OT: Tax Freedom day
 

Today, 7/7/04, is the day on which the average American worker has earned enough gross income to pay off his or her share of taxes imposed by all levels of government. In other words, everything most of us have earned from 1/1/04 to 7/7/04 goes to pay for the government. Starting tomorrow, you keep what you make :rolleyes:

Here's an interesting report on it for those of you interested:

http://www.atr.org/pdf2004/2004cogd.pdf

Maybe I'm confused, but that doesn't make a lot of sense to me. I'm no fan of high taxes, but this implies that the average American pays well over 50% of their income to high taxes. As a lawyer in NYC, I'm in a pretty high tax bracket and pay city, state, and federal income tax, and I come close to 50%. I find it hard to believe an average American would be that high. Your link is more about total taxes (which includes businesses and other entities) and cost of government. I think your conclusion about the "average worker" is a little misleading based upon that data.

I would think that once a person adds up the average federal with the average state with the average amount of sales tax a person pays each year, it'd have to be pretty close to 50%. And that's pretty sad if you ask me.

My first thought was that it was awful fishy as well, but maybe they're counting in sales tax, etc?

I am in such a low income bracket that my tax freedom day is in like early March.

OK, this includes all taxes from the federal, state and local governments. All combined, they represent 51.6% of the revenue earned by the average US worker. Here's how the breakdown works:

Federal Spending: 86 days
State/Local Spending: 42.9 days
Federal Regulations: 36.7 days
State/Local Regulations: 22.9 days

Total = 189 days

Read the report if you guys still have questions, it's pretty interesting.

I thought those "all-in" tables that purport to show sales tax, property tax, etc. end up having a lower percentage than what is withheld because of the deductions people take on their tax returns (i.e., a person in a 38% tax bracket ends up paying closer to 23-25% on their tax return because of deductions).

Also, the cost of government does not equal what individuals pay in taxes. As John Galt mentioned, there are also corporate income taxes, as well as other ways for governments to take in revenue (payment of penalties, for example).

...fuckin' eel tit.

The last two categories are where I take issue and why the numbers seem way off. Regulations are what tip the scale over 50% and their economic effects are not easily measured. Just assessing the cost of compliance is not enough. Many regulations (arguably) create efficiency and eliminate externalities that have a significant negative economic effect. The relationship is far too complex to presume those numbers aren't politically motivated.

Besides, regulations aren't taxes.

Arles's numbers say otherwise and I think unless you consume a lot of crap, sales tax doesn't amount to too much and are included in the state tax figure. I'm probably in the most taxed city in the nation (in a high bracket) and I may just barely hit 50% with sales tax.

Well, one could certainly quibble with the numbers and how they're figured, and as you say, much of the relationships of these figures are too complex to easily analyze. The point though, is still valid in my mind. Whether you're talking forty percent or fifty percent, that amounts to a ridiculous number in my opinion for a great portion of the population.

Most Americans that commute pay about $600-$700 a year in regulations based on gas alone. Through in the cost of regulations in things like air and train travel, liquor, cigarettes, junk food/soda, and even some aspects of education. I think you would be surprised how much you can actually calculate in regulation for the average American. And, as you say, this doesn't even count the economic vice things like certain environmental and other regulations put on the manufacturing and overall economy in general.

Before regulations hit, a gallon of gas would normally cost about $1.00-$1.20 a gallon. Sometimes even less depending on where you live.

So, when you figure regulation (liquor, gas, travel, renting cars, some junk food, numerous other items ...), you are probably well over 60%. Not to mention most Americans probably don't manage their taxes as well as some like you or myself.

The point is, we pay a lot of frickin' taxes.

so what

Well this is thoroughly depressing to consider, ain't it?

(And if I figured in my higher than avg household income, and then figured the amount of corporate taxes/fees/et al that we pay which directly effect my personal income ... sheesh, I figure I'm lucky if I'm covered by f'n Halloween)

Thank God the great Republic of Texas has shunned state INCOME tax.

sheesh...

So, when would these days be for, say, Canada and Sweeden?

You do pay state tax, just not income tax.

I knew that. Really I did. :D

In theory, if we didn't have any government at all, we might be able to get migrant laborers to work for $1.00 per hour to do all osrt of menial tasks like washing dishes or sweeping floors or working ion sewatshops to make our clothes. Consequently, we'd be paying a lot less for the food we eat, the clothes we wear, and the homes we have. I guess we need to factor in those additional "taxes" too then, right?

