How much tax ARE you paying?

Back before I paid much attention to finances and before I started paying any sizable taxes myself I didn’t think much about the US tax rate and how the government spent MY money. But as of late both taxes and government spending have REALLY begun to irk me.

Most people don’t realize just how much tax they are paying. I’ve got a simple run down from when an average American, Joe, is paid an income of $100 until he spends all of that income buying an imaginary product from a US corporation. Hopefully this should remind you of JUST HOW MUCH YOU ARE TAXED AND WHY YOU SHOULD CARE ABOUT GOVERNMENT SPENDING.

Joe makes $100 in income from the company he is working for.
Of this $100, Joe pays $25 to the IRS (25%), $10.40 to Social Security (5.4% with matching from his employer), and $2.90 to Medicare (1.45% with matching from his employer)

That leaves Joe with $61.70 left to spend.

So Joe makes a purchase for $61.70. $5.09 is paid as sales tax (8.25%) and the remaining $56.61 goes the US corporation.

So already, it has cost Joe $100 to buy $56.61 worth of goods.

BUT WAIT! It gets better

Of this $56.61 gross amount, the company profits 15% or $8.50. The remaining $48.11 is operating expenses.

Let’s say it’s 50:50 purchases and payroll on those operating expenses. The company pays property tax and purchase related taxes on the $24 purchase expenses to the tune of around $6.00. They pay payroll taxes on the remaining $24 to the tune of $9.21.

PLUS they’re taxed on those profits at 38%, or $3.23.

So the total tax paid in this scenario is a whopping $61.83!! The ACTUAL COST of the product Joe purchased was $38.18….

So due to taxes, Joe has to make $100 to purchase $38 worth of goods!!

The lesson is, you better pay attention to how the government is growing and spending your money! You’re paying more in taxes than you imagine!!