From: perlman@qso.Colorado.EDU (Eric S. Perlman)
Subject: Re: taxes. (Was: Re: A Simple Thought Experiment)
Organization: University of Colorado, Boulder
Distribution: na
Date: Mon, 31 Aug 1992 21:31:37 GMT

In article <1992Aug31.180037.28472@clpd.kodak.com> fischer@li.serum.kodak.com (Chris Fischer (x39613)) writes:
>In article <1992Aug28.171741.7029@colorado.edu> perlman@qso.Colorado.EDU (Eric S. Perlman) writes:
>>In article <1992Aug28.161759.12965@mcnc.org> ekp@mcnc.org (Edward Pavelchek) writes:
>>>Because of different needs for housing, purchasing patterns, graduated
>>>rates, etc, a % tax rate number cannot be achieved.   A better way of
>>>approximating one is to look at total government expenditures.  Roughly,
>>>the Federal Budget is 25% of GDP, and the sum of state and local
>>>spending is ~60% of the Federal, so that the total gov spending is
>>>40% of GDP.  But due to the deficit, tax load is 35%.  Whether this is
>>>sales tax, property, cigarette or FICA, it has to come out of somebody's
>>>income. 
>>
>>Very true.  To be fair, are school districts included in this?
>>
>>>All you have to do is figure out how much of your income is exempt from
>>>taxation, and how much of the national income is exempt.  Not that much
>>>of either for the average person, as it turns out.
>>>
>>>A study of some 40 cities came up with the highest non-federal 
>>>tax rate of 14.7%. (Milwaukee, 1988)
>>>
>>>The highest marginal tax rate?  Including the FICA your employer pays?
>>>
>>>FICA         15%
>>>FED          33%
>
>With the phase-out of deductions, this is equivalent to 35% for
>many people.
>
>>>State (HI)   10%
>>>Property (1) 10.7%
>>
>>First of all, this is deceptive, since you only get 15% FICA if you
>>count the matching amounts paid by the employer (the employee only pays
>>7.51%)  
>
>Old data.  Currently 7.65% employee, 7.65% employer.  For the self
>employed, they have to cover both.

Ok.  My point essentially remains.

>>Second, we should also recall that income above $48,000 is not
>
>Old data.  This year it is close to $55,000 for OASDI (social security).  
>For medicaid it is $125,000 (medicaid is 1.45%, Social security is 6.20%).

Check the tax brackets - while my data was a couple of years old, the
point I was trying to make is still valid.  55K/yr is still lower than
the low end of the 33% bracket.

>>subject to FICA - and that is lower than the low end of the 33% bracket.
>>Third, as others have already pointed out, every state in the union
>>allows you to deduct the amount of federal income tax paid from your
>>state taxable income.  
>
>Not in New York State.

That's news to me.  

>>All of these reduce the amount quoted above
>>significantly.
>>
>>Finally, it would be useful to re-iterate the fact that Social Security
>>is currently not only paying its way with no deficit, but also *making*
>>money for the government.  Indeed, this is seen in the current deficit
>
>This doesn't effect that fact that I will probably not see a penny
>of SS.  Therefore it goes into the great government spending machine as
>far as I am concerned.

Hmm?  In case you hadn't heard, Social Security is making about 80-100
Billion / yr.  That's a *profit* of about 25%.  If the government
treated it like the insurance premiums or trust funds they are they
would be socked away into a bank account - long term - and earn some
interest.  Further, Social Security probably won't go into a deficit for
at least a quarter century.  Not according to data I've seen.

>>rates, which are about $80B/yr lower than actual because of the fact
>>that FICA tax collected is counted in with *general revenues* instead of
>>being counted as the trust fund and insurance policy that it is in fact.
>>
>>>Sum .687/1.075= 64% (to normalize for FICA you never see, paid directly)
>
>Nothing needs normalizing.  If the govt. did not take 7.65% from my
>employer, I could be getting that money.  It is a stealth pay cut.

No, it's not.  It's an insurance premium.  Employers *can* opt not to
participate in FICA (I've been employed by one of those).

>>>Now out of the last dollar you earn, you are going to go out and buy
>>>cigarettes, or whiskey, or gasoline.  Of course, you only have $.36 left
>>>of the last dollar you earned, but you buy some dirt cheap rum 
>>>(~70% BATF tax(2), and 8% sales tax) - value of rum received was equal
>>>to (.36/(1+.08))*.3 = $0.10
>>>That means your marginal tax rate was just 90%.
>>
>>Of course, in most states, food is not subject to sales tax, and in many
>>people's case, a lot of what they spend goes for rent and food - which
>>are not taxable.  In fact, in a number of states, the deposit a renter
>>pays on his apartment must be treated as if it were a bank deposit -
>>e.g. you get interest back on it comparable to the going passbook
>>savings rate.
>
>But most of what I buy also covers the taxes paid by the companys
>I buy from, and the parts that they buy also has taxes built into 
>them.

Granted.  That's part of the cost of doing business, no?  


-- 
"How sad to see/A model of decorum and tranquillity/become like any other sport
A battleground for rival ideologies to slug it out with glee." -Tim Rice,"Chess"
     Eric S. Perlman 				 <perlman@qso.colorado.edu> 
  Center for Astrophysics and Space Astronomy, University of Colorado, Boulder
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