Once again, American taxpayers are being asked to perform a grim annual ritual. Or else you'll be paid a visit by the dreaded tax man.
The grim ritual is the annual filing of federal income tax returns. And in all but nine states, they'll also have to file state income tax returns.
But that's nowhere near all the taxes that Americans have to pay. As an American, did you ever wonder how much of your income goes to pay all the taxes you pay? It's not just federal and state income taxes. That can include local income taxes, Social Security and Medicare (FICA) taxes, property taxes, utility taxes, sales taxes, excise taxes, etc.
What percentage of your income is going to pay all those taxes?
Answering that question is why we've built the following tool. It identifies the major taxes most Americans will encounter during the course of a year and can be used to estimate how much of your annual income is really sucked up by governments at every level you might encounter. If you're reading this article on a site that republishes our RSS news feed, please click here to access a working version of the tool! And if you're already here, you can get started by entering any numbers of interest into the tool or running the default scenario we've entered. Let's get to it!
For the default example, we've set the annual income to be a little under the median household income for the United States as of December 2021, so it represents an income that half of American households make more than, and half of American households make less than.
For fun, we set our hypothetical median income earning household in Philadelphia, Pennsylvania, where residents are subjet to federal, state, and local income taxes. Since the city and county for Philadelphia is one and the same, we've only entered taxes paid at the county level.
We also set our median household up in a home that cost $304,000 in 2021, which happens to be the median sales price of a single family home in Philadelphia, adjusting the property taxes accordingly, including the city's school district taxes.
But wait, there's more! Our median income-earning household will pay water/sewer/stormwater, electricity, natural gas, telephone/mobile, cable/internet, solid waste/trash, and other utility taxes!.
Think that's all? Guess again! There are sales taxes to be paid too, for the state, county and/or city. There's also excise taxes like those for gasoline and others, which are paid by those who pay for alcohol, cigarettes, soda, parking, etc. There are so many we can't easily incorporate them into our tool and keep its user interface manageable, which is why we've had to add categories for "other" in a couple of spots!
Just for the record, we've omitted things like sales taxes for real estate and vehicles, mainly because they're usually not regular annual events for most households.
So how much of a median income earning household's income would be consumed by taxes if they lived in Philadelphia? Our tool conservatively estimates 37.3%.
How does your household compare to that? Would living somewhere else make a big difference? These are questions our tool can help you discover. Go ahead. Take it for a test drive. The Tax Man already has.
Image credit: Photo by Jon Tyson on Unsplash.