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For years I’ve been saying that we Americans pay among the highest amount of taxes in the entire world. Invariably, whenever I say that, a few folks get upset and tell me I’m wrong because of some article they read once. Or something. Today I’m going to lay out specifically why Americans pay among the highest taxes in the world, with specific breakdowns of the taxes I’m talking about, and with links to my sources. When I say Americans pay among the highest taxes in the world, I’m talking about the total amount of taxes the typical American pays as a percentage of his income. I’m not talking about anything else.
-By Caleb Jones
I am not talking about taxes as an amount of government revenue.
I am not talking about taxes collected as percentage of GDP.
I am not talking about taxes collected per captia.
I am not talking about taxes billionaires pay. I'm talking about the typical working American.
I’m not talking about tax rates. The federal income tax of 25% (or whatever) doesn’t fucking matter at all because the typical American pays a crap-ton more taxes than just federal income tax, as I’m about to demonstrate.
None of that stuff above matters. If you’re paying 40% of your total income in taxes, who gives a shit what your GDP is or how much total federal receipts are going to be this year? I certainly don’t, and you shouldn’t either.
I also did not say Americans pay the highest taxes in the world. I said they pay among the highest. There are a few areas in Europe, particularly in Scandinavia, where those crazy socialists pay even more taxes than we do. We’re still up there though. Out of the 196 countries on the planet, Americans are easily in the top ten highest taxed people on Earth. Not number one, but definitely in the top 5%. I also didn’t say that every American pays a lot in taxes. I’m talking about the typical American. I will be more specific as I go along.
The typical American pays these types of taxes on a regular basis: Federal Income Tax: This is a flat income tax rate of 10%, 15%, 25%, 28%, 33%, 35%, or 39.6%, depending on how much money you make[*]. America stupidly uses the Marxist concept of progressive taxation, in that the more you make, the more you get taxed. Since the US government loves to make things needlessly complicated, the rate is actually staggered, so if you make a little over $37,650 per year, the amount under that is taxed at 15%, and the amount over that is taxed at 25%.
Let’s look at the typical American. According to the Census Bureau, annual median personal income is $31,099[*]. Such a person is going to annually pay $925 on the first $9,275, and 15% on the remainder ($21,824) which is $3,273, for a total tax bill of $4,198, which is 13.4% Remember, if he makes more than $31K per year, he’s going to pay a lot more than 13.4% in federal tax, but I’m being very nice here.
Payroll Taxes: This is another income tax Americans pay that covers our bankrupt welfare services; Medicare and Social Security. Pretty much every working American pays these taxes, since everyone who makes under $118,500 a year are forced at gunpoint to pay them[*]. (And before you say we aren't "forced at gunpoint" to pay our taxes, yes we are. Stop paying your federal taxes, wait a few years, and watch what happens. Guys with guns will come to your house.)
Social Security is 12.2%, Medicare is 2.9%, for a total of 15.1%. However, half of this is paid by your employer (7.5%, and the other 7.5% is paid by you), but that’s not really relevant because if your employer didn’t have to pay that 7.5%, he’d just give that money to you and your pay would increase accordingly. If you’re a left-winger, I suppose you could ague that Employers Are All Evil™ and that they would instead just tell you to fuck off and keep this money for themselves, but that’s unlikely to occur across the board. You have to admit that some of that money would come back to the employee, anywhere from 1% to 7.5%. Therefore, payroll taxes is 7.5% plus an additional 1% - 7.5% for a total of 8.5% - 15.1%
UI Tax: Another income tax Americans are forced to pay is for unemployment insurance. The federal government charges you 6% of your first $7,000[*], then your state charges you an additional amount listed here based on your state. We could use an average of all 50 states for an average UI tax, but that wouldn’t be accurate since the vast majority of Americans live in a much smaller number of states[*], and as usual, the bigger the state, the higher the taxes. Since the majority of Americans live in the top 27 states, the average UI tax rate for those 27 is 4.1. If you’re a nitpicker or math nerd, I realize this isn’t 100% accurate since it’s not a weighted average, but it’s close enough. (I know that drives you guys insane.) If anything, it’s going to push this average down, not up, so again, I’m being very generous here. I won’t even include the federal UI tax into any of these calculations, just the state UI tax. Therefore, the typical American pays around 4.1% in UI tax.
