Now, calling something the "federal income tax" is a bit misleading because, as we know, the payroll tax is levied on your income as well, it's just called something different.
Anyway, I just got my W-2 for 2017 and thought it would be enlightening to discuss the distribution of all taxes I paid on my income in 2017.
My W-2 taxes, which of course does not capture sales taxes, property taxes, etc. (including health insurance) amount to approximately 26% of my income.
Of the total W-2 taxes paid, the breakdown is as follows:
- 49% in Federal Income tax
- 25% in Social Security Tax
- 13% in State of IN tax
- 7% local income tax
- 6% in Medicare tax
I consider myself fortunate to have an income large enough to create a federal income tax liability. I also expect to get a refund, as I generally choose to have more withheld so that I can get a refund, as opposed to having less withheld so that I get a bill. Nonetheless, take a look at that distribution and recognize that when people don't pay federal income taxes, they still pay a lot of other taxes; and this is only the taxes that are withheld. Again, this does not include taxes that are paid on the spot, such as sales taxes.
One final point: If you include what I spent on health insurance premiums in the past year, I paid an income tax rate of 34%. If you include both health insurance premiums and deductibles, I paid 42% on income taxes. Note, this amount does not include the amount that my law firm has paid for my health insurance; this is simply the amount that I pay in cash to insure my wife and children. By that math, you could rather easily increase the deductive taxation on me from 26% - 42% and give me public instead of private health insurance, and the only thing that would change for me would be that I no longer need to worry that my coverage will be rescinded.
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