / Internet fees                          13.56  ($1.13 from the latest bill)



*Tolls on roads are no more a tax than paying the phone company to use its telephone lines.

 

[Gone4Good]

$100 for toll roads?  That's less than $.20 each way.  Where do you live?  In Florida it's $3.00 each way to travel 40 miles.  Get some real numbers.   Not to mention it's a road you already paid for (or should have paid for at 50-60%).

You still haven't supported your assertion - because you can't.

 

[justin]

Dave, if you don't like paying $3 for the privilege of using a toll road, then don't use it. I'm sure you can get to your destination some other way. Obviously, you save enough time to justify your $3 expenditure (your time is worth more than a burger flipper's time). It is a voluntary user fee, you choose to pay it because it saves you time/money.

Are museum admission fees a "tax" (I'd call them a user fee), according to you?

 

[Gone4Good]

Dave,
The first link goes to a site titled “The Department of Homeland Stupidity” . . . not exactly a place I would expect to find an unbiased analysis. Even considering that, the article title says “40% of your money goes to taxes”, not 60%. Why you keep sending me links that don’t support your position is a mystery. The article is also similar to your posts in that it does not provide any supporting evidence, just an assertion unsupported by fact. Just because you, or “The Department of Homeland Stupidity” says it, doesn’t make it so.

The second article includes a chart titled “Employees’ social security contributions and personal income tax less transfer payments % of gross wage” which shows the US in the middle (not the bottom 5th as indicated by one of your previous posts) with what looks to be an 18%-27% tax burden. Again, why you keep sending me links that don’t support your position is a mystery. A second chart does claim “all-in” tax rates in the US near 50%, but the reference is to top marginal rates, not tax burden (I assume you understand the difference? I also assume you understand that people in the 35% federal tax bracket don’t pay 35% on all of their income, right?). I don’t disagree that top marginal rates can approach 50%. I live in NJ where the top marginal state tax rate is 9%, combined with a top federal rate of 35% gets you to 44%. But that doesn’t mean people in the top tax brackets pay 44% of their income in Federal and State taxes. And even if they did, it doesn’t support your assertion that “most people” pay 50-60% of their income in taxes because “most people” aren’t even close to paying the top marginal rate.

The third article was too long for me to read at the moment but the quote: Compare that with a schoolteacher with taxable income over $28,400, who pays a payroll tax rate of 15.3% (directly and indirectly) plus a marginal income tax rate of 25% for a total marginal rate of over 40%! This again talks about “marginal tax rates” – you do understand the difference, right? But even at that, the article is wrong!! Someone with taxable income of $28,400 would not be in the 25% tax bracket. Against the taxable income they would take a $5,000 standard deduction (at least) and a $3,200 personal exemption (at least) which pushes them into the 15% tax bracket. Considering the article is flat out wrong on this simple point, I’d be hard pressed to trust anything else written therein.

These articles are everywhere. Look them up yourself next time.

Yes these articles are everywhere but you've surprisingly been able to find none that actually support your claims (I've been through 4 of them now). Meanwhile the actual federal and state tax tables are there for everyone to see for themselves what the true tax burden is. For anyone who takes the time to look they will see that they do not pay anywhere close to 60% of their income in taxes. I'm still waiting evidence to the contrary. I expect to wait a very long time becuase it is hard to prove something that isn't true. I do give you credit, though, for your persistence on this lost cause.

Regards,
Brian

 

[justin]

I think Dave's arguments are approaching their quixotic or asymptotic limits.

Dave, I don't like paying a taxes a whole lot either. Do what you can to minimize taxes that makes sense in your life. Then suck it up, pay the rest of the taxes, and move on. Vote (with your ballot or feet) to reduce those taxes in the future.

 

[ladelfina]

I think Dave is on the right track, but has derailed..

There are indeed a lot more hidden taxes that some of you aren't taking into account. When I set up on my own and had to pay 15% FICA, on $25,000 income, for me that was a big hit. My prop. tax at the time was $2400, nowhere near $7k, but at the time almost 10% of my income. Then there's sales tax on everything you buy, which no one seems to have mentioned (I may be wrong). In CA, for example it's something like 12%!! So if I lived in CA, boom! right away I'm paying 37% without beginning to take into account regular federal & state income taxes and all the other smaller ones mentioned. OK, if I'm able to put some $ in the bank, I'm not paying the 12% on all my income, but at some point I will be spending it, I hope.

I remember my dad saving every single receipt (back when state sales tax was deductible). It added up to a lot!!! The issue of double taxation is not insignificant.

I absolutely disagree with Dave's lumping in all his drycleaning and job-related expenses together with taxes. That way lies insanity. It's certainly correct to do so from a "is-this-job-worth-it" standpoint. But those expenses are still personal choices, not gov't. extortion.

Road tolls are absolutely a form of tax. You can "choose" not to drive, you can "choose" not to buy gas, or buy a house, or buy clothes, and thus avoid a lot of taxes. But the tax is being collected in the aggregate. If the state weren't raking in those tolls, the sales tax or the property tax would go up; they would just shift the burden.

I'm not in the anti-tax camp. I'm with those who are talking about getting value for your tax dollar. I see gov't. spending going up and up with no end in sight, and so while, yes, I agree there are a lot of services I am happy to pay for, every blessed year there is more waste and corruption. I don't feel on the whole we're getting good value. No one's feet are being put to the fire on this.

