Do You Know Taxes Take 30% of Your Year?

CascadeNewLogoBy Kathryn Hickok

If every penny earned since the beginning of the year went to pay federal, state, and local taxes, by April 21 Americans would have worked long enough to pay this year’s tax bills (April 20 for Oregon). Tax Freedom Day is a calendar-based illustration of the cost of government which divides all taxes by the nation’s income. By this calculation, Americans will work 111 days in 2014 and pay 30.2% of their earned income to all levels of government.

But this is only what Americans actually pay, not what government spends. According to the nonpartisan Tax Foundation: “Since 2002, federal expenses have exceeded federal revenues….If we include this annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur on May 6, 15 days later.” That’s an additional two weeks of federal government spending paid for by borrowing.

Americans pay more in taxes ($4.5 trillion) than they do on food, clothing, and housing combined. The saying goes, you should “work to live, not live to work.” But the more government grows, the more Americans are working less to live and more to pay for runaway government spending. That leaves fewer resources to invest in the real engines of economic growth: private sector businesses that create jobs and produce goods and services for a market fueled by Americans’ hard-earned purchasing power.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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Posted by at 05:00 | Posted in Taxes | Tagged , , , | 36 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jack Lord God

    The 30% figure is pretty ridiculous, especially when taken in historical context of where taxes started out.

    I don’t think there is much changing it because of several reasons:

    Withholding – People are kept purposefully in the dark about how much they pay in taxes via withholding. If withholding were ended, tax rates would change within six months maximum.

    Low information voters. – We might not like it, but the vast majority of people now get their news through Facebook memes. As an example, we have the highest corporate taxes in the world and yet Facebook is a universe of people who think corporate taxes should be raised.

    Point of no return – We are now at the point where, because we have the most progressive income tax system in the world, close to half the population pays nothing in federal income taxes. That is a recipe for disaster in any civilization because there is no restraining force on the non payers demanding those who do pay give them more goodies. Eventually there becomes no point in being productive in society and people either give up or move away. We have started to see this already with moving jobs overseas, a record number of people giving up their citizenship and more and more people trying to offshore profits as rapidly as possible. Likewise we see more people taking, as in the midst of the fantastic Obama recovery we have more people on food stamps than ever before, and yet more efforts to extend unemployment benefits.

    The only conceivable change in any of this reasonably on the horizon is rising interest rates. Should interest rates go up substantially, payments on our debt go through the roof. This then starts crowding out discretionary spending, which hits the military first, but eventually ends such nonsense as two years of unemployment benefits.

    Unfortunately this also results in a severe blow to society, generally resulting in loss of world power status, the mildest example of which would be the Suez crisis effectively ending any claim Britain had to being a world power.

    Really the most interesting aspect of all of this is it is hard to see an historical example of a society turning this sort of thing around. Chile’s privatization of social security would be a partial example. However an example of a society realizing it cannot tax its way into prosperity and changing its social benifits programs both in scope and so as to discourage sloth rather than foster a non working but politically reliable underclass totally escapes me.

    • Eric Blair

      “Low information voters. – We might not like it, but the vast majority of people now get their news through Facebook memes. As an example, we have the highest corporate taxes in the world and yet Facebook is a universe of people who think corporate taxes should be raised.”

      Or, perhaps those low information voters know that the nominal corporate tax rate is the highest in the world, but the effective tax rate is not. According to the GAO (in July of 2013), the effective tax rate for profitable companies in the United States was 12.6%… or 16.9% if you factor in foreign taxes as well.
      Nice try.

      Money.CNN.com

      • Dick Winningstad

        Hmmm….. just a quick look at the GDP and tax revenues (Federal and local) for 2013 shows: $16.8 tera GDP, $5.4 tera tax revenues or 32%. No matter who pays, the consumer is the ultimate payer as taxes from business are added to the price of products/services. Certainly tax revenue from foreign sources off sets this a bit, but the 30% figure looks quite accurate.

        • Eric Blair

          I’m not disputing the 30% total on individual incomes, etc.. I was noting that Jack’s comment about the nominal tax rate did not take into account that very few corporations actually pay at that rate, and that the effective tax rate for corporations is actually much less.

          • Dick Winningstad

            And I was pointing out that taxes paid by companies, no matter the level, are passed on to consumers.

          • Jack Lord God

            Tax rate and effective tax rate is somewhat immaterial, the point is how we compair to the rest of the world. That’s the point that you are missing.

            I could get into Sarbanes Oxley, another little gem that has stifled IPO’s in this country and shifted them abroad but I doubt you have the mind for it.

            We are making ourselves less competitive in case all the jobs being shipped overseas hadn’t been noticed by you. .

