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Are We Being Taxed to Death?

Posted By Miranda Marquit On 02/06/2013 @ 12:10 pm In Taxes | 31 Comments

During the election season this year, there was a big deal made about how almost 50% of Americans don’t pay taxes. Endless soundbites about “the 47%” made the rounds, and there was quite a to-do about how more people should be paying taxes.

However, what some people forgot in the debate is that the number cited refers to federal income tax. While not everyone is paying federal income tax, nearly every American pays some taxes throughout the year. That’s because federal income tax isn’t the be all and end all of tax liability.

Other Taxes Americans Pay

There are plenty of other taxes paid by Americans, often in the form of state and local taxes. Indeed, the Institute on Taxation and Economic Policy points out that the bottom fifth of taxpayers pay about 12.3% of their incomes in state and local taxes. The top fifth, however, pay about 7.9% of their incomes in state and local taxes. So, even though some might not be paying federal income taxes, many of them are paying taxes on a more local level. (There are states that don’t collect income tax at all, though.)

That’s not the end, though. Even those who manage to avoid federal income tax liability still end up paying payroll taxes for the most part. And, with the payroll tax cut [3] possibly expiring, the amount paid could go up for just about everyone. Once again, the percentage of income paid when it comes to the payroll tax differs between those considered middle class and those at the top of the income pile. Since Social Security taxes are only collected on the first $113,700 in income in 2013, as your income goes up, you pay a smaller percentage of your income toward payroll taxes.

Other taxes that many Americans end up paying include:

  • Gasoline taxes: Whenever you pay for gas, you pay taxes. You are charged a federal tax, as well as a state tax.
  • Sales taxes: Most states charge a sales tax, and many local areas also charge their own sales tax. So every time you buy something, you pay a tax.
  • Taxes on travelers: There are some states and localities that charge taxes on travelers. So, if you stay at a hotel, there might be a room tax added. And, of course, there are taxes charged when you buy airfare, and participate in other types of travel purchases.
  • Property taxes: When you own property, you generally have to pay taxes on it. This includes your home, or land that you own. In some states (like my state of Utah), you also pay a property tax on your car when you register it for a new year.

And, of course, one can’t forget federal and state estate taxes and inheritance taxes. There is also a gift tax when you give large money gifts that are beyond the scope of the exemption.

Before you decide that a large portion of the population isn’t “paying taxes,” the reality is that you are probably wrong. Your fellow Americans may not be paying federal income tax, but they are probably paying other taxes.

(Photo: Tax Credits [4])


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[3] payroll tax cut: http://www.bargaineering.com/articles/expiration-payroll-tax-cut-cost.html

[4] Tax Credits: http://www.flickr.com/photos/76657755@N04/7027608495/

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