Quick Tax Calculation

For the average worker, all your income from January to the middle of May goes to paying all forms of taxes. That's about 37% of annual income. It includes federal, state, local, sales tax and a few others. Let's compare the big ticket items:

Taxes 37%
The average mortgate 30%
The average car less than 15%

For most people, these are necessities. You can substitute apartment rent for a mortgate and in some cities you can use public transportation. However, rent and taxes are higher in big cities while public transportation does cut into the car savings.

The gov has done a nice job of making mortgages more affordable, but this has put Fannie Mae and Freddie Mac in the red, requiring billions of tax dollars. So while mortgage payments are somewhat lower, taxes are somewhat higher.

About 25% of your paycheck covers all remaining living expenses, activities and savings.

So you are sitting in your car, driving home to your mortgage, where you are going to file your tax returns and you turn on the radio. How often do you hear about a new sales tax, a new state tax and new federal spending, larger deficits? And when you hear about a tax cut, is it a temporary measure, a stimulus or a really enduring cut? The answer is always in one direction, toward higher taxes. So the above percentages will quickly get out of date.

Two questions:

• By far, you are paying more for your government than anything else. Are you getting a good deal? And I mean for you to ask that question every year. You might have liked that road or this park, that regulation, or this subsidy for another shopping center. That's just one year. What about the others? We have to stop thinking of each project as permanent.
• How do you feel about the deal you are getting if all your taxes eventually rise by 50% in real dollars? That is, from 37% to 55% of yearly income. You will then be handing over your paychecks from January 1 through July 21. You'll have to compensate by moving to a sharply reduced standard of living. The tax changes are happening now, the effects on your standard of living are slight in any one year, but they are already happening. Is that the deal you were expecting?