 

[wildcat]

Dave -

You owe the ER forum $25.00 in user taxes. Kidding of course

 

[Gone4Good]

ladelfina,
I am the last person who wants to be arguing that taxes are low, but at the same time some of the statements made here as undisputed fact are clearly wrong.  I, too, agree with Dave that there are plenty of taxes and fees paid to the government that are not commonly included in tax calculations.  But it's easy to overstate their significance.  For example:

1) 15% FICA.  The full 15% amount is paid directly only by the self employed.  The self employed are generally eligible to take all kinds of "business" tax deductions that are not available to salaried folks, lowering their taxable income subject to both FICA and regular income taxes.  It is impossible to say how much of the "Self Employment Tax" is offset by these increased deductions but it is safe to say that some of it is for "most" people.  The "Self Employment Tax" is itself deductible from regular taxable income so it is incorrect to include the whole 15.3% as an increase in the tax burden.  In my specific case in 2004, my net "Self Employment Tax" amounted to just 6.5% of gross self employment income - not 15.3%

2) "The employers portion of FICA" I disagree with Dave that this should be included in a calculation of an individual's tax burden for the simple fact that the individual does not pay it.  You can make the theoretical argument (as I'm sure Dave will) that your wages would be higher if the employer did not have to pay it, but that is pure speculation.  You could use the same logic to include the corporate income tax in your calculation of individual tax burdens, and it would be equally wrong.  Furthermore, if you include the portion of the tax you don't pay as part of your tax burden you must also include it as part of your income.  Otherwise you could conceivably end up with a calculation that shows you paying more than 100% of your income in taxes (which I think is consistent with Dave's thoughts on the matter).

3) Sales taxes.  You can't just add a sales tax rate (say 12%) on to your other tax rates and claim "boom, already I'm paying 37%" because you don't pay 12% on every dollar you make, only on what you spend (and keep in mind that your "spendable" income is reduced by the other taxes we've been talking about and by whatever you save).  Also, many states exempt certain classes of products from the sales tax.  In NY food is not subject to the sales tax, which eliminates a significant portion of the tax for many lower income people.  According to this site California's sales tax is 7.25% and excludes food and prescription drugs. 

4) Toll roads.  I don't see why tolls on roads should be viewed any differently then any other fee paid for a service.  If the road you are driving on has been privatized (as they were thinking of doing in NJ) is it still a tax?  Similarly is postage for the US mail a tax whereas postage to UPS isn't?

 

[Cut-Throat]

You aren't alone... there have been many just like you throughout history (in today's terms they are often referred to as 'democrats' Wink ). I happen to vehemently disagree.

Republicans have NEVER cut the cost of government. You have been suckered dude!

 

[Gone4Good]

An impasse indeed.

All "non-deductible costs associated with working" are not taxes.  Perhaps we are using different definitions but a definition that includes "non-deductible costs associated with working" as taxes is very unconventional and not altogether accurate.

I do an accounting every month of all of my income and expenses and depending on what you lump into 'non-deductible costs associated with working' -most of which are taxes- the rates are 50-60%.  

If you do such an accounting then surely you can illustrate how one calculates a 50-60% tax burden for “most people”.  I've asked several times, and I'll ask again.  Please show me how you get to this number.

 

[ladelfina]

3) Sales taxes.  You can't just add a sales tax rate (say 12%) on to your other tax rates and claim "boom, already I'm paying 37%" because you don't pay 12% on every dollar you make, only on what you spend (and keep in mind that your "spendable" income is reduced by the other taxes..

Ok, yes, it is reductive because I'm "only" being taxed on what's left over after paying all the other taxes. That's cold comfort. You're partially right that I misstated the CA tax. But in LA county it's 8.25%, not 7.25%, and I paid 14% sales tax on my hotel. The 12% number I just pulled out of the air, remembering it from one of my sister's tax rants (she has lived in NYC and LA, two of the highest-tax places, where there is a city sales tax in addition to state sales taxes; I'll make sure to be more precise with my numbers in the future. ). In New York State there are three (3!) levels of local sales taxes that vary from county to county.

In looking at overall tax burden, we could also include the level of corporate taxes that are built into the cost of everything we touch/buy (if we are not the proverbial survivalist/Unabomber). We pay those, too, even if we don't see it.

Everyone who looks in their pocket and says, "gee, after the gov't. takes its cut, I'm still pretty well off, considering." is correct. But those who point out that we are taxed at a higher level than we are consciously aware of is also correct, IMO. Even if it isn't 60%, no way is it 18% either.

The words 'Republican' and 'conservative' are mutally exclusive these days. I thought this budget analysis at Reason was interesting. Bush has not vetoed a single spending bill, ever. "Conservative" voters have been fooled, methinks.

 

[HFWR]

The Republican party is more about religious conservatism than fiscal conservatism...

 

[HFWR]

And another thing...

On the continuum between anarchy and socialism, there must be a sweet spot that provides the freedom and the economic growth potential inherent to capitalism, while still providing a social safety net, and, hopefully, a limited amount of social "engineering". Like a pendulum run amok, we seem to oscillate wildly between the extremes, but never find that sweet spot...

IMHO, of course!!

 

[REWahoo]

And another thing...

On the continuum between anarchy and socialism, there must be a sweet spot that provides the freedom and the economic growth potential inherent to capitalism, while still providing a social safety net, and, hopefully, a limited amount of social "engineering". Like a pendulum run amok, we seem to oscillate wildly between the extremes, but never find that sweet spot...

I couldn't have said it better myself.

http://early-retirement.org/forums/index.php?topic=3557.msg60486#msg60486
http://early-retirement.org/forums/index.php?topic=4082.msg69569#msg69569
http://early-retirement.org/forums/index.php?topic=3832.msg67652#msg67652