State Income Taxes: Another tax most Americans pay is yet another income tax, this time to their state government. This is in addition to taxes collected by federal government, an important point I'll circle back to in a minute. Not all states have an income tax, but 43 out of the 51 do in some way (I’m including Washington DC in there), so the typical American does indeed pay this tax. The list of all the states and their tax rates are here. There are such huge differences that getting an accurate average for the typical American is going to be difficult. To get a workable estimate, I took the 27 most populous states and calculated a median average for a guy making around $31K per year. That resulted in 4.6% the typical American pays in state income taxes. (If you want to get more accurate figures, feel free to do your own math.)
I also did not say Americans pay the highest taxes in the world. I said they pay among the highest. There are a few areas in Europe, particularly in Scandinavia, where those crazy socialists pay even more taxes than we do. We’re still up there though. Out of the 196 countries on the planet, Americans are easily in the top ten highest taxed people on Earth. Not number one, but definitely in the top 5%. I also didn’t say that every American pays a lot in taxes. I’m talking about the typical American. I will be more specific as I go along.
The typical American pays these types of taxes on a regular basis: Federal Income Tax: This is a flat income tax rate of 10%, 15%, 25%, 28%, 33%, 35%, or 39.6%, depending on how much money you make[*]. America stupidly uses the Marxist concept of progressive taxation, in that the more you make, the more you get taxed. Since the US government loves to make things needlessly complicated, the rate is actually staggered, so if you make a little over $37,650 per year, the amount under that is taxed at 15%, and the amount over that is taxed at 25%.
Let’s look at the typical American. According to the Census Bureau, annual median personal income is $31,099[*]. Such a person is going to annually pay $925 on the first $9,275, and 15% on the remainder ($21,824) which is $3,273, for a total tax bill of $4,198, which is 13.4% Remember, if he makes more than $31K per year, he’s going to pay a lot more than 13.4% in federal tax, but I’m being very nice here.
Payroll Taxes: This is another income tax Americans pay that covers our bankrupt welfare services; Medicare and Social Security. Pretty much every working American pays these taxes, since everyone who makes under $118,500 a year are forced at gunpoint to pay them[*]. (And before you say we aren't "forced at gunpoint" to pay our taxes, yes we are. Stop paying your federal taxes, wait a few years, and watch what happens. Guys with guns will come to your house.)
Social Security is 12.2%, Medicare is 2.9%, for a total of 15.1%. However, half of this is paid by your employer (7.5%, and the other 7.5% is paid by you), but that’s not really relevant because if your employer didn’t have to pay that 7.5%, he’d just give that money to you and your pay would increase accordingly. If you’re a left-winger, I suppose you could ague that Employers Are All Evil™ and that they would instead just tell you to fuck off and keep this money for themselves, but that’s unlikely to occur across the board. You have to admit that some of that money would come back to the employee, anywhere from 1% to 7.5%. Therefore, payroll taxes is 7.5% plus an additional 1% - 7.5% for a total of 8.5% - 15.1%
UI Tax: Another income tax Americans are forced to pay is for unemployment insurance. The federal government charges you 6% of your first $7,000[*], then your state charges you an additional amount listed here based on your state. We could use an average of all 50 states for an average UI tax, but that wouldn’t be accurate since the vast majority of Americans live in a much smaller number of states[*], and as usual, the bigger the state, the higher the taxes. Since the majority of Americans live in the top 27 states, the average UI tax rate for those 27 is 4.1. If you’re a nitpicker or math nerd, I realize this isn’t 100% accurate since it’s not a weighted average, but it’s close enough. (I know that drives you guys insane.) If anything, it’s going to push this average down, not up, so again, I’m being very generous here. I won’t even include the federal UI tax into any of these calculations, just the state UI tax. Therefore, the typical American pays around 4.1% in UI tax.
