Taxing Questions

It’s been a long time since I’ve written anything in this space. Not because I had nothing to say. I just didn’t know where to start.

I still don’t, really. But today, I’ll start with taxes. We’ve heard a lot about them in recent weeks. Federal, state and local governments are strapped for cash. They’ve been slashing budgets with a vengeance. Liberal/progressive types think we could stand to raise some taxes -- especially on wealthier Americans, who, they say, are not paying anywhere near their fair share. Conservatives just want to cut.

As a taxpaying American, I wanted to find out where I stand in this equation. So I did a little exercise this week. I dug out all the paperwork I could find and added up the taxes my household paid in 2010. It came to 26.27% of our total pre-tax income. Just over a quarter of each dollar we made went to taxes.


The numbers are interesting on several fronts.

I’ve been hearing all over the place that close to half of Americans pay no federal income tax. Here are a couple of stories about that:

• Christian Science Monitor
• Fox News (!)

Well, I do send money to the IRS every year, but really not all that much. Last year’s payment, after taking all the exemptions, deductions and credits the tax code said I was entitled to, came to just 5.16% of our 2010 income.

Of course, income tax isn’t the only government levy that drains our wallets. Social Security and Medicare took another 6.9%. If I throw in the federal portion of the gasoline tax (18.4 cents/gallon), our national government took 12.37% of my income.

State and local taxes took a larger share,13.9%. And here’s what’s funny about that:

1. As you may have heard, the Governor of Texas is running for president. He’s traveling around the country claiming that the Texas economy is in great shape, that our job market has improved not declined, that our state government knows how to balance a budget, and how, if elected, he’s going to get Washington off our backs.

Well. I saw what Gov. Perry and our Legislature did to balance the budget for the two years just ahead. Making sausage doesn’t begin to describe it.

2. I read a story yesterday in The Austin Chronicle that referred to an organization called United for a Fair Economy, which claims that Texas has the most regressive tax structure of any state in the union. UFE says the poorest Texans pay 12.2% of their income in state and local taxes, while the richest pay only 4.4%. You can download a chart here.

Hmmm. If UFE is figuring pre-tax income the same way I did, I’m in one of the middle income groups. Which means I would be paying somewhere between 7 and 10 percent. According to their chart, nobody is paying rates as high as I’m paying.

Oh, well. I never heard of the UFE until yesterday. I’m sure there are plenty of groups out there, advocating a wide spectrum of tax reforms or lack thereof. I wouldn’t be surprised if they all came up with different numbers.

Here’s what I know about Texas. It’s true that we have no state income tax. We rely on a variety of other taxes and “user fees” to finance our streets, highways, schools and other public services. The biggest pieces of that patchwork, from my perspective, are:

• Property taxes. Levied by city and county governments, independent school districts,  rural utility districts, etc. Schools account for the biggest share of this. Education is expensive, and property taxes are their primary means of support.
• Sales taxes. We have a state tax of 6.25 cents on the dollar, and local governments can tax up to an additional 2 cents. Sales taxes are known for being regressive. Our code softens that effect, to some extent, by waiving tax on “essential” items like groceries and prescription drugs.
• Fuel taxes. 20 cents/gallon on gasoline, and I forget what it is for Diesel. Statewide, this generates a lot of funds. Texans drive long distances, and many areas have little or no public transportation.

So. Am I overtaxed or under-taxed? How does your experience compare to mine? Are we getting what we pay for? Here are my numbers, as best I could figure them. Let me know what you think.

• Federal income tax - 5.16%
• Social Security - 5.57%
• Medicare tax - 1.3%
• Property taxes - 10.39%
• Tax on telephone service - 0.05% (any line item