How Much Does the Government Get?


Lately there has been a lot of discussion about the wealthy needing to pay more taxes. This always raises the question for me, why don’t the people doing all this talking make a donation to the welfare program of their choice if they feel so passionately about it? But, nope, they want to force others to do something they aren’t willing to do themselves. Then there’s the recent rash of the President’s nominees who were discovered to have not even met their minimum tax obligation, let alone paid any extra – they want to raise taxes on others, but they won’t even pay their own? Something seems wrong here.

But, I digress. The topic for today is how much does the government actually take from every dollar you or I earn, so let’s take a look. I will start with a nice round $100,000 in salary to make things easy. Now assuming you’re not self-employed, your employer will be paying 6.2% of your salary to Social Security and 1.45% to Medicare. That’s $7,650 above and beyond the $100,000 that your employer has to cough up in your name (keep that in mind the next time they turn you down for a raise – they could have paid you another $600 a month, but it went to the government). Of course, you have to match those contributions via Soc. Sec. and Medicare withholding, so that leaves you with $92,350.

Don’t get excited, we’re just getting started. Let’s move on to the big leagues – income tax. If you’re single and have no children to claim, the government will take a bite to the tune of $20,124 in income tax withholding (maybe they should call it hold-up instead of withholding) leaving you with $72,226. Next, your state will take a bite. In my state of Massachusetts that bite will cost you 5.3% or another $5,300 leaving you with $66,926. If you live in one of the major U.S. cities you’ll likely get hit with a city income tax as well, but we’ll leave that alone for now. So, to this point the government has received $40,724 and your clutching $66,926 of your hard earned money.

But, we’re not finished, not even close.  Here are a few more taxes most Americans pay and to generalize I’ve used the amounts I paid in 2008 as examples:

  • Property tax – $3,100
  • Communications (phone, cable, cell phone) -$138
  • Gasoline (average 35¢/gallon -18.4¢ goes to the feds, the rest to your state) – $263
  • Sales tax (assume 5% and $10,000 a year in purchases) – $500

There goes another $4,001 leaving you with $62,925.  But, there are still more taxes. Capital gains is a fun one; it’s where if you manage to save some of these after-tax dollars, and are brave enough to invest it, and are lucky enough to make a little profit, they have the audacity to take a percentage of that too! There are cigarette and alcohol taxes, travel taxes (many times 10% or more on hotels, airfare, rental cars, etc.), and the list goes on and on.

So, in the end your $100,000 salary nets you roughly $60,000 and your government rakes in $47,650. Seems like a pretty good deal for them since you did all the work. But, here’s the best part… You or I must find a way to pay our bills and save for retirement out of the $60,000. But, the government doesn’t bother with any of that; instead, they spend Trillions more than they take in resulting in a national debt that you will someday end up paying for. Better put some of that $60,000 aside just in case!

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Filed under Financial, Taxation

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