State Income Taxes: Another tax most Americans pay is yet another income tax, this time to their state government. This is in addition to taxes collected by federal government, an important point I'll circle back to in a minute. Not all states have an income tax, but 43 out of the 51 do in some way (I’m including Washington DC in there), so the typical American does indeed pay this tax. The list of all the states and their tax rates are here. There are such huge differences that getting an accurate average for the typical American is going to be difficult. To get a workable estimate, I took the 27 most populous states and calculated a median average for a guy making around $31K per year. That resulted in 4.6% the typical American pays in state income taxes. (If you want to get more accurate figures, feel free to do your own math.)
In addition to state income taxes, some Americans pay yet another income tax which is levied by the city in which they live. This is in addition to the federal and state income tax(!). New York City residents pay this, for example. However, most cities in the US don’t do this, so I’ll be nice and just keep a city income tax out of this discussion. Just remember that millions of Americans pay this tax on top of everything else I’m listing here.
Okay, those are all the income taxes Americans pay, but they’re still not done paying! Once they get paid, they continue to pay a shitload more taxes. Let’s continue…
Property Taxes: Every American pays property taxes. Even if they rent, they still pay this since property taxes are charged to the renter of a property. Even if you purchase your own home and pay off the mortgage, you still must pay property taxes every year or the government takes your house away. This is why it’s often said that Americans don’t actually own anything; they just rent it from the government. Even worse, property taxes increase just about every year. Every state charges its own rate of property taxes, listed here. According to the U.S. Census Bureau, the typical household spends $2,127[*]. Since the typical American makes about $31K per year, that’s an estimated effective tax of 6.8%.
Corporate Taxes: America has among the highest corporate tax rates in the entire world. “But wait a minute,” you say, “The typical American doesn’t own a company, so he pays no corporate tax!” Wrong. At least some of the cost of corporate taxes are passed down to the consumer. It’s standard business practice, and I’ve done it myself. If I’m a business owner and I want to make X in take-home profit, but the government is going to take Y in corporate taxes, that’s an expense I have to cover in order to make my X. Therefore, I’m going to charge the customer more than X in order to make up the Y. I’m not just going to eat the Y.
I may not charge exactly Y extra on my prices, but I am going to charge at least some extra to make up that expense. That’s what an effective business owner does. Thus, yes, you as the customer are indeed paying corporate taxes, at least indirectly. America’s corporate tax rates, again among the highest in the world, range from 15% to 35%[*]. As many left-wingers point out, there are lots of loopholes that big corporations take advantage of that can reduce this corporate tax rate. This is true. The Department of the Treasury estimates that the “real” average corporate tax rate is around 22%[*]. Some of this is passed onto the consumer as a hidden sales tax, of anywhere from 5% to about 20%. And speaking of sales tax…
Sales Taxes: 46 of America’s 51 states (again I include DC) charge people sales taxes on everything they purchase, with the occasional exception of some groceries. On top of the state, most counties and/or cities impose yet another sales tax on top of the state’s sales tax. Isn’t that nice? A table that combines both of these taxes per state is here. Again, using the top 27 most populated states, the median average state and local total sales tax on Americans is a whopping 7%.
Excise Taxes and other Hidden Taxes: On top of all that crap, Americans pay numerous excise taxes and other “hidden” taxes on things they purchase. Every time you pay your cell phone bill, pay your electric bill, stay in a hotel, or put gas in your car, you’re paying an often huge hidden tax that is sometimes reflected on your bill, and sometimes not. For example, 50 cents per gallon of gas you put into your car is actually nothing but taxes to big government[*]. It’s fucking ridiculous.
