I haven’t written in a few weeks for several reasons. One, of course, is that personal commitments all clamored for attention at once and took several weeks of undivided attention to meet. Another is that, frankly, I watch the government response to the economic disaster unfold and I become severely depressed. I watch the same old solutions that have managed to drive us to the present point of distress tarted up in fancy rhetoric and presented as necessary solutions to the endemic social conflicts that are the real causes of our present difficulties.
Somehow, economic issues have become separated from civic issues in the social consciousness. Perhaps the so-called collapse of Marxist Socialism with the fall of the Berlin wall in ’89 functioned as defacto proof of the necessary division between the acts of government and the pursuit of personal wealth. The fact that the old CCP in Russia and the PRC in China are far from Marxist in their politics and policies means little in the common perception. What is also forgotten or misunderstood is how the generation who fought the Second World War pursued economic policies that were consciously rooted in their sense of civic duty. Make no mistake, their social/civic record was not spotless or idyllic. Their racism was an undercurrent that tainted all their decisions until the late 1950s. But even in regards to their racist failings, members of that generation took action that was rooted in civil rights and which brought an economic benefit to all citizens of the US. LBJ, for all his faults, did wonders in bringing that hidden undercurrent to the surface of the social and governmental mainstream by establishing legal tools for its civic redirection and civic redress. His War on Poverty was a magnificent effort that assisted millions of Americans move from abject poverty and hopelessness into the mainstream of American civil and economic life. The effort was gutted and destroyed by those who believe the same “free market” nonsense that infects the politicians of the present generation.
We have ideologically/intellectually separated business decisions from civic consequences. The dramatic rise in unemployment is simply a figure not a story of despair and hardship for those who suddenly find themselves unemployed and unable to financially meet their family's physical needs. The worldwide rise in food prices is an economic phenomenon of an impersonal, mechanical market not the story of millions who exist on the brink of starvation because their income cannot cover the increase in staple food prices. The destruction of the industrial manufacturing base in the pursuit of a high profit “service” economy is not seen as an assault on the livelihood of the minimally educated or traditional craftsman. The consequences of such decisions are framed as impersonal forces at work in a “bottom-line” economy. The social and civic consequences of such “business” decisions are ignored.
Our congress votes billions to bailout greedy billionaires in order to save “jobs” and perpetuate an economic world-view that is destructive of human dignity. Truly depressing.
Sunday, December 7, 2008
Saturday, November 15, 2008
The Insane Tax Burden of Average Americans
I recently drove to visit my granddaughter and daughter in Florida and spent an evening in Knoxville, TN. I was stunned at the 9 ¼% sales tax I paid on a meal and a $12.00 rape the visitor tax on a $40 a night room. The jolt began me wondering about how much actual tax we, as Americans, pay each year. We sometimes forget the hidden taxes we pay as a matter of course in conducting our daily business, such as the excise tax on a gallon of gasoline.
I live in Nashville, Indiana where I pay a greater amount of tax on my monthly water bill than I do for the actual water. Last month I was charged $31.47 for the amount of water used and $51.48 in a sewer usage tax. The insanity of such a situation is self-evident. So, I decided to calculate, approximately, the amount of tax, both hidden and evident, an average middle class family of four pays in the state of Indiana over the course of a year.
According to the latest census the average household income in the US is $47,000 per year and an average household consists of a family of four (plus a decimal child, which we will ignore since partial children only serve to bloody the floor).
Let’s begin with actual income tax charges. In the State of Indiana citizens pay a federal income tax, a state income tax and a county income tax. The present federal tax rate for $40K plus a year is 25%. Thus, a family of four taking standard exemptions and filing as married filing jointly pays a federal income tax of $8,500. Indiana’s income tax rate is 3.4%; thus, the state income tax totals $1462. The Indiana County tax for Brown County, Indiana is .014875% for a tax total of $639.63. Total raw income tax due in Indiana for a family of four is $10,601.63.
Now, the same family must pay a 6.2% FICA tax that totals $2914. Thus the accumulated total of straight income taxes becomes $13, 515.63. But, we are far from done paying tax. Sales tax in Indiana is a flat 7%. The average family of four spends $8600 per year on food, says the GAO. Thus, 7% of $8600 equals $602, bringing our tax expenditure total to $14,117.63.
Now a modern middle class family of four must have two vehicles in order to operate. Vehicles at an average $25,000 purchase price entail a $1750 per vehicle, or $3500 total sales tax, which we can amortize over a 60 month loan for a total $700 per year, for an annual tax total at this point of $14,817.63. In Indiana the state charges an annual excise tax plus a fee for automobile registration. The excise tax is on a sliding scale but two new cars over a five year period will average approximately $225 per vehicle per year, for a tax total at this stage of $15,267.63.
