Nothing in life is free. My dad told me that when I wouldn’t accept that Ed McMahon’s sweepstakes wasn’t just a random opportunity at wealth. No matter how many examples I gave him, he’d prove how there was a cost. It used to drive me crazy, and he was right.
Everything has a cost – time, money, attention, services, focus….all costs of engagement. That’s why I shudder when people eagerly talk about how we should have college paid for by the government, or healthcare, or even our salaries. As much as I also shudder at the inflated costs of many of life’s basic necessities, there is not a money tree that any government grows behind their public buildings to generously bequeath extra services upon the people they serve. Unless, well, unless you consider the taxes citizens of that nation pay as a money tree.
So, let’s shake it down a little. In the United States, we pay into social security, Medicare, federal withholdings, and various state (maybe some city) taxes. For SS and Medicare, that’s 7.65% off the top, combined total tax, which employers match for each employee. Social Security is 6.2 % of that percentage and has a changeable cap of taxable income evaluated annually. In 2020, that cap is the first $137,700 annual salary, or $8,537.40 total paid to Social Security, max, in 2020. Medicare doesn’t have a cap on taxable income. At 1.45%, an income of at SS income cap, that total amount taxed is $1,996.65 a year.
Federal taxes depend on many factors. Are you married? Does your spouse earn an income? Do you have any children? Do you have pretax benefits that are deducted from your gross income? How about secondary revenue streams? It’s enough to make your head spin, at least in the United States. State and city taxes vary widely. But, if you were to assume a flat tax of 4% goes to your state taxes, and you made the SS tax cap, that would be $5,508 a year.
According to a very spotty internet review I just conducted, the average annual wage in the US for a full-time worker is roughly $40,000.00. That’s an average, so it includes those bell curve highs and lows, and that looks like $19.23 an hour. In some states, minimum wage is much lower, and the Federal Minimum Wage is currently at $10.00 an hour which is $20,800 a year for a 40 hour a week employee, each year, pretax. The SS income tax on this dollar amount is $1,289.69 a year, Medicare is $301.60. Hopefully, by the time you retire and become Medicare eligible, the funds will still be available to help you in your Golden Years.
Social Security and Medicare are essentially flat taxes. They don’t look at your legal marital status, how many children you have, etc. Everybody pays the same share of their income into the system, no breaks, no alterations. That’s $0.62 an hour, $49.60 a paycheck, in Social Security taxes $0.145 cents in Medicare, or $11.60 a paycheck, paid by each full-time worker making the federal minimum wage.
Well, Social Security caps off at $137,700 a year, and we all know how quickly that’s being borrowed from/spent by the government on other funds.
These are facts on how the US taxes play out each year. So, what happens if we decide to have “free” anything? The government pays the bill. And, where does the government get its money for these public requested services? It’s not a money tree or a lemonade stand, it’s mostly taxes and debts owed to the government. Taxes paid by working citizens. Ok, yes, we know this, and we also know our government is majorly in debt.
Politicians, while perhaps better educated than some of the populace, are people. People who typically had similar elementary, junior, and high school educational measures as the general populace to learn from, and who also have their share of persons in debt.
We need taxes to fund government programs and services, so we pay taxes to fund things, and the people running the budgeting and balancing of those dollars are very rarely better at it than your neighbor. You know your neighbors, how well are they managing their money? It depends, right? You might trust the Smiths to watch your dog for a week, but would you ask them to invest your savings for you? Again, it depends.
So, here is my point, politicians/The Government don’t manage their money very well as a collective group. Would you like to give them more of it? It depends, right? Ok, what if we have them take the same amount taxed from you as today, but we doubled what the people earning above you were taxed? Sounds ok, but is it right? What is fair, lawful, and equitable abot a person making $200,000/year paying $30,600 in Social Security and Medicare tax? Or possibly $20,000 in state income tax? Google says they pay roughly 32%, or $64,000, at today’s taxable rates, no deductions. So now, that person takes home $85,400. Seems ok, right? But…they have a PhD, an MD, and they have to constantly prove their ability to do their job. They might one day save your life. And you paid far less into the system. But it’s fair, right? The more they make, the more the government will take, and you will have a lot of benefits you don’t pay as much for.
Not to mention, employer taxes will go up, too. How quickly do you think employers will find they can’t pay a higher salary, because taxes are prohibitive and possibly needing to cut jobs? The “1%” isn’t the majority of businesses. Plus, when faced with such incredibly personal high taxes, where do you think our talent pool will look for work? That means fewer persons who keep important skills in the country and more outsourcing of well paying jobs. Plus, the ones who stay behind are going to be paying more individually, but probably there will be fewer of them living and working in the US.
Let me again point out, you are trusting the government will wisely utilize those shiny new tax dollars, and budget, and save. Again, what does your average friend do when they get a raise, invest a portion of it or…? The government is a collection of individuals raised in a culture of bigger, better, more. They are your slightly more impressive neighbors.
Ok, so flat tax? That seems more likely, but can you afford more in taxes? When is it fair to charge more taxes? At $40,000 a year? $60,000? $100,000? Who decides? Flat tax keeps everyone paying the the same percentage, but what would a $20,800 a year employee do if they had to pay an additional 3% in taxes each year, or $624 annually/$24 a paycheck at 80 hours. Can they really afford it? Probably not. Not to mention what will happen to the cost of homes and goods when they realize everybody can afford more. Is that going to need more regulation? Who decides what’s equitable?
I think before we demand more, we understand the cost and impact. Could America suddenly shift to a flat 50% tax rate on everything? What about just taxing high earners more? Aside from the severe ethical question this poses, would anyone want to live and work in US when they know they are working to pay a less equitable share of services for everybody else? How would that transition go? Is anybody looking at the facts? Just to be clear, the House and the Senate can barely agree on anything at this point. I don’t think we have a good answer yet.
That said, I think all children should have access to good health, dental, and vision care, regardless of a parent’s annual income. Quality lower and affordable higher/trade school education, needs to be available. Healthy, well educated citizens are just better for a nation as a whole. Plus, save the goddam trees, nature is important for physical and mental health.
Finally, there is a distinct shrinking of the Middle Class. This is not good, remember that bell curve? The middle is the sweet spot for a reason. Plus, the Dark Ages sucked on many levels, let’s not go back there. But, HOW do we solve the economic and political issues we are facing? Remember, old ideas aren’t always the solution. The government isn’t a bunch of wise old elves who are going to save us from ourselves. In other words, I don’t know, but I have not given up hope that it is solveable.
A few thoughts from a girl who was raised to understand that nothing is ever free.
S
OverTheHillsAndFarAway 