Effective tax rate

[jc3900]

So, since the average rate is about 34%. That means anyone who is doing really well is paying 40+%. How in the world has our government come to this? Taking 40% of what someone makes year after year is just wrong. Just think if the average rate was 25%. That would mean you would have 9% more to save/invest. If you were making a 60,000 that would mean 5400 dollars more a year. Using an online investment calculator, investing 5400 dollars a year with a 9% return and 3% inflation would be 613,000$ (net of inflation) over 35 years. To bad people are to stupid to realize this and will continue voting for idiot politicians. Maybe someday someone from savingadvice will run for office.

[DebbieL]

In Canada there is a day in July (or maybe it's August) where they say that if you are the "average" earner, then from that point on your money is now yours (in other words, between income taxes, sales taxes, etc. over 50% of our income is going to taxes - yikes).

[jIM_Ohio]

Keep in mind the United States was formed by a bunch of englishman which were sick of paying their taxes.

Being taxed by your government, then finding a way to not pay it is the real American way since 1776.

[LivingAlmostLarge]

Our effective tax rate is like 6% for federal. It's crazy we had so many deductions this year it was wild! Our AGI was $110kish.

Gee paying $30k in tuition really seems to help. That and a large mortgage :P

[zetta]

AGI $168k
Federal: 12.5%
CA state: 4.8%

If I had stayed a SAHM instead of working part-time for six months:
AGI: $151k
Federal: 8.7%
CA state: 4.3%

Just goes to show what life is like in the phase-out zone!

[LivingAlmostLarge]

If it makes you feel better, we paid 5.3% state income taxes.

[srblanco7]

AGI $151,000
Federal Tax $19,600

Effective Tax Rate 13%

But we also paid over $8k in NYS income tax. Ugh.

[DebbieL]

We also don't get any deductions for mortgages here in Canada (not that I have one with the ridiculous prices in my city right now).

[Aleta]

This also doesn't include what some of us pay for private health insurance. No one mentioned the gas taxes. I wonder what we really pay when you add it all together including the health insurance which some countries have included in their tax base?

[jc3900]

Stop putting up bogus tax rates.

Please, look at some of the posts above. The "effective" rates that you guys are using don't include all of the taxes that you are paying. What about sales, property, state, medicare, and social security. The average rate that is paid by americans is 34%. That means if you are on the wealthy side, you are most likely paying higher than 34%. These numbers in the teens actually make me want to live in the United States, to bad they are false.

[jIM_Ohio]

Please, look at some of the posts above. The "effective" rates that you guys are using don't include all of the taxes that you are paying. What about sales, property, state, medicare, and social security. The average rate that is paid by americans is 34%. That means if you are on the wealthy side, you are most likely paying higher than 34%. These numbers in the teens actually make me want to live in the United States, to bad they are false.

That average is greatly skewed. 75% of all americans earn in 15% federal tax bracket or lower. Even if you are at top of 15% tax bracket, you are paying much less than 15% tax bracket because of the standard deduction and the fact that there is a 10% bracket for first amount of income under around 10k.

A foreigner critizing the US's tax system holds little water. Yes there are other taxes we pay, some of which are accounted for in effective tax rate. My 8% effective tax rate takes into account payroll taxes and property taxes, but does not take into account consumption based taxes.

[Joan.of.the.Arch]

They aren't false, jc3900. They are answering with regard to federal income tax, clearly the original topic of the thread. I understand you are wanting to make us aware that we pay more taxes than just federal income taxes, but I believe we are already aware of that. It is still interesting to see responses to the original question.

Debbie, I don't think most USA homeowners get to deduct mortgage interest, either. One third of homeowners have no mortgage, so of course no interest to deduct. Another portion have interest amounts low enough never be deductible. This is my case, due to taking only a small loan in the first place. Another portion may pay enough interest to be deductible in the early years of ownership, but lose that deduction in later years.

Aleta, someone *ahem* mentioned gasoline taxes.

[jc3900]

I just get so heated about the tax issue because virtually 80% of your tax dollars are going to waste. All the money that you fork over goes to pay interest on the debt, doomed entitlement programs, and an overextended military.

[DebbieL]

Well, I don't think there's actually any government that gets it right or will please everybody. We all pay our taxes anyways - what else are you going to do? In Canada, we do feel we are heavily taxed, but there aren't too many places I would rather live than in Canada or the USA based on general standard of living.

[Aleta]

Well, almost everybody pays taxes. The underground economy doesn't. This is one reason why Fair Tax would be useful to make sure that everyone pays taxes. It would be one way to flush the money out and possibly help with the tax situation.