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Sunday, April 26, 2009

What are all the Taxes you Pay?

I did this exercise previously, but I'll repeat it. What are *ALL* the taxes that the average person pays? There isn't just explicit direct taxes. There's indirect taxes and the cost of regulation compliance. There's also the cost of State restriction of the market.

  1. The marginal Federal income tax is 40% for a typical middle class worker. I'm including the employer-paid portion of Social Security and Medicare taxes.
  2. Where I live in NYC, the marginal state income tax is nearly 10% for a typical middle class worker. We're already at 50%.
  3. Unemployment insurance is funded via a payroll tax on employers. This does not show up as a deduction on a worker's paycheck.
  4. Property taxes are another couple percent of your income per year. This tax is partially avoidable, because you don't have to buy the most expensive house/apartment you can afford. This brings the total to 52%. Due to property taxes, nobody has full allodial title to their land.
  5. State sales taxes are another 5%-10%, whenever you buy something. The average middle class person spends most of his income buying things, so this tax hits them the hardest. This brings the total to 60%. (I'm rounding down, to be charitable.)
  6. There's the tax on gasoline. Even if you don't own a car, the cost of this tax is factored into the goods you buy in stores.
  7. There's the inflation tax, which steals 10%-20% of your savings each year. Even if you invest in stocks, they don't earn a positive inflation-adjusted return compared to gold. The only way to avoid the inflation tax is to invest in physical gold or silver, and take possession yourself. If you're a net debtor, such as someone who has a mortgage, you may benefit from inflation. However, if you're a debtor, you risk losing everything due to the Compound Interest Paradox during the next deflationary depression/recession.
  8. Without State licensing requirements for doctors, medical care would cost $50/month or less. Medical insurance actually costs $400/month or more, due to the State licensing monopoly and regulations. The difference is a tax. This adds another couple percent. Even if your employer pays for your health insurance, this merely comes out of the money available for salaries. Doctors must spend 10+ years and $500k+ to get a State license. The cost of this license is included in the amount you pay for medical care.
  9. Most industries are organized as a cartel/monopoly/oligopoly. This means you pay higher prices and receive a lower quality product, compared to a free market.
  10. Driver's licenses and other State paperwork/fees are a type of tax.
  11. You pay an additional tax for the State-licensed electricity/phone/Internet monopoly/oligopoly, in addition to the cost of the monopoly itself.
  12. It's hard for workers to start new businesses, due to State restriction of the market. This means that workers receive lower wages compared to a true free market.
  13. There's the cost of regulation compliance. Whenever a business must spend money to ensure compliance with a State regulation, the cost is passed on to customers as higher prices.
  14. Corporations cannot pay taxes, because they are abstract fictional entities. With a State-licensed monopoly/oligopoly, most corporations pass on all the taxes to customers.
If you add up everything, including all the hidden and indirect taxes, your total taxation rate is 90%-95% or more. Any regulation or restriction of the market has a cost. Most people only notice the explicit taxes they directly pay. For example, most people aren't fully offended by the magnitude of the income tax and Social Security tax, because it's automatically deducted from your paycheck, and half of the amount is paid by the employer.

Let me know if I missed anything important!


F. E. Huginn said...

While not a tax in nature, all penalty fees for non-crimes could also be included.

Matthew said...

how do you calculate the marginal federal income tax at 40% for average people? if i look at my paycheck and add up the federal taxes, i'm paying about 13% of my salary in federal taxes (with 2 children, maybe it'd be a little bit higher with no children but not that much). what else are you factoring in? my pay stub says it is deducting for social security and medicare...

Matthew said...

are you really suggesting that my boss is paying out as much as or more than i am for social security and medicare for me alone? and that he does so for every other employee??

gilliganscorner said...

Perhaps it might be worthy of noting the "Tragedy of the Commons" tax. This is not a monetary tax per se, but it is the State siphoning off your greatest perishable asset we have: time.

For example,

- commuters who sit in traffic jams as a result of poorly designed and maintained State roads.
- The time you spend filing paperwork and taxes for the State.
- The time you spend in State run schools, preventing you from learning.
- The time you spend in the hands of State healthcare.

And so forth....

Matthew said...

ignore those comments before! i just figured it out, i didn't realize my employer pays half my federal taxes... that does add up to 40%! insane!!

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