Taxing Times for Regular Americans

This essayist gets a kick out of the politicians and bureaucrats and now, even more of a kick out of all the union folk representing government employees who now make much more than private sector workers while enjoying European style vacations and days off, health care benefits and, most of all, ridiculously generous pension plans and payments, telling us that the solution is higher taxes, higher government fees and higher everything flowing to them. 

Let’s take a look at what a real, regular American family earns and pays in taxes.  First we go right to the census bureau (home of really well paid, hard working, public servants who have almost guaranteed job security; all sorts of union rules protecting them from any form of difficult job pressure – lots of high civil service grades paying $80, $90 even $100,000 per year and then, on top of all that, they also get all the free benefits and the generous pensions) and they tell us that the typical American family earns $72,000 a year.  So let’s start with this $72,000.00 (a lot less, by the way, than many government family's).  And let’s give them a household of four – spouse and two kids.  What do they pay with those middle income earnings of theirs to our various hard working public servants across the land?

First, the feds.  Right off the top goes 5.65% (goes up to 7.65% on 1/1/2013) for social security and Medicare.  Never even see it - $4,100.00 gone.

Also, the IRS tells us that this family will pay federal income tax around $4,320.00;  goes to Washington DC, straight out of the paycheck; never seen; never enjoyed; absconded before the worker even gets to count it out and turn it over.

Now this family owns a home.  Bought it fifteen years ago; paid $225,000 and it was worth $450,000 for a few days in 2006 but now it is valued at $275,000.  The local government and the school board and the police and fire pension funds and the library and the mosquito abatement folk all get to add their needs to a property tax bill sent out once a year.  Totals 2% of the value now set by the local appraiser which is $300,000.  So, out goes another $6,000.00.

This family also buys things to support their life style.  Mind you, not a lot of things because you can see that two governments have already relieved them of $18,740 of their earnings or 25%.  When they buy things they pay state and local sales tax at the rate of 7%.  We estimate that they spend about $20,000 each year subject to that tax so out goes another $1,400.00.  And, they live in a state with an income tax – most Americans do, 41 of the states have income taxes.  Their state charges them 3% of their federal “adjusted gross income” which is about $50,000 so another $1,500.00 is gone.

Let’s do a quick tally of where our “middle American family” stands after the needs of the “public servants” have been met from their paycheck proceeds:

Gross Earnings                                                                 $72,000.00

Taxes/Government:

            Social security/Medicare                $ 4,100.00

            Federal Tax                                       4,320.00

            Property Tax                                      6,000.00

            State/local Sales Tax                         1,400.00

            State Income Tax                               1,500.00

                        Sub total                               17,320.00

                              Left over, so far                                   54,680.00                                        

Now, we are not quite done yet but we are already at 24% of our private sector working typical American family earnings are going to governments – one way or another; one place or another.  Over seventeen thousand dollars is levied on them by many different government agencies and those costs keep rising regardless of whether the family is able to earn more.

This family has to pay for its own health care insurance; not entirely but they make a significant contribution each month to its cost unlike most “public servants.”  Each month they pay $450.00 or a total of $5,400.00 for the year.  And as you may be thinking, there are many other forms of government fees and taxes they pay – on their electric, telephone, natural gas and cable TV bills.  They also pay a big tax at the gasoline pump each week.  And, less we forget, they pay license fees for their car and they need to pay other local fees for the bikes, the dog and even the parking meter when they run into the doctor’s office.  Whew!  It adds up to about $950.00 each year.

So, let’s recap.  The family wages start out at $72,000.00 and can be recalculated down to $54,680.00 (see above) after social security, federal tax, property tax, state sales and income tax.  Then they pay for health insurance and other hidden fees and taxes and they end up with $48,330.00.  33% of their earnings go out before they can even address their own issues.  ONE THIRD OF WHAT THEY EARN.  They may want their kids to go to good schools, not the ones run by the local teachers union; they may want to contribute to their church; maybe even take a vacation – not to some foreign destination but just to the state park.  First though, they have to pay their mortgage and they have to buy different forms of insurance and they have to pay for their utilities and many other necessities. Their grocery bill rises almost weekly because of the runaway inflation that the high paid, ride around in limousines with all sorts of security, bureaucrats tell them does not exist.  On top of that, this family used to make a few hundred dollars on their savings account and they used to be able to teach their kids to save because the savings would grow with interest payments each quarter.  No more.  No more interest for either them or their kids.

America is destroying its middle class in a way unheard of or unseen in its 236 year history.  It is taking money from regular people and wasting it on record levels of government employees earning record levels of salary and benefits and receiving pension payments earlier and at levels our privately employed family cannot even imagine much less comprehend.  The other consequence of this spending - there's no money for roads and schools and other needed public services.  Money has been spent on bureaucrats instead of products and services.

You can tax the rich, tax everything they make, and you still will not have enough money to pay all the government employees and all their generous benefit programs and all their bureaucratic activities.  So, don’t tell TheFundamentals that you are going to offer relief to regular Americans by taxing the rich.  The only relief for regular folk, working people will come through significant cuts in spending on government employees and programs.  Until then, the times will be very taxing for those of us in the middle.