          • Eric Blair

            Actually, I’ll have to disagree.. nominal and effective tax rates are very important, and it’s necessary to reflect what is really being paid, not what corporations are hypothetically paying. The numbers, and the comparisons, change when you talk about effective tax rates.
            I’m not sure the job loss is due to taxes, as much as it is due to a cheaper labor pool. Isn’t it true, in fact, that even if items are produced in another country, the profits made in the United States are still taxed? Wouldn’t that seem to argue that taxes have little to do with outsourcing labor? You could probably drop the tax rate to 3% and corporations would still go where labor costs are cheaper.

          • Eric Blair

            Here I was, all excited that you seemed to be willing to debate an issue in a reasoned manner. Then, I read below. Sadly this response was an aberration, and you resorted to your usual snark, hyperbole, and just being as unpleasant as you want. Why is that? Do you treat people face to face like that? Or do you reserve it for the internet? If you were to respond like you did above all the time, and didn’t give in to being rude and personally insulting people who disagree with you, would your head explode? Would the world end? Have you ever considered that the “deer in the headlights” response you frequently mention might be due to how you approach people, and not that they’re mesmerized by the facts you’ve presented? If you haven’t considered that, you might want to.

      • Gardenhomeboy

        Really who cares? We should end corporate income taxes altogether.

        http://www.npr.org/blogs/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate

        • Eric Blair

          Why would that be? Don’t corporations make use of public services paid through taxes? Roads, airports, police, fire, etc…?

          • Gardenhomeboy

            The people who own them and work for them do use those services. The corporation is just a contract between those people tax the people not a contract. Also it is economically bad to tax corporations for investment and growth reasons. Many economists agree. I linked to NPR for you. check it out!

          • Eric Blair

            And yet quite a few studies have shown that tax rates have very little to do with economic growth.
            I think taxing corporations is quite justifiable. We can argue about the rate, but I doubt that most people in this country would argue that they shouldn’t pay anything. I might (and I emphasize might) go along if stockholders and management are held financially accountable for the actions of the corporation.
            As for a corporation being just a contract, you’re going to have to get the Supreme Court to walk back a hundred plus years of history since, technically, a corporation is treated like a person. I wish they weren’t, but wishing isn’t changing anything.

          • Dick Winningstad

            Tax rates have little to do with growth? Isn’t France is driving is best and brightest out of the land due to tax rates? is not France stagnat economically due to high taxes? As was the UK in the 1970’s which did not begin to pull out until taxes were reduced?

          • Jack Lord God

            To be fair – the high tax rates in Britain did get us The Rolling Stones “Exile on Main Street” when they fled to France to avoid the taxes. So high tax rates can have an up side.

          • Dick Winningstad

            Well I’ll give you that! 😉

          • Jack Lord God

            “tax rates have very little to do with economic growth”

            This should clear up what I mean by low information voter.

          • Eric Blair

            LOL.. you can’t help yourself can you? It is just impossible for you to be nice and discuss anything in a calm and polite manner.

          • Gardenhomeboy

            The experts(economists) don’t think we should tax corporations and for good reasons. Here is another article for you:

            http://www.theatlantic.com/business/archive/2010/10/why-we-should-eliminate-the-corporate-income-tax/65351/

            I could really care less either way about “corporate personhood”. Corporations are made up of people and when they harm others they should be held accountable. strict and limited liability is an interesting debate in itself. I think in certain circumstances both are okay, it just depends.

          • Eric Blair

            So, a truck driver goes from FedEx.. and transports a product to one of their clients using public roads. Who gets taxed? The truck belongs to the corporation, yes? Doesn’t that imply that a corporation is more than a paper agreement, if the corporation can own property and real assets?
            How do you handle gas taxes? If the truck driver pays at the pump with a credit card, isn’t the corporation being taxed?
            If the corporation buys a truck in a sales-tax state, isn’t the corporation paying a tax?
            Is it only the corporate income tax that you’re against, or all corporate taxes?
            Would you be in favor of getting rid of the capital gains tax and taxing all dividend income as regular income?

          • Gardenhomeboy

            I am only speaking about corporate income taxes which are specifically scorned by economists. When it comes to using a particular service like roads you(or a corporation) should pay for use, but it shouldn’t be through income taxes instead I think either the gas tax or a usage tax would be best. The same goes for other services. IMO the corp. income tax is about plundering rather than paying for stuff we need. I also feel capital gains should be tax free as it is a similar tax to the corporate income tax in that it limits investment. I have no comment on taxing all dividends as regular income. My dividends were taxed if I remember correctly.

          • Eric Blair

            OK.. and sorry about peppering you with questions. Let me start out by saying that not all economists agree on whether or not corporations should pay income taxes.

            What about those instances where corporations use services that are funded through income taxes? What if they make use of the DOJ’s fraud unit? Or, the use of the court systems to declare bankruptcy, sue another corporation to enforce contracts or protect intellectual property? My understanding is that corporations use the court system much more than individuals.

          • sally

            No, they don’t. People pay, you dufus.

          • Eric Blair

            Well, depends. If a corporation is taxed, “people” aren’t paying since it’s not coming from a personal bank account, but rather from a corporation’s account.

