In a July 6 opinion piece a citizen wrote “Regarding Walter Williams’ tax calculations.” He was right to point out the specific mechanics of how taxes are calculated, but I think some further perspective is needed to avoid leaving a skewed impression.
The author’s overall thrust was that, “less is being taken out than you think.” In support, he used the example of an individual earning $150,000 per year and did a basic calculation of the federal income taxes using the tiered tax assessment approach. For his example, the highest bracket was 24% and the overall tax liability, as he calculated it, was just over $30,000. So for purposes here, let’s assume he was taxed at a blended average of 20% of income. Here’s the rub:
In addition to federal income tax, he also pays social security tax (6.2% of income) and medicare tax (1.45% of income). So, to the federal government alone, he is paying 27.65% of income (the employer pays another 7.65% on top of that).
But let’s go further. In addition to federal taxes, he pays state income tax (let’s conservatively round to 5% of income) and property tax and sales tax. Property tax varies widely, but if he owns a home, it’s safe to assume the individual would pay something around 3% to 5% or more of their income in property taxes. Sales tax varies by jurisdiction, but can be as little as 2% and as much as 9% … Let that sink in. After paying all other taxes, of the discretionary income he can spend, if he spends it on goods, he could be taxed another 9%.
Tally all of this up and it’s pretty easy to see that someone making $150,000 is taxed at a bare minimum, 35% of their income.
Ross E. Rochat