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Aug152010

TAXES

In the section concerning wages I discuss the fact that a large portion of the money that we earn is taken before we receive it. For me personally that was approximately 45% of my gross wages.

Unfortunately our tax obligation does not stop there.

Property Taxes

I pay approximately 7% of my gross wages in property tax to the Township of Mt. Olive, bringing my total tax burden to 52% of gross wages.

Sales Taxes

In addition there is a 7% sales tax on most everything that I buy....but not everything, to be fair I'll assume that it works out that 3% of the my money goes to sales taxes on goods, bringing my tax burden to 55%.

Embedded Taxes

Perhaps worst of all are the embedded taxes included in the cost of everything we buy.

Businesses that produce products pay taxes on most everything they use in the process of making them. They pay taxes on labor, on raw materials, on their trucks, the gas for those trucks, etc. It has been estimated in detailed studies that approximately 22% of the price of all products goes towards covering the increased cost of doing business introduced by taxation. This brings that total tax burden to 77% of gross wages.*

Excise Taxes

On top of this there are excise taxes from both the Federal and State level on many of the items we buy. Most notable of which are on gasoline, cigarettes, and alcohol.

In New Jersey 33 cents or each gallon of gas is excise taxes, given a gallon of gas costs around $2.50 that's a 13% tax. 

In New Jersey $3.71 per pack of cigarettes is excise taxes, that's about 50% of the cost of the pack! (Thank goodness I don't smoke)

Excise tax on beer, 70 cents a gallon, or about 7 cents for a 12 ounce can or bottle.

Wine comes in at 2.45 a gallon, which is 65 cents a liter, or 49 cents a bottle.

Whiskey? 19 dollars a gallon! That's 5 dollars a liter, or about 3.77 a bottle.

Percentages are hard to figure, as prices for beer wine and whiskey vary greatly by type and brand, but given a $6 six pack, $10 bottle of wine, and a $30 dollar bottle of whiskey, these excise tax rates vary from 5-10%

A complete list of federal excise tax rates can be found here. 

A state by state breakdown of excise taxes on products can be found here.

Federal excise taxes on cigarettes is by weight, the per pack amount was gotten from Wikipedia, which referenced this document.

Import Taxes

The US Department Customs and Border Patrol (CBP) administers taxes on imported goods. This great little blurb comes right from the CBP website.

The Harmonized Tariff System (HTS) provides duty rates for virtually every item that exists. The HTS is a reference manual that is the size of an unabridged dictionary.

I bet. As an example, for the $30 bottle of whiskey mentioned above, if it is imported, includes a 14 cent tariff in its price.

Here is a link to the full tariff schedule. 

Determining how this myriad schedule of tariffs and fees affects the tax load on my gross wages is anyone's guess, but suffice to say that it does play a role , and needs to be kept in mind.

Other taxes

Lastly let us not forget all the miscellaneous ways in which the government manages to take our money. Things like tolls, fees, fines and the like. Much like the import tariffs it can be difficult to measure how much these things increase our tax burden, but increase it they most certainly do.

Conclusion

Given that 77% of my gross wages were already accounted for prior to figuring in excise taxes, import taxes, and all other random miscellaneous taxes, I think it is fair to say that at least 80% of my gross wages are taken via taxation.

It's a testament to the resilience of the US economy, and the US citizen, that we can be taxed at such a punitive rate and still manage to make ends meet, although making ends meet is becoming increasingly difficult for everyone, and the economy is finally starting to collapse under the weight of this heavy taxation burden.

The tax load must be lightened if any positive economic progress is to be made. Any talk of increasing taxes, be it for deficit reduction, health care, cap and trade, or any other purpose is sheer madness.

*There are some who may say that it really isn't accurate to just add these consumption taxes directly to my total tax burden, as I may choose not to spend all of my money, I may choose to save some. This however does not change the fact that the money will some day be spent, and these taxes will be paid at that time. In addition, that saved money will be subject to taxation while it sits there if it manages to grow in principal via interest payments or other investment gains. It will also be subject to the hidden tax of inflation of at least 2-3% a year. If I am unfortunate enough to die before I have managed to spend all my money, ( that's called "bad timing" ) my money will then be subject to estate taxation, which will not even consider here.

So for purposes of this argument it is fair to treat all wages as being spent.

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