Today is tax day, and that means that we’re bound to be “treated” to all sorts of anti-tax libertarian blog posts today about how horrible it is that the government rapes us, steals our money at gunpoint, takes “half” our money, etc., etc., whine whine whine, bitch bitch bitch. Now the part that these taxophobes don’t ever want to talk about is that while everyone hates paying taxes, people generally like most of the things that taxes pay for (unpopular wars aside). But I’ll let someone else write about that aspect. What I want to talk about, instead, is how horribly the anti-tax crowd exaggerates how much we’re actually taxed.

To counter that, without revealing too many personal details, I’m going to post a summary of my tax situation, and challenge the anti-tax folks to do the same. No specific numbers, just the generalities that I’m listing here.

To that end, for the tax year 2007: (Below the fold)

  • We filed as “married filing jointly”
  • We claimed 2 exemptions (no children)
  • Our combined household income from all sources puts us in the top 25% of household incomes nationwide
  • Almost all of our income for the year — taxable or otherwise — came from our salaries; capital gains were negligible
  • We own a home
  • We did not itemize our deductions — we took only the standard deduction
  • We took a small HOPE & Learning credit
  • Our only other tax benefits: pre-tax health insurance; a very small pre-tax flexible health spending account; and 401(k) contributions for the year of roughly 10% of pre-tax income

With that information in mind, the question becomes: how much was our effective rate of federal income taxation? Adding up gross income from all sources (not AGI, which isn’t really gross income, and not taxable income, but ALL income from ALL sources), and comparing against the total tax we paid in 2007, our effective rate of taxation clocks in at right about 12%. Nowhere close to the 35-50¢ on the dollar type rates that the anti-tax pinheads like to bleat on and on about.

Of course, that’s just income tax. Let’s humor the anti-tax folks and try to paint the most pessimistic tax picture possible. Factor in FICA taxes (for Social Security and Medicare), that still only puts the effective rate at under 20%. So add in the employer-paid portion of FICA (which libertarians like to do when it suits them, but ignore when they’re complaining about low-income people who “pay no taxes”), and we’re still only up to 27%. Add property taxes, and you’re up to a little less than 29% — getting closer, but still not good enough. Now let’s assume, just for giggles, that we spent every penny of our after-taxes-and-deductions income inside the City of Memphis, and paid 9.75% sales tax on all those purchases. Even with all that, we barely manage to make it to 35% of our total income paid for taxes of all kinds paid to all levels of government — city, county, state, and federal.

So to recap, my real-world example is a top-25% household income with almost no tax-avoidance strategy whatsoever, with an effective federal income tax rate of a scant 12%. Factor in all taxes paid to all sources, both by us, and by our employers on our behalf, and grossly overestimate things like sales taxes paid, and you’re still barely hitting 35%. The more realistic figure — with less-aggressive estimates of sales tax paid, and not including the employer-paid portions of FICA — works out to around 26%. Still a lot of money? Sure it is. But hardly the oppressive burden the taxophobes make it out to be.

So, this tax day, if you’re a libertarian or other anti-tax type wanting to bitch about how horrible taxes are, go right ahead. But if you’re going to do it, why not sprout a pair, and disclose what your effective rate of taxation is when you do it? I expect that most won’t, because most of them take much more advantage of various tax avoidance strategies; I further expect that many of them will have a lower effective rate of taxation despite having higher incomes.