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: Fri, 28 Aug 1992 17:17:41 GMT

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%
>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%)  Second, we should also recall that income above $48,000 is not
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.  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
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)
>
>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.

-- 
"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
Xref: sparky talk.politics.misc:42493 alt.rush-limbaugh:4037