But then who would fight the war on terror?

I had heard it's around June 30 or about in Canada, depending on which province you live in. Was very surprised to even think it's earlier than in the States, but found this article to link to:
http://www.fraserinstitute.ca/shared...sNav=nr&id=613

They claim it's June 28 on average...

FM

Interesting. We Americans have been told for years that we actually pay fewer taxes than other industrialized nations, and that Canada's national health plan was prohibitively expensive. Yet they pay fewer taxes than us??? I am appalled.

Yeah but in Canada you go for an appendix removal and end up leaving the hospital with breast implants

Oh, I don't want our government in charge of my family's health. I have just long been under the general impression that the US was taxed less than most others in the west (especially Canada and Europe) and certainly far less than any nation with a national health plan. This does not appear to be the case.

Read above - this is apples and oranges. Arles's numbers include the costs of regulation whereas the Canadian tax numbers don't. I'm also unsure of how the aggregate US tax numbers are measured in Arles's study - they don't seem to be after filing numbers (which means they are already suspect) and they may be fudged in other ways as well (counting corporate taxation as being passed onto the consumer).

I did not have time to read into the exact methodologies. I would, but it hardly seems worthwhile seeing as though I am convinced the Reps & Dems are conspiring to steal way too much of my money.

One point though - since corporatations are owned by people, corporate taxes are paid by people, and it is not fudging in any way to count them as so. Since they reduce the profits made by corporations, they reduce the dividends paid to stockholders. The amount those dividends are reduced are a "hidden tax" on stockholders.

My Cost of Government Day isn't until July 17th. :( (Stupid New Jersey...I'm moving to Alaska!)

Canada has very little military spending and I don't think that study counts all the regulatory factors as well. If the US didn't have to worry about protecting the world from a military standpoint and could get by with a few mounties, no real FBI/CIA and much less of a police force, our tax rates would be much lower as well.

However, given the much larger population we have and the fact that we are (by default) the world's military, Canada's defense and police budget is simply not an option for us. Which, IMO, is a good thing.

What's scary is with a much lower population, no real military and very little intelligence gathering, Canada is still close to the US in overall taxation. Imagine the tax burden in Canada if they were to assume the role of world protector.

You don't have time to read the methodologies, but you still reach the conclusion that America pays more taxes than Canada or most of Europe? The discussion of the differences is above - I assume you can bothered to at least read the thread you are posting in.

As for corporate taxes - you are missing the point. Corporations are considered entities (like people) in the US. This means taxes are paid by the entity and not the people within that entity. People may purchase goods from that entity, they may receive a paycheck from that entity, or they may sell to that entity, but the the corporation pays the taxes. To simply say taxes reduce dividends is to oversimplify a more complex economic relationship. At the very least, it calls into doubt the idea that the "average worker" (as Arles said) in the US pays over 50% of their income to taxes - that just isn't true.

I'm looking forward to higher taxes.

A similar theory is behind the regulations as well. I've worked in two different parts of the manufacturing industry and have seen what regulations can do first-hand. Take the automotive industry. Let's say Kerry/Edwards get their wish and impose higher CAFE and environmental standards. It then costs more to make a car. That means the manufacturing companies have three options:

1. Just live with a lower profit and watch their stock suffer.
2. Raise car prices (and potentially lose sales/market share).
3. Cut jobs and/or outsource to cheaper labor.

Which one do you think they will choose?

Unless regulations are absolutely proven to be necessary, we have to be very careful as the reason some jobs are outsourced is because of the level of regulation the US has. Plus, the quickest way to kill a rebounding economy is increasing regulations.

Adding up some numbers in my head:

somewhere around 20-25% federal income tax (I'd have to go look at last year's Turbo Tax report to get more exact)
+7% state income tax
+6.5% (or so) for Social Security
+a few points for Medicare
+6% on almost everything I purchase
+property tax on house and cars
+40 cents/gallon for gas

I'm at almost 40% just on federal income tax, state income tax, and social security taxes alone. Why is 50% on taxes you directly pay so hard to believe?

I am not missing the point at all of corporate taxes. I undersand that legally they are entities, but what they really are is groups of people, which you do not seem to be understanding.

