How much tax does a single dollar generate?

Just a curious question, is there any estimate out there on how much tax a single dollar generates for the purpose of taxes?

Think about this. I take a freshly printed dollar, take it down to the store and buy a candy bar. I pay a few cents tax, but the life of that dollar isn't done. It gets given back as change to the next customer who then takes it to the super market to buy groceries and again pays a tax on it.

So I am just curious if there are any estimates on this number.

It's just mind blowing how much the government generates off of our money.

 

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Zero, the tax is on the product, not the currency. The $ is only the unit of exchange.

 

Looked at the same way, it's equally mind-blowing how much money individuals generate off our money. You got $1 at work, you made $1 (less the tax). You spend it on a candy bar, the guy at the store made $1. He pays an employee the dollar, he made a dollar. So all the time your percentage of taxes is adding up, there's a similar tally of income adding up, all around the same "dollar bill" if you will.

 

Sounds like you're talking about velocity of money. Higher velocity equals higher taxes because it's used to buy more goods.

 

Is that the term, I hadn't heard it.

 

I see this scenario used frequently as the foundation of a "we're taxed too much" argument. It's wrong, though, and derails useful discussion.

That same dollar could easily be spent a hundred times in the course of a month. If there's a 5% sales tax each time it's "spent", does that mean that the government gets $5.00 in tax revenue from each dollar that it prints? Of course not.

 

True, you cannot count velocity. However, by my math our tax rate is trajic. I pay about 33% Federal income, another 11% State income, then about 15% Fica, (employer "pays" half, but it really comes out of my pay), then my property taxes take another 4.2%. So, before things like Sales taxes, gas tax, "fees", etc I am already paying 62.2% of my income. If I assume I spend the rest I am over 70% due to sales taxes and fees. Really? And now "some" claim we are undertaxed and need to pay more? Europe does not have nearly this high of a tax rate, and get free college education, free healthcare, etc. I wish a politician would talk about TOTAL taxation for a change.

 

Yeah, they argue that, but its not true. When I calculate budgets for employee compensation, I take into account all taxes I as an employer has to pay. I count that money just like its in the employee's paycheck, so in reality if they did away with the tax I could afford to pay the employee more. Nothing is free, in the end it NEVER comes out of the employer's pocket, it comes out of the employee's in lower pay rates.

 

I agree and do the same calculation each year, I'm over 50% and I don't think I make much money.... I know your calc is back of the envelope, but the federal rate of 33% I assume is marginal, your total federal take is probably less because all your income is not taxed at the 33% rate. I could be wrong because I don't know how much you make, but I think total federal tax of 33% starts at around $800,000 in wage income. If that is you, congrats!

Going the other way, you're not including the various costs of regulation, things like stricter emissions laws for cars, which require additional maintenance and shorter lifespan. EPA changes to HVAC requirements which make furnace/AC units obsolete quicker and provide shorter lifespans for the products. The list goes on... all things which cost us money but don't show up in tax rate calculations.

 

Not arguing the over all "that's a lot of tax", but 33% Fed tax is rarefied air though. For 2014 that's equivalent to a gross income of about $650K after deductions.

 

Your confusing tax incidence with tax burden. The wage earner bears the total tax burden of the FICA tax, the full 15.3%, even though the tax incidence splits this between the employer and employee.

 

You and Beef are probably right. Maybe I am more around 28-29% all inclusive. Still, it works out to be about two thirds of my income in taxes, not even talking about regulation costs. Any talk about people being undertaxed in this country is a myth. The only time I would agree to this would be in the case of hedge fund managers. Allowing them to classify their income as long term capital gains rather than income IS a "loophole" I would like to see closed. To me, that one is simply untenable and unethical.

 

But as others are saying, to pay 33% Federal, your total income needs to be north of 600k sooo, since you only pay 15% for the first 118k in 2015 (both halfs) the total FICA is around 17k which is a mere 2.8 % of your income. In addition, at least part of that money will come back to you in the form of Social Security checks.

Also, do your really believe that company would just give their half to the employee, if they didn't need to pay it!!!! The experts say doubty

 

I budget for total expenses. If taxes were lower, I would give managers more room to increase salary. Also remember there is no cap at all on Medicare costs.

 

But all I am really saying is the tax picture is not nearly as bleak as you painted it. I think we can safely assume you are not paying close to 15% FICA. Also, you failed to mention Investment income. That is only taxed at 20 % with nothing at all going to FICA.

You are probably paying less than 11% state also, even if you are in the highest bracket. Plus you calculated that 100% of you remaining income was being taxed with sales tax. That is not even close to being true as most people's biggest expense, their mortgage, has no sales tax. In most states food and clothing don't get taxed either.

So when all is said and done taxes may be high, and you may not like them, but not nearly as bad as you suggested at 70%. Just trying to keep you honest Chris

 

Yes, I will not disagree. Fair enough points. Btw, small point. Most states DO tax clothing, but few tax food. So what, would 60% or so be fair? Still a long ways from what the politicians claim is our tax burden in this country. How could anything over 50% cumulative, meaning they are taking more of your paycheck than the person who earned it, ever be considered "fair"?

 

On the investment income, check Form 8960

With a net investment income tax of an additional 3.8%

 

Individual