The average household vehicle averages 15,000 miles per year. If the vehicle averages 25mpg it will use 600 gallons of gasoline. For a middle class family of four with two vehicles the total usage becomes 1200 gallons of gasoline a year. The average excise tax on a gallon of gasoline in Indiana is $.184 federal and $.317 state for a total of $.501 tax per gallon or a total tax expense of $601.20, raising our tax expense total to $15,868.83.
We are not yet finished, not by a long shot. The average cost of clothing in the US is $624 per child, slightly higher for adults. The sales tax on this amount is $174.72, for a tax expense total of $16043.55.
Finally, Indiana has a property tax of .014% on privately owned real estate and recently passed a 2% cap on rental property and 3% cap on business property. If an average family of four owns a house valued at the national average of $187,000 their annual property tax bill is presently $2618, for an expense total of $18,661.55. If they rent, the tax bill they pay increases to $3740, unless their landlord is an exceptionally generous individual who just loves sheltering people for the Christian love of it, which brings the rental family’s total tax expense to $19,783.55. Most obviously, businesses will pass on the 3% property tax to their customers but the actual cost to a family is impossible to calculate.
Given these figures, we see that a family of four making the average househould income of $47,000 a year pays $18,661.55 in tax if they own their house in Indiana and $19,783.55 if they rent. This means their actual disposable income is $28, 338.45 or $27,216.45, respectively, which translates into a tax burden of 39.7% and 42% respectively.
I understand that by finagling deductions and some creative bookkeeping these tax bills could be reduced by a few thousand dollars. Even so, something is seriously out of kilter here.
I live in Nashville, Indiana where I pay a greater amount of tax on my monthly water bill than I do for the actual water. Last month I was charged $31.47 for the amount of water used and $51.48 in a sewer usage tax. The insanity of such a situation is self-evident. So, I decided to calculate, approximately, the amount of tax, both hidden and evident, an average middle class family of four pays in the state of Indiana over the course of a year.
According to the latest census the average household income in the US is $47,000 per year and an average household consists of a family of four (plus a decimal child, which we will ignore since partial children only serve to bloody the floor).
Let’s begin with actual income tax charges. In the State of Indiana citizens pay a federal income tax, a state income tax and a county income tax. The present federal tax rate for $40K plus a year is 25%. Thus, a family of four taking standard exemptions and filing as married filing jointly pays a federal income tax of $8,500. Indiana’s income tax rate is 3.4%; thus, the state income tax totals $1462. The Indiana County tax for Brown County, Indiana is .014875% for a tax total of $639.63. Total raw income tax due in Indiana for a family of four is $10,601.63.
Now, the same family must pay a 6.2% FICA tax that totals $2914. Thus the accumulated total of straight income taxes becomes $13, 515.63. But, we are far from done paying tax. Sales tax in Indiana is a flat 7%. The average family of four spends $8600 per year on food, says the GAO. Thus, 7% of $8600 equals $602, bringing our tax expenditure total to $14,117.63.
Now a modern middle class family of four must have two vehicles in order to operate. Vehicles at an average $25,000 purchase price entail a $1750 per vehicle, or $3500 total sales tax, which we can amortize over a 60 month loan for a total $700 per year, for an annual tax total at this point of $14,817.63. In Indiana the state charges an annual excise tax plus a fee for automobile registration. The excise tax is on a sliding scale but two new cars over a five year period will average approximately $225 per vehicle per year, for a tax total at this stage of $15,267.63.
The average household vehicle averages 15,000 miles per year. If the vehicle averages 25mpg it will use 600 gallons of gasoline. For a middle class family of four with two vehicles the total usage becomes 1200 gallons of gasoline a year. The average excise tax on a gallon of gasoline in Indiana is $.184 federal and $.317 state for a total of $.501 tax per gallon or a total tax expense of $601.20, raising our tax expense total to $15,868.83.
We are not yet finished, not by a long shot. The average cost of clothing in the US is $624 per child, slightly higher for adults. The sales tax on this amount is $174.72, for a tax expense total of $16043.55.
Finally, Indiana has a property tax of .014% on privately owned real estate and recently passed a 2% cap on rental property and 3% cap on business property. If an average family of four owns a house valued at the national average of $187,000 their annual property tax bill is presently $2618, for an expense total of $18,661.55. If they rent, the tax bill they pay increases to $3740, unless their landlord is an exceptionally generous individual who just loves sheltering people for the Christian love of it, which brings the rental family’s total tax expense to $19,783.55. Most obviously, businesses will pass on the 3% property tax to their customers but the actual cost to a family is impossible to calculate.
Given these figures, we see that a family of four making the average househould income of $47,000 a year pays $18,661.55 in tax if they own their house in Indiana and $19,783.55 if they rent. This means their actual disposable income is $28, 338.45 or $27,216.45, respectively, which translates into a tax burden of 39.7% and 42% respectively.
I understand that by finagling deductions and some creative bookkeeping these tax bills could be reduced by a few thousand dollars. Even so, something is seriously out of kilter here.
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