You Pay Too Much Tax: A Budget Breakdown
By Andrew Min • Sep 11th, 2008

It’s the fashionable thing for politicians to complain about high taxes and unbalanced budgets. Are we paying too much tax?
How much are you being taxed?

The national average income as of 2007 was, according to a census.gov PDF, $50,233 (see page 14). A dinkytown.net tool puts this at approximately $5762 in federal income tax for a single, male, head of the household. Note that this is just your income tax. No sales taxes or any other type of tax is included here. Additionally, this does not include state, county, or municipal tax, so you most likely pay much more (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington state, and Wyoming are the only states that don’t have a state income tax, so chances are that you do pay something).

While we’re at it, let’s also talk about the “rich”. The highest tax bracket is for people who make $350,000 or more, so we’ll use $350,000 as our “rich” income. According to the dinkytown.net generator, that means the rich man pays $95,423 in tax. Again, this is minus sales taxes and any non-federal income tax for a single, male, head of the household.

Now, our tax goes to the president’s budget. Today, the budget is reckoned at about $3.1 trillion, which has a deficit of about $407 billion. I then went to the Wikipedia budget article and looked up the cost of each program. Then, I calculated what percentage each was of the federal budget. Then, I multiplied the decimal form of each percentage into the income (50233 and 350000) to get the resulting amounts of how much each cost. Since these are rounded estimates, the numbers don’t quite match up. They are rough numbers, not the exact numbers. I’m not good enough at Excel for that.

Speaking of Excel, I then compiled everything into a nice spreadsheet (link) and PDF (link), hosted by the wonderful folks at Scribd. So if you like spreadsheets, stop reading now and go take a look. If not, on to the results.
Social Security: Most expensive

Looking at the tax breakdown, it’s obvious that the most expensive part of the budget is Social Security (Iraqi War and War on Terror isn’t covered in the budget, but I’ll get to that in a bit). Social Security, our retirement pension plan, costs $644 billion, or 20.77% of our budget. The median income taxpayer pays approximately $10,569.02 a year (Social Security + Social Security Administration). Unfortunately, you don’t get anything until you’re about 65, according to Wikipedia. 65. In that time, the government has forced you to pay $10,569.02 a year. That means you pay the government $686,986.30 before you even get a penny back. And then, you only have about fifteen years (if you’re lucky) to enjoy that money. Sure, it supposedly keeps you out of poverty. But maybe you wouldn’t be in that position in the first place if you could just get your own money (and perhaps invest it in the stock market, government bonds, or even get some interest).

It’s even worse for the rich guy. He pays $73,640 a year for Social Security, meaning that he pays 4,786,600 before he even sees a cent. That’s almost five million dollars. And he doesn’t even get all of it back! In other words, the rich guy is working hard all of his life, then doesn’t even get all of the money he earned. It’s not like he stole it. He earned it.
Medicare: A killer

Medicare is almost as bad as Social Security. Weighing in at $408 billion (13.16% of the budget), Medicare takes the bronze medal for most expensive program on the books. It’s a great idea, but you don’t get the benefits until you’re 65, like Social Security. And like Social Security, Medicare costs a lot for the median taxpayer, who pays $6,610.66 a year, forcing him to pay $429,693.08 before he gets to see his benefits. Additionally, what if he invested in the stock market? What if he had put $400,000 in a startup called Google? I’ll tell you: he’d be sitting pretty on about $2,000,000.

Again, the rich man pays a lot as well. He pays $46,060 a year for a health plan he may not even need or be eligible for. He basically pays $2,993,900 before he’s even eligible. Sure, he’s helping to pay for the median taxpayer’s health care. But maybe if the median taxpayer had the money he spent on Medicare, he might not even need the help. Maybe. Not definitely. Maybe.
Education: $59.2 billion on failing schools?

We spend approximately $59.2 billion (1.91% of the budget) on federally funded education. It’s actually not a bad deal, really. It only costs the median taxpayer $959.45 a year to send his kid to a public school. However, it’s actually a little more skewed. If you have four kids born two years apart, you have your kids in a public school system for about twenty-four years. The Cato Institute says that 41% of all private schools cost $2,500 annually. Since each kid is in school for 18 years, that’s $180,000. But wait. You keep on paying education taxes even after your kids don’t go to school. Suddenly, the price is $76,756 (if you live 80 years) for all four kids. That’s still about a lot less. But wait. We haven’t taken into account state or municipal education taxes. Suddenly, private school might be more affordable. But only if the government (all of the governments) refunded all of your educational money. I’ll take a slightly more expensive but good private school over a failing cheaper public school. Why not at least give people the opportunity to choose?
War on Iraq and Terror

I can’t do an estimate on this, since it’s not actually part of the budget (it’s an appropriation). However, if you look at the federal budget in 1944, it’s obvious that all wars cost a huge percentage of the budget. Obviously, no one (in hindsight) believes that we shouldn’t have fought World War II because it cost too much. Therefore, cost cannot be the primary reason for not fighting a war. If you have issues with the war itself (maybe the direction it’s heading, or the fact that there are supposedly no objectives), that’s one thing. But don’t complain about the cost. It’s expensive. So was World War II. Cost can not be the sole reason of why we stop fighting the war on terror.
Debt costs a lot

If you haven’t noticed, one of the most expensive things on the budget ($260 billion, 8.39%) is the interest on the National Debt. As it grows, it gets much more expensive. As one of the fellas from Ocean’s 12 put it, “Boy, the interest just kills you”. Obviously, the National Debt needs to be paid off. There are several ways to do this.

The first way (the “liberal” way) is to stop the war in Iraq and on Terror. The Department of Defense and the Global War on Terror costs about $660.6 billion. The debt is about $9.7 trillion, so I’ll let you figure out how long it would take to pay it off (make sure you factor in interest and the current deficit of about $407 billion). Not that long.

The second way (the “conservative” way) is to eliminate Social Security and Medicare and begin privatizing it. I won’t argue the moral issues here, just the fiscal ones. If we eliminate Medicare, our deficit is gone. Eliminating Social Security (including the Administration) would give us $652.4 to work with. It would actually pay off faster than the war costs.

The third way (the “Ron Paul” way) is to kill both. Obviously, it would go twice as fast as either of the other options. So if balancing the budget is your most important prerogative, this is the quickest way.

Andrew Min /ˈændruː/ /mi:n/ (n): a non-denominational, Bible-believing, evangelical Christian. (n): a Kubuntu Linux lover (n): a hard core geek (n): a journalist for several online publications
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