          • Corporations don’t have some magic bank account full of money that doesn’t ultimately belong to individuals, be they employees, managers, customers, and/or owners/shareholders. When you tax a corporation its hard to determine which of those individuals actually bear the burden.

            So if we want to tax customers, enact a sales tax. If we want to tax employees, enact a payroll tax, etc.

            Government loves corporate taxes because it’s harder for those hit be those taxes
            to blame the real culprits, i.e. the politicians who enacted the tax.

          • Eric Blair

            No, the bank account is not magic, but it does exist. There are such things a corporate banks accounts, yes? And the money does belong to the corporation – as managed by the CFO, etc…
            I’m guessing that the money is actually “owned” by the share holders, but they’re not allowed to just go and make a withdrawal whenever they want to, correct? And, if the money is dedicated to a reserve account, I’m pretty sure it belongs to the corporation.

      • Jack Lord God

        Astonishingly bad try here but confirmation of low information voter status. Apparently it doesn’t occur to you that listing an effective tax rate really shows nothing, unless you compare effective tax rates to other countries.

        And, when we do, again the US is appallingly high.

        http://taxfoundation.org/blog/another-study-confirms-us-has-one-highest-effective-corporate-tax-rates-world

        Nice try, but you really don’t have the skill set for this argument if simply listing the effective tax rate was all that occurred to you.

        • Eric Blair

          Well, the ETR reported by the GAO is significantly different than the rate reported by the Tax Foundation. I noted that the Tax Foundation only studied six industries, so I have to wonder if they’ve cherry picked their data? But there is a rather large discrepancy.
          But what do I know? In your opinion, I’m just a low information voter. I’m so confused. So many different numbers. Aaarrggghhh! Please, please, please would you explain it to me Jack? I know that I try your patience by constantly disagreeing with you. It’s obvious because you get all mean and snarky. But I blame myself. I wish I was as brilliant and smart and wise as you are, but I just don’t have it in me. Please help me, Jack. Please. If I keep on like this I’ll always be a liberal. Conservatives like you are the only truly smart people in the world.
          lol

  • unemotional

    This is only the direct taxation. Some estimates say the “hidden” taxes –the inflated price of goods and services due to passed-on fees, penalties, compliance measures, excise taxes, employee taxes, and other mandates imposed on the manufacturers, distributors, retailers and other providers– could be as much as 30% of the “sticker price.” For example the average cell phone bill includes a number of difficult-to-trace payments to government agencies. Texas even sued Sprint because the company listed a state tax as a line-item on its bill rather than hiding it from customers. Utah uses what they call a wireless “fee” to fund its poison control centers, but the levy is really a tax because the government service benefits the general public regardless of cell phone ownership or usage. Seven states (New York, Kentucky, Indiana, North Dakota, Pennsylvania, Rhode Island, and South Dakota) impose sales taxes on wireless customers as well as gross receipts taxes on wireless service providers. Both taxes are ultimately borne by customers.

    States charge insurance companies a tax on the insurance premiums they receive from customers in that state and, of course, the insured pays that too.

  • Bob Clark

    You know what an ideal relation with government would be for me? It would be a cap on aggregate government spending and taxation not to exceed 30% of total U.S economic output on a rolling ten year average basis. In good economic times (above one standard deviation in GDP growth), government would accumulate reserves. In bad economic times (below one standard deviation), these reserves would be tapped.

    With this spending and taxing regulator, government could levy broad based taxes any way it likes. The long lived tug a war between those wanting a dominate private sector economy and those wanting a dominate government sector economy would be laid to rest.

    Well anyway such is a dream.

  • Sally

    Of course people don’t know. The vast unwashed are stupid.
    I say let them pay!!!

  • Eric Blair

    I would like to take this opportunity to thank both gardenhomeboy and Dick Winningstad for engaging in a civil discourse. We disagree, but at least we can act like adults when we debate. I wish the same could be said for others on this site.

    • Wil Burton

      “”What difference at this point does it make, Sen~or?

      ‘Sides that kick, BHO and HRC swear and lie like rugs around the crock and/or whenever their distemper moots it.

      Civil discourse? Count on the Dems to ‘tale’ it their way – butt, the GOP, always off course, of course!
      .
      Hiss Boom Blah, wail…

      A horse is a horse, of course,
      And no one can talk sense to a horse of course,
      That is, of course, the horse sounds like Eric Blair

      Go right to the source and ask the horse

      He’ll give the answer that you’ll endorse.

      He’s always on a steady course
      Talk to Mr. Blair.

      People yakkity -yak the street and waste your time of day.

      But Mr. Blair will never speak unless he has something to say

      A horse is a horse, of course, of course,

      And this one will talk until his voice is hoarse.

      You never heard of a talking horse?
      Well, at least one that doesn’t air like Seattle Slough at low tide.

      Well listen to this: Nuances are, He’s Mr. Blair.

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