How much tax does a single dollar generate?

I'm bothered by the same dollar being taxed multiple times. I earn a dollar and pay income tax. I take what's left and buy a car and pay sales tax. Then at the end of the year I have to pay personal property tax on the car.

 

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Ugh. Now, see, Chris, I'm one of your biggest fans in nearly every area here, but this is exactly the kind of argument I was complaining about.

First, as best I can tell, FICA is now 6.2%. It used to be 7.5%. But it only gets withheld on the first $118.5K.

If you're in the 33% bracket, you're making at least $189K. That means your actual FICA percentage is a good bit lower -- closer to 3.9% each for you and your employer. The more you make, the lower that percentage gets.

And 33% is your marginal rate -- you only pay that on the amount you earn over $189K. If you earn exactly $189,301 (by the chart above), you pay $46,075.25 to the Feds -- that works out to a bit over 24%.

State tax, at least if it works for you the way it works for us, gets charged against your earnings minus Federal taxes. So you aren't paying 11% on $189,301, you're paying it on $189,301 - 46,075.25 - 7,347.00 = 143,218.40. 11% of that is $15,754; that's only 8.3% of your $189,301 gross income.

So, at this point, you've paid 24% + 3.9% + 8.3% = 36.2% of your income in Federal and state taxes. Property taxes aren't based on your income, of course, but we'll assume that they amount to 4.2% of that $189,301. That means you're down 40.4%, not 62.2%. Even if you double up that FICA number, you're still under 45%.

And if you're playing in this range, with a solid six-figure income, I have to assume that you're wise enough to find every tax break that's available to you, or better yet, hire professionals to do it. Mortgage interest? Retirement contributions? All of those come off the top, before you even determine your bracket.

Now, I might have some details wrong here; my wife, for whom I'm thankful every day, takes care of doing our taxes. But the simple addition of marginal rates, coupled with ignoring actual regressive taxes (that cut off above a certain income level), is always going to give artificially inflated rates. It's misleading, and distracts from the real tax issues.

Without venturing into dangerous political waters, I'm going to guess that you and I differ strongly on some of those issues as well. I certainly think that many dollars the government collects get spent on the wrong things, and the ones spent on the right things are often spent inefficiently. But it really bugs me that, in order to figure out the lowest amount of tax you can legally pay, you basically need to be wealthy enough to hire expert consultants. (Actually, it's worse than that; only the really wealthy get the lowest tax rates of all, by hiring politicians.)

 

Well I will argue until I am blue in the face that both halves of SS/Med comes out of the employee's paycheck. It is how I budget my Labor rates, as well as all CFO's I know. We only care about all in costs of hiring someone, not who gets the money.

So, giving you all of your points, how am I not at least over 50% mark? You have to count sales taxes, gasoline taxes, fees, etc. We have not even BEGUN to talk about how every American pays much higher prices of everything they buy due to Corporate income taxes, which of course are simply passed along to all consumers in the form of higher prices. Corporations aren't stupid, there is a direct correlation with retail prices and corporate tax rates. Raise the corporate tax rate, prices for everything go up.

I am betting we are not far apart on spending priorities sir, but this is not the forum to discuss them. If we ever meet at a show I would love to sip a cold coke and discuss them.

 

This is getting so far off track as to the actual question I think confusion is being created.

Simply put what is the average amount of spread tax revenue generated for the government off a single dollar bill in it's lifetime?

A physical Dollar Bill changing hands whether as individual income, buisiness income or gift so fourth. The answer is dependent on if the dollar itself is changed hands and spread on income tax reports by every register the physical dollar bill is recorded on for taxes or if it was taken by an individual and stored under a mattress so fourth. It is a variable undetermined unless the bill is founded and followed through it's life until destruction. This is why it is illegal to destroy money because it makes taxable revenue "money" for the government.

What I know is I have heard from a Federal Reserve Economist is that an avaerage $1 bill can make through it's lifetime over $100,000.00 in tax revenue for the Goverment if the velocity is good and the bill remains unharmed. Or it will simply be destroyed in a fire by a individual and produce far less. I hope this answers the original question.

 

This is getting so far off track as to the actual question I think confusion is being created.

Simply put what is the average amount of spread tax revenue generated for the government off a single dollar bill in it's lifetime?

A physical Dollar Bill changing hands whether as individual income, buisiness income or gift so fourth. The answer is dependent on if the dollar itself is changed hands and spread on income tax reports by every register the physical dollar bill is recorded on for taxes or if it was taken by an individual and stored under a mattress so fourth. It is a variable undetermined unless the bill is founded and followed through it's life until destruction. This is why it is illegal to destroy money because it makes taxable revenue "money" for the government.

What I know is I have heard from a Federal Reserve Economist is that an avaerage $1 bill can make through it's lifetime over $100,000.00 in tax revenue for the Goverment if the velocity is good and the bill remains unharmed. Or it will simply be destroyed in a fire by a individual and produce far less. I hope this answers the original question.

 

Please keep in mind that the title will attract individuals who will want to discuss it in a political vein like " My candidate will.....". That will be detrimental, so try to induce them to edit before such. Thanks, Jim