This is yet another sales tax Americans pay. I’m going to be very nice and estimate that these hidden taxes are just 2% extra on all purchases (on average) Americans make, but I’m quite positive its higher. Add It All Up If you add all the above taxes up, this means that the typical American who makes just $31K per year pays a total income tax of 30.6% to 37.2% (depending on how you factor payroll taxes) then turns around and pays another 20.8% to 35.8% in aggregate taxes on everything he purchases, which is pretty much all of his after-tax income since a guy who makes only $31K isn’t going to be saving or investing very much.
If you add those two numbers together, you get 51.4% to 73% of his income (sort of) that is sucked up by taxes in some way. Are you getting the picture here? Do you see how much taxes Americans really pay? That’s just the guy who makes $31K per year. He’s kinda poor. What about a truly middle class American? Then the numbers get even worse. While hard to estimate with averages, again if we take the top 27 most populated states in the US and look at average “middle class” incomes[*] we get an average income of $48,510 per year. That places this person in higher tax brackets for federal and state income tax. That middle class guy is going to get whacked with a total income tax expense of 41.6% to 48.2% if you add everything up, and he’s still going to pay another 20.8% to 35.8% on everything he spends his money on. Plus, I haven’t even covered capital gains taxes in this conversation, which is yet another fucking tax most middle class Americans pay.
Other Tax Analyses Leave All This Stuff Out Every time, and I mean every time someone sends me a link to an article or chart about how Americans don’t pay as much taxes as compared to other first world countries, that article or chart only accounts for federal income tax and payroll taxes. That’s it! It doesn’t account for state income taxes, sales taxes, pass-through corporate and excises taxes, and all the other taxes I listed above.
Property Taxes: Every American pays property taxes. Even if they rent, they still pay this since property taxes are charged to the renter of a property. Even if you purchase your own home and pay off the mortgage, you still must pay property taxes every year or the government takes your house away. This is why it’s often said that Americans don’t actually own anything; they just rent it from the government. Even worse, property taxes increase just about every year. Every state charges its own rate of property taxes, listed here. According to the U.S. Census Bureau, the typical household spends $2,127[*]. Since the typical American makes about $31K per year, that’s an estimated effective tax of 6.8%.
Corporate Taxes: America has among the highest corporate tax rates in the entire world. “But wait a minute,” you say, “The typical American doesn’t own a company, so he pays no corporate tax!” Wrong. At least some of the cost of corporate taxes are passed down to the consumer. It’s standard business practice, and I’ve done it myself. If I’m a business owner and I want to make X in take-home profit, but the government is going to take Y in corporate taxes, that’s an expense I have to cover in order to make my X. Therefore, I’m going to charge the customer more than X in order to make up the Y. I’m not just going to eat the Y.
I may not charge exactly Y extra on my prices, but I am going to charge at least some extra to make up that expense. That’s what an effective business owner does. Thus, yes, you as the customer are indeed paying corporate taxes, at least indirectly. America’s corporate tax rates, again among the highest in the world, range from 15% to 35%[*]. As many left-wingers point out, there are lots of loopholes that big corporations take advantage of that can reduce this corporate tax rate. This is true. The Department of the Treasury estimates that the “real” average corporate tax rate is around 22%[*]. Some of this is passed onto the consumer as a hidden sales tax, of anywhere from 5% to about 20%. And speaking of sales tax…
Sales Taxes: 46 of America’s 51 states (again I include DC) charge people sales taxes on everything they purchase, with the occasional exception of some groceries. On top of the state, most counties and/or cities impose yet another sales tax on top of the state’s sales tax. Isn’t that nice? A table that combines both of these taxes per state is here. Again, using the top 27 most populated states, the median average state and local total sales tax on Americans is a whopping 7%.
