Remember when we thought a 50% effective tax rate in some northern European countries seemed outrageous. Well here ya go.
If you file individually and earned just $31,850 in 2007 your federal tax rate was 25%. Your Social Security tax was 6.2% and Medicare added 1.45%. If you live in all but 9 states, you also incur a state tax liability that varies between 3% - 9.3%.
So far we are paying between 28% - 34.3%
We also pay sales tax on pretty much everything we buy. That's generally about 8.25% And if you earn around $32,000 per year, I am pretty sure you are spending every bit of it to keep the wolves from the door so it too is effectively an income tax. That means that right here in the good old USA we are paying 40% tax. We won't even discuss the 50 cent per gallon fuel tax (for now.)
So what do you do about this situation? Well, first I suggest that you fire anyone that you ever voted for in any local, state or federal election. They are all complicit in this grab for YOUR cash. Some tax is necessary, but is it really necessary to take almost half of the salary of a school teacher, bus driver, and secretary? Where is all this money going?
"Vote Gridlock" is what I say. When too many Democrats are in office, they enact whatever spending plan they want and it all comes out of your pocket. Ahhhh, but when the Republicans are in power, guess what... they do the exact same thing. The only way to stop them is to try to make sure no one has the advantage and we can only do this by keeping the Congress as close to 50/50 as possible and hoping that a few from each party will cross over when the really worthwhile ideas emerge from the noise.
There is one other thing you can do if you are self employed or retired. Be careful about what you earn. Stay on the right side of the delineations in the federal tax schedules. In 2008 those delineations will be as follows;
Taxable income -> Fed Tax Rate
$0 - $ 8,025 -> 10%
$8,026 - $32,550 -> 15%
$32,551 - $78,850 -> 25%
$78,851 - $164,550 -> 28%
$164,551 - $357,700 -> 33%
$357,701 - $lots more -> 35%
Staying below one of these lines in the sand can save you thousands. Good luck