I would like to share with you the eye opening fact of how much we really pay to the government in taxes? Obviously you know that we are taxed on average about 25% of any earned income give or take a few percentage points. But did you know that then that net income is taxed in many different ways thus increasing your tax percentage significantly. Whenever you buy that cool new cell phone or a six pack of beer or even batteries for your electronics. All these items are subject to sales taxes. Read below to get a better idea of how much we pay in additional taxes.
Earned Income : 25%
Sales Tax : 7% (My State sales Tax)
Property Taxes: .5%-2.5% (Depending on the assessed value of your home by state)
Dividends : 15%-25% ( Depending on your income)
Interest: 15%-25% (This is subject to ordinary income tax, on top of your earned income)
Final Result: Depending on how you use your net income you could be paying up to 50% of your earned money to the government in the various forms of taxes.
Now that you see the final result of how much we really pay in taxes; wouldn’t it make sense to make things like health care, education, and home ownership somewhat more affordable. It’s no wonder that the average person is struggling to make ends meet and the income gap is widening everyday between the rich and the poor. I have always rooted for the underdog because I feel we all should have our share of success and wins in life. So I guess that’s why I am for making things fair for the citizens who are really trying to get by and not just abusing the system.
Example of average taxes for someone who makes 35,000 in earned income:
Income Tax: $8,750
Sales Tax (Clothes, Alcohol, electronics, Etc. ) =$3000 spent *.07= $210
Property Taxes @215K*1.5% (Home Owners only): =$3,225
Dividend Taxes = N/A
Interest Taxes 10K @ 1% interest = $100
Total in Taxes = 12,285 / 35,000 = .35 or 35% in taxes paid.
Income Left over for living expenses and savings = $22,715
In conclusion somebody making this much is paying 35% to the government when it’s all said and done on a yearly basis. Also this example is on the low end of the estimated amount people spend on sales tax. Granted if you contribute to a retirement plan your taxable income will be less than if you do not contribute. I did not include dividend income because most people do not have dividends and the majority of those who do have them are invested in a Roth IRA vehicle thus making earnings in those types of vehicles tax deferred. The final number is not enough for the average person to pay mortgage /rent, all expenses to live, and have fun money. The Net income for somebody making this much broken down by paycheck is about 1,000 or $2,000 monthly on a biweekly pay cycle.
So be well informed on how you can for your specific situation pay less in taxes by legally doing what is beneficial for you and your family.
Contact a tax professional to get more detailed specific tax information