You are actually making something very simple more complex than it is. My wife is a Ph.D. economist, and they are taught, in no uncertain terms, that corporations paying taxes is a fallacy, that people are really paying those taxes (and making profit, and paying their workers, etc). I'll believe her.

Now, are they in general, rich people? Of course. Whether or not you consider the "average worker" to be paying them depends on what you mean by average. If by average you are really trying to say 'typical' then no, the typical US worker pays little of that tax. If you mean a literal mathematic average it should be included and will skew the results.

EDIT: Arles, I understand their point that regulations increase costs for companies to provide us goods and services, and thus increases their price. What I would question would be their ability to accurately compute how much this really costs every year.

all the firemen getting laid off appreciate your tax whining, im sure

If you believe atr.org, you can add up federal income tax, FICA, state income tax, property tax, county income tax (where applicable), tax on leased/purchased vehicles, sales tax, capital gains, taxes on dividends, regulations and fees on numerous goods (ranging from cigarettes and booze to hotels, rental cars, services, rent, airfare, trains, junk food, tourism...) for the average american and get about 51%.

Just look at an average american living in an appartment making 40K. They will pay about 35% in federal, state and FICA tax (dep on where they live). If you have on car payment, a 20-mile commute, and $1000 in rent, you will probably pay a couple grand in fees on those. So, if they end up paying 3-4K in sales tax, liquor/junk food fees, road tolls, transportation taxes (air, train), cigs, education fees, a vacation in the summer (hotel, car, air) and any other fee, they pay well over 50%.

It's not that hard to imagine that. And that's not counting any capital gains, dividend or property tax.

50% for an "average worker" is hard to believe. I'd say most people here are above average if only by the fact that they spend a lot of time on the internet. Social security maxes for a lot of people in a given year, so I'm not sure what the average percent is. Sales tax and state tax are obviously variable. I'm not saying people don't pay more than 50% (I believe they do), I just find it hard to believe that the "average worker" pays that much (and the methods used in Arles's study make the claim more suspect).

If your wife really believes that, she needs to go back to school. The way American tax structure is setup, corporations have rights and responsiblities under the tax code independent of the people who own it. Here are easy examples:

When a corporation loses money, who pays the taxes?

When a corporation gets a tax refund, who gets the money?

When a corporation is found to have filed a false tax return, who is punished?

If a corporation loses money, but its shareholders make money, does the corporation owe taxes?

If a corporation makes money, buts its shareholders lose money, does the corporation owe taxes?

No one is denying that corporate taxes affect the shareholders and/or profits - that is a basic truth. However, undertaking a cost of government study without differentiating corporate taxation makes it impossible to conclude that this is what the "average worker" is taxed.

First off, someone in the 40K bracket is getting taxed at a 25% marginal rate. That means the first 7K is taxed at 10% and everything up to about 28K is taxed at 15% and only the last ~12K is taxed at 25%. Adding state and Fica to that will not usually add up to near 35% as you assume. I also don't know what "fees" you are counting for sometone paying rent. And no way does sales tax, road tolls, transportation costs, etc. add up to 3 or 4K for someone on a 40K income (they just don't have the disposable income after you take out the federal tax, state tax, and rent).

As for capital gains, that rate can never exceed your marginal rate, so I don't think it adds much to the discussion.

I'm not for high taxes or anything, but I do think it is dishonest to say America pays higher taxes than Canada based on an apples to oranges comparison.

I believe that it is a reasonable approach to say that all profits and losses that inure to a corporate entity ultimately translate to profits and losses for its shareholders. I realize John Galt's approach above (specifically the last two, in the short run) but all in all, I think it's absolutely sound to apply all taxes, ultimately, to individuals.

A couple things here. FICA is 7.65%. 2.9% is medicare and never maxes out. 4.75% is social security and maxes it at about 90K. So, unless you make more than 90K, you will not max out on social security. This is why the middle class ends up often paying well over 50% when you add it all up. Most don't have the deductions of the rich, or the low brackets, EITC and floor deductions for the poor. So, they pay 35% in Fed and state, 7.65% in FICA and usually have a bunch in sales tax, education, car payment tax, liquor/cigs and other consumables.

If you make $30,000 to $60,000, you are hit the hardest by our tax system. And, not coincidentally, that's where most people fall into.

QS - I have to disagree - there are multitudes of examples where such an analysis doesn't work (and they don't even out):

When the economy is down, the relationship is far different because corporations become tax shelters for individual taxpayers.