Excise Taxes and other Hidden Taxes: On top of all that crap, Americans pay numerous excise taxes and other “hidden” taxes on things they purchase. Every time you pay your cell phone bill, pay your electric bill, stay in a hotel, or put gas in your car, you’re paying an often huge hidden tax that is sometimes reflected on your bill, and sometimes not. For example, 50 cents per gallon of gas you put into your car is actually nothing but taxes to big government[*]. It’s fucking ridiculous.
This is yet another sales tax Americans pay. I’m going to be very nice and estimate that these hidden taxes are just 2% extra on all purchases (on average) Americans make, but I’m quite positive its higher. Add It All Up If you add all the above taxes up, this means that the typical American who makes just $31K per year pays a total income tax of 30.6% to 37.2% (depending on how you factor payroll taxes) then turns around and pays another 20.8% to 35.8% in aggregate taxes on everything he purchases, which is pretty much all of his after-tax income since a guy who makes only $31K isn’t going to be saving or investing very much.
If you add those two numbers together, you get 51.4% to 73% of his income (sort of) that is sucked up by taxes in some way. Are you getting the picture here? Do you see how much taxes Americans really pay? That’s just the guy who makes $31K per year. He’s kinda poor. What about a truly middle class American? Then the numbers get even worse. While hard to estimate with averages, again if we take the top 27 most populated states in the US and look at average “middle class” incomes[*] we get an average income of $48,510 per year. That places this person in higher tax brackets for federal and state income tax. That middle class guy is going to get whacked with a total income tax expense of 41.6% to 48.2% if you add everything up, and he’s still going to pay another 20.8% to 35.8% on everything he spends his money on. Plus, I haven’t even covered capital gains taxes in this conversation, which is yet another fucking tax most middle class Americans pay.
Other Tax Analyses Leave All This Stuff Out Every time, and I mean every time someone sends me a link to an article or chart about how Americans don’t pay as much taxes as compared to other first world countries, that article or chart only accounts for federal income tax and payroll taxes. That’s it! It doesn’t account for state income taxes, sales taxes, pass-through corporate and excises taxes, and all the other taxes I listed above.
If you want to say that other countries pay more taxes than Americans, then you need to compare apples to apples. You need to compare ALL taxes Americans pay to ALL taxes citizens in other countries pay, not just the two taxes that are easy to look up and calculate. It’s a completely unfair and inaccurate comparison to just compare those two taxes and leave everything else out.
What About Deductions?
It's true that typical Americans can get some deductions off some of their taxes for things like having children in the house. The problem is that these deductions usually only affect federal income tax. All the other taxes I listed are completely unaffected, so these deductions, if any, barely make a dent in the total numbers I'm describing. (It's true that business owners get more deductions, but again, I'm talking about the typical American here, and the typical American does not own a business.)
But Other Countries Pay All These Taxes Too! (Right?) When people try to point out all these other countries that supposedly charge more taxes than the USA, they're usually talking about Europe. They say that European countries have sales taxes too (VAT) and various other taxes. Yes, they do, to some degree, but the majority of European countries don’t charge the amount of taxes with regards to these other taxation methods. For example, people seem to conveniently forget that countries in Europe don’t have states. European countries are small; they don’t need states. Sure, they have provinces, but most European countries don’t levy a “province tax” against their citizens as an income tax. Therefore, most Americans pay a state income tax and most Europeans don’t. (Remember I said most Europeans, I didn’t say all Europeans. I know some Europeans do pay an equivalent to state income tax.)
What about property taxes? Most Europeans do pay a property tax of some kind, but while Europe is hard to generalize, most European property tax rates are lower than the US due to reforms starting in 1997, and there are numerous exemptions for citizens’ property taxes in Europe[*] while in the US, there are none. I agree that Europeans get hit with high sales taxes often, called VAT, so I’ll give you that one. European corporate tax rates are also lower than America’s 22%. Go here and check it out for yourself, and note those under 22% tax rates are the gross tax rates, before deductions, which make them even lower. This means less pass-through charging to the typical European.
