Decided to take a look at how much taxes I really make and it was an eye opener. First of all, when your employer tells you what they pay you, they are not really telling you the whole story. That’s because they have to pay Social Security taxes (FICA and medicare) on your salary, an amout equal to what you pay. They don’t do this out of their profit or out of the goodness of their hearts, they just pay you less. Thus, if you were told you are being paid $8.67 and hour, they are not telling you the truth because they are paying $1.33 and hour for FICA and Medicare to the government….and you pay an equal amount, too! Thus, you’re really being paid $10 an hour. On top of that, you pay federal tax. But in reality, you are probably one of the 75% of americans who actually pay more in FICA/Medicare than you do in federal taxes… I know I do. All of this trickery by the government is designed to make you think you pay less taxes than you do.
I looked at my tax burden last month. Looking at my salary, I find that I paid 32% of my wages to the government in taxes, and that burden is reduced substantially because I put the maximum in my 401(k) — thus reducing my federal tax burden by quite a bit. This is ridiculous. On the other side, I may get a measly 2% of that back as a tax refund, in part because I can deduct the substantial interest I pay on my house. No matter, I still know that at the end of the day, I pay too much in taxes! Is there a solution? I believe so, but that’s a topic for another day.
I challenge you, sit down and figure out how much you really pay in taxes. For a real eye-opener, use last year’s tax forms. But don’t forget to double the amount of Social Security taxes, because your employer is forced to pay half of it for you before you even see that reported anywhere. What a scam!