There are a lot of common misconceptions about who pays taxes and who doesn’t. Most people think they actually pay taxes and don’t, others have no idea how much they pay, and both of those types like to tell people who actually pay that they enjoy paying them and doing their fair share.
From the data below you will notice that not only do a lot of people not pay taxes but they actually get money back, nonetheless, this chart will help you identify people you are talking to as a “tax-payer” and a “non tax-payer” which I’ve found to be important when having tax conversations with people because there are a lot of people who think they are entitled to say what gets done with money.
A few things I must clear up. These tax scenarios below are as basic as they get, this means they do not include deductions / credits passed children, which means, that it is more than likely that people who appear to pay taxes at these base estimates actually do not, especially if they have education expenses, medical expenses, charitable contributions, or interest on things such as a house; but to be fair, you’ll get the general idea of who and who doesn’t pay taxes.
Additionally, these do not include state taxes, this is federal only. Some of you may actually pay taxes due to sales tax, property tax, car registration, gasoline tax, etc; and if you do, great, I will grant you the privilege to complain about the roads, education, police, and fire departments in your state. Please note however, virtually none of the money paid to the federal government comes back to the state to affect those things, and if you do not pay federal taxes, it would seem logical that you in turn, have no right to complain about or tell others who do pay taxes, where that money should go…simply because it’s not yours and you didn’t contribute.
The reason for the not a business owner or self employed is important because when we get to people who make their income from those activities you’ll notice their tax rates are significantly higher even though they make the same amount as someone who works for someone else. This is due to self-employment tax (yes they punish you for being responsible and running your own business), self employed personnel must pay the entire social security / medicare tax where an employer picks up half for their employee normally.
Having said that, enjoy the figures below!
Filing Taxes Single (Non Business Owner or Not Self-Employed)
For all of those who file taxes single.
The format will be Earnings Annually, Tax Due, Actual Tax Rate:
$5,000 / -$384 / N/A
$10,000 / -$227 / N/A
$11,300 / $2 / .0176%
At this point you are starting to actually pay for your mandated retirement fund (Social Security) which has been reduced to 4.2% for 2012. You still are not paying taxes yet.
$15,000 / $553 / 3.68%
$16,500 / $703 / 4.26%
At this point, I congratulate you, you have paid for your social security tax, there is an addition 1.45% tax you pay for your own medicare, but we won’t count that.
If you make more than $16,500 on your taxes for end of year, you start to pay toward the federal tax bill, this is with no kids and no deductions. Most of you will still not pay taxes at this rate, but let’s continue this up a bit.
$20,000 / $1,154 / 5.7%
$30,000 / $2,654 / 8.8%
$40,000 / $4,154 / 10.3%
$50,000 / $6,256 / 12.5%
$75,000 / $12,506 / 16.6%
So there you have it, if you are single and make $75,000 a year you pay 16.6% tax rate minus your social security of 4.2% for 2012, or about 12.4% of your total income toward taxes. Adjust any of the tax rates by 4.2% to cover for social security to find your tax rate.
Filing Single with Kids (Non Business Owner Non Self Employed)
The format for this will be Earnings, Tax Due with 1 Kid, Tax Due with 2 Kids, Tax Due with 3 Kids, Followed by Percentage with 1 kid, etc
$10,000 / -$4,094 / -$5,060 / $-5,561 / N/A
$15,000 / -$3,913 / -$6,912 / $-7,551 / N/A
$25,000 / -$1,413 / -$4,544 / -$6,553 / N/A
$35,000 / $1,685 / -$957 / -$3,151 / 4.8% / N/A / N/A
At this point if you are single with 1 kid and made $35,000 you paid 4.8% which is .6% more than your mandated retirement money and are now starting to pay taxes, excluding medicare.
$45,000 / $3,349 / $1,794 / $239 / 7.4% / 3.98% / .53%
$60,000 / $6,831 / $4,906 / $2,981 / 11.3% / 8.17% / 4.96%
$75,000 / $10,581 / $8,656 / $6,731 / 14.1% / 11.5% / 8.97%
So…people who made $75,000 but have no kids, how does it feel to know that people who have kids pay less percentage in taxes than you even though you made the same income? Someone with 3 kids actually pays only half of what you do 🙂
Filing Married (Non Business Owner, Not Self Employed)
The format for this will be earnings, no kids, 1 kid, 2 kid, 3 kids, and the rates.
$25,000 / $603 / -$3,343 / -$6,427 / -$8,066 / .24% / N/A / N/A / N/A
$45,000 / $3,054 / $1,499 / -$271 / -$2,361 / 6.7% / 3.3% / N/A / N/A
At this point $45,000 no kids actually pays taxes.
$60,000 / $5,304 / $3,749 / $2,194 / $639 / 8.8% / 6.2% / 3.6% / .1%
At this point, $60,000 with no kids and 1 kid starts to pay taxes.
$75,000 / $7,554 / $5,999 / $4,444 / $2,889 / 10% / 8% / 5.9% / 3.8%
At this point everyone making $75,000 married with 2 kids or less pays taxes, 3 kids or more does not.
Conclusion
These calculations are done with the extreme basics, adding in your charitable contributions, education expenses, child expenses, interest on mortgages, and so many other things, it is more than likely those that pay taxes in these scenarios still do not pay taxes at all at the federal level.
I could go into business owners and taxes, but a rule of thumb, if you’re talking to a small business owner, they will pay more in taxes than someone who makes the same income as them who doesn’t run their own business or trade.
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