The sheer number of corporations means they should be counted as "people" in terms of the number of taxpayers. Doing otherwise ignores the way money is distributed between shareholders and the company itself.

Corporations change the way individuals are taxed through all sorts of policy choices. Depreciation is easy example on a sports board because that writeoff is why most MLB owners only own a team for 5 years and then leave the league.

It ignores gigantic differences in bankruptcy law and how those affect the economy. When a person goes bankrupt, it doesn't create a negative economic value for that person. When a large corporation goes under, you often have negative value assets and net lost dollars.

Tax deferal structures are also radically different for corporations and change the ways in which taxes are allocated among multiple years.


I understand that taxes affect the people who own the business, but to pretend is a 1 to 1, dollar to dollar ratio misses the unique way American corporate law has developed. Corporations are "people" as far as taxes are concerned and if you want anything close to a 1 to 1 ratio, you need to at least count the corporations in the number of "people" being taxed.

That's the first thing you have concluded that I firmly agree with. Our tax system is heavily progressive, but the middle and lower middle classes get screwed in actual money available. Of course, I think the GOP is the primarily responsible for this distribution, but I really don't like the Democrat's solutions either.

Looking at the original study again, does it really use a "mean average" instead of a "median average?" I can't tell for sure. If they used a mean that clearly is another major problem since the over 50% crew in the top 5% that pays most of the American taxes heavily weights the mean and has nothing to do with the real "average" worker.

Federal = ~$7000
State and local = ~ $1500-$1600 in AZ
FICA = ~$3060

Total is about 30% for this example for Arizona (we have low state income tax). Might be more if you live in Chicago or New York. Places like Ohio also have county income tax as well

There is a service fee on rent in Arizona and California. I'm pretty sure it's in most other states as well. That, tax on gas and taxes on car leases/payments can be fairly high amount when it's all said and done.

You're forgetting taxes on rental cars, hotels, airfare, cigarettes, gas, liquor, ... Most people making 30-50K spend a big chunk of their disposable income on gas, liquor, cigs and other such consumables. All taxed at a significant rate.

I think it's very appopriate to bring in the very small amount of money Canadians spend on things like National Security and the military when comparing the two. Without the US to protect them, Canada would have to make the same decision as the US in whether to tax their average citizen 60-70% or not have their huge number of social services.

Arlie

The secession has started my brother.

An observation by presidential administrations from chart Cost of Government by day 1977 - 2004

---------Started----Ended----Difference
Carter.....07/07..........06/24.......-13 days
Reagan....06/24........07/03.......+9 Days
Bush.......07/03........07/15.......+12 Days
Clinton....07/15........06/28.......-17 days
Bush W...06/28........07/07.......+9 Days

Why the hell do Republicans keep raising my taxes?

I think your top numbers are fair (although one could also argue that FICA isn't a tax in the strictest sense). It should be noted that they still represent pre-filing numbers and don't count deductions at all (and that is a big difference).

I've never heard of a service fee on rent. Go figure. Is it much?

I think your statement that most people in the 30K to 50K range spend a big chuck of their disposable income on cigarettes, gas, liquor, rental cars, etc. is a bit bold and unsupported. Either way, it doesn't add up to that much when you take out rent/food (adding in their respective lower taxes), state taxes and federal taxes.

As for the Canadians, I'm quite sure that there military budget is much smaller than ours, but military isn't the biggest chunk of our budget - social security and the like is - and Canada vastly outspends us in that area. I also don't believe the Canadian numbers above measure regulation impact and given the breakdown above, that is an enormous difference. And I also find it a little ironic that one of the most hawkish posters on this boarding is lamenting high taxes due to military spending. ;)

This is primarily because of social security and medicare. The only way to limit the taxes on the middle class is to change the way social security and medicare behave, privatize some of education (ie, vouchers) to limit the cost to states and try to curtail overall non-discretionary spending. Now, both parties are guilty of the third, but I see much more hope from the reps than the dems on items 1 and 2 (albeit both sides have a way to go).

Don't forget, a study was done in the mid-90s on the optimal income tax rate for economic growth (using a 5-tiered bracket system). The result was a higher rate at the lowest income and a low rate at the highest income. So, the fact that we are the opposite shows that much of the tax system is based on politics, not economic growth. So, sticking it even more to the rich will not help economic growth and job creation.