And so on. Yes, Europeans pay a lot of taxes. Everyone in the Western world does. But that doesn’t mean they pay more than Americans if you add everything up side-by-side. In summation, here is what I’m saying: The USA is in the top ten highest taxed nations in the world if you add up all the taxes I listed above. If you include and add up all those taxes, you will not be able to find more than ten other countries whose typical citizens pay more in taxes than typical Americans. You can find a few, but not ten. I am happy to change my opinion on this if any of you can provide real evidence, with links to sources, that prove that above statement wrong.
I will completely ignore any comments from math nerds / nitpickers who try to nitpick my math. I’m not saying my numbers are 100% accurate. I’m saying they’re close enough to demonstrate that Americans pay among the highest taxes in the world. Even if my numbers are off a little, they still demonstrate the point. Americans pay among the highest taxes in the world. Period.
Want over 35 hours of how-to podcasts on how to improve your woman life and financial life? Want to be able to coach with me twice a month? Want access to hours of technique-based video and audio? The SMIC Program is a monthly podcast and coaching program where you get access to massive amounts of exclusive, members-only Alpha 2.0 content as soon as you sign up, and you can cancel whenever you want. Click here for the details.
It's true that typical Americans can get some deductions off some of their taxes for things like having children in the house. The problem is that these deductions usually only affect federal income tax. All the other taxes I listed are completely unaffected, so these deductions, if any, barely make a dent in the total numbers I'm describing. (It's true that business owners get more deductions, but again, I'm talking about the typical American here, and the typical American does not own a business.)
But Other Countries Pay All These Taxes Too! (Right?) When people try to point out all these other countries that supposedly charge more taxes than the USA, they're usually talking about Europe. They say that European countries have sales taxes too (VAT) and various other taxes. Yes, they do, to some degree, but the majority of European countries don’t charge the amount of taxes with regards to these other taxation methods. For example, people seem to conveniently forget that countries in Europe don’t have states. European countries are small; they don’t need states. Sure, they have provinces, but most European countries don’t levy a “province tax” against their citizens as an income tax. Therefore, most Americans pay a state income tax and most Europeans don’t. (Remember I said most Europeans, I didn’t say all Europeans. I know some Europeans do pay an equivalent to state income tax.)
What about property taxes? Most Europeans do pay a property tax of some kind, but while Europe is hard to generalize, most European property tax rates are lower than the US due to reforms starting in 1997, and there are numerous exemptions for citizens’ property taxes in Europe[*] while in the US, there are none. I agree that Europeans get hit with high sales taxes often, called VAT, so I’ll give you that one. European corporate tax rates are also lower than America’s 22%. Go here and check it out for yourself, and note those under 22% tax rates are the gross tax rates, before deductions, which make them even lower. This means less pass-through charging to the typical European.
And so on. Yes, Europeans pay a lot of taxes. Everyone in the Western world does. But that doesn’t mean they pay more than Americans if you add everything up side-by-side. In summation, here is what I’m saying: The USA is in the top ten highest taxed nations in the world if you add up all the taxes I listed above. If you include and add up all those taxes, you will not be able to find more than ten other countries whose typical citizens pay more in taxes than typical Americans. You can find a few, but not ten. I am happy to change my opinion on this if any of you can provide real evidence, with links to sources, that prove that above statement wrong.
I will completely ignore any comments from math nerds / nitpickers who try to nitpick my math. I’m not saying my numbers are 100% accurate. I’m saying they’re close enough to demonstrate that Americans pay among the highest taxes in the world. Even if my numbers are off a little, they still demonstrate the point. Americans pay among the highest taxes in the world. Period.
Want over 35 hours of how-to podcasts on how to improve your woman life and financial life? Want to be able to coach with me twice a month? Want access to hours of technique-based video and audio? The SMIC Program is a monthly podcast and coaching program where you get access to massive amounts of exclusive, members-only Alpha 2.0 content as soon as you sign up, and you can cancel whenever you want. Click here for the details.