There is an interesting post at Zero Hedge arguing that the statutory tax rate on the middle class in high tax states (read: blue states) is 75%. This might be slightly high but I think it’s basically accurate.
Above a rather modest $34,600 in taxable income and up to around $106,000, the [statutory] middle class tax burden in high-tax American locales is 75%:
Social Security and Medicare: 15.3%
Federal income tax: 25% (28% above $83,600)
State income tax: 5% (mid-range)
Healthcare insurance: 15%
Property tax: 15%
The Social Security, Medicare and federal income income tax rates are indisputable. They add up to 40%-43% but let’s stick with 40%.
State income taxes vary but in looking at charts of state income tax rates by income, 5% is a reasonable approximation for the middle class. But even if someone insists this is too high, it would only drop the statutory tax burden by a percent or two. So, the total is up to 45%.
Pegging the property tax rate at 15% is arguably a bit high. As an example, let’s take the median property tax ($7,500) and the median income ($67,000) for New Jersey. That’s about 11% of income. However clearly 15% is quite likely depending on exactly what a person’s income/tax bill is. But let’s go with the exact median, 11%, and the total comes to 56%.
Now we come to healthcare. I’m sure this is the one that will get the biggest push-back. However, I say tough luck, lefties. You won the ObamaCare policy fight and you now own the healthcare system. We now have (partly) private ownership of health insurance with government control. HHS will effectively determine through minimum coverage requirements (read: by fiat) what the cost of health insurance will be for all of us. We no longer have the option of purchasing a cheap policy. Plus, ObamaCare places enforcement of the insurance mandate with the IRS and the Supreme Court declared it a tax. So, lefties, you broke it; you bought it. Health insurance is a mandatory expense required of us by the federal government. It is a tax and the math is as follows. For 2011, the U.S. median income was $51,400. The average healthcare cost for a family of 4 was $19,400 of which $8,000 was paid out-of-pocket. $8,000 is is 15% of the median income. Using the out-of-pocket expense only, frankly, is playing it very conservative. Now that health insurance is a federal requirement, it is reasonable to argue the employer portion should be counted as well (just like the Social Security tax).
That brings the total statutory tax rate for the middle class to 71%, if you take my more conservative property tax calculation. If you agree with the Zero Hedge calculation it’s 75%.
Plus, this does not include sales taxes, excise taxes, investment taxes, local wage taxes and the cost of regulatory compliance, which are passed on to taxpayers.
I can already hear the lefties shrieking that nobody actually pays a 71% tax rate. I will acknowledge that this is only the statutory tax burden and the effective tax rate is lower.
However, this is a story that still matters a lot. First, is that the left feels it is somehow morally justifiable to claim a prior right through coercion to 71% of a family’s income. Second, the only reason the effective tax rate is 71% is through deductions, credits and exemptions that have proliferated in the past few decades, primarily at the federal level. But it is much easier to change these tax modifiers than it is to change the actual rates. When our debt crisis hits, who knows what will happen with the tax code. If the availability of tax modifiers are reduced, the left will simply argue that they tax rates are unchanged and they did not raise taxes. No doubt the luminaries in the legacy media would happily shill for them.
This is something we need to be shouting from the roof tops.