IRS tax attorneys suggest that when you stop to think about it, most of us are really taxed in so many different ways we lose track of how truly burdensome our current taxing methods can be on the average American’s pay check. Tax lawyers ask you to consider as an employee your wages are taxed at least four (4) different ways by the federal government alone. Specifically, U.S. employees pay income tax, Social Security tax, Medicare tax, and unemployment insurance tax. And, if you drive yourself to work, you are probably also paying federal taxes (18.4 cents per gallon) added to the price of the gasoline you had to buy to get there.
Then of course, tax lawyers remind us that there are the various State and local taxes which typically include some form of income tax, at least at the State level, and even a few local governments impose their own income tax (i.e. New York City) on City/County residents. According to tax attorneys, in several States there are mandatory insurance taxes to fund social insurance benefit programs (i.e. State Disability insurance in New York and California). And, of course, the City, County and School Districts all need their hands in your pocket as well, so you are probably paying some form of local taxes to fund these entities also. The most common of which is property tax, which even renters subsidize in their rent payments to landlords.
As most of us know, and tax lawyers confirm, the amount of income tax you pay is based upon the amount of income you earn. As you make more money, the rate by which your income is taxed increases progressively to a ceiling which is currently at thirty-five percent (35%) of your taxable income. Contrarily, IRS tax attorneys explain Medicare Tax is a flat 2.9% on all of your compensation income. Half (1/2) of the Medicare taxes is paid by your employer (which still affects how much you earn) and the other half (1/2) comes out of your pocket directly. Similarly, the Social Security tax is also a flat tax, but it has a maximum cap (12.4% of all income up to $106,800 dollars). Like Medicare taxes, your employer pays half (6.2%) and you get to pay the other half yourself (note for 2011 only, your percentage will be reduced to 4.2%).
When taken as a whole, most middle class Americans see a huge amount of their income go to fund Federal, State and Local governments. And yet, with gasoline prices skyrocketing and unemployment running at somewhere around nine percent (9%), the government wants to raise more revenue through increasing your taxes again. So when are American taxpayers going to say enough?
The problem according to several tax attorneys is that most taxpayers don’t really understand how much of their hard-earned money is already going to the government. And because approximately 45% of Americans don’t pay federal income tax, the burden doesn’t seem too significant. But tax lawyers warn even if you don’t pay federal income tax, chances are you are still seeing a large amount of your income going to pay some forms of taxes.
With federal elections upcoming, you can bet there will be a lot of discussion about taxes by all the candidates. Knowing the facts can help you make the right choices in the ballot box.
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