Federal Taxes

Federal Taxes

"Nothing is certain but death and taxes."  And that truth has been aggravating us for a long time; versions of that sardonic quote seem to have been coined by both Daniel Defoe and Benjamin Franklin back in the 1700s.  And in the centuries since, we've probably made more progress toward defeating death, really; taxes are as certain as ever.

Why do we have taxes at all? Well, we need to pay the people who govern us.  The tax power is probably the most fundamental power of government... and government certainly does use it.  Somebody has to pay for everything the government does. And somebody is us.

Taxes come in a bunch of flavors.  Most of them aren't really too tasty, to be honest, but there certainly is a wide selection.

You pay taxes to our city, county, state, and federal governments. You look like a fool when you curse the president for your high property taxes, and you lose all of your tax-whining credibility if you write to your congressperson about the sales tax. Property taxes are generally imposed by local governments—county and city, and in many places state, too.  There is no federal property tax, though.  Sales taxes are generally imposed by state governments. So before you join a tax-protest movement, make sure you know that you're protesting the right government for the right tax.

The good folks out in Washington, DC are responsible for overseeing federal taxes.  The US government collects personal and corporate income taxes, as well as excise, estate, and trade taxes. It also collects payroll taxes to fund certain specified programs such as Social Security and Medicare. Individual income taxes make up the lion’s share of federal government revenue—about 47%. Corporate taxes produce about 12% of the government’s income. Customs Duties and Excise taxes generate about 3% apiece. And estate taxes yield 1% percent. Payroll tax represents 35% of all federal government revenue (source).

Why It Matters Today

Just look at your paycheck, my friend!

After you put in your hours on the job, you'll be excited to get paid, to enjoy the fruits of your labor.  But if you take a gander at your paycheck, you'll notice that a whole bunch of other folks with funny acronyms have eaten up slices of your fruit.  

Who's FICA? What's OASDI? And why are they taking a cut of your cash, above and beyond the income taxes already taken out by the federal and (probably) state governments?  It all adds up; your take-home pay is going to be way lower than you think it probably should be... there's no avoiding that.  But if you know what you're paying for, you'll be able to think long and hard about whether the government programs you're funding are worth it.  And if you think they're not... vote accordingly.

Sometimes, a Song Says it Better: Sunny Afternoon, by The Kinks

The tax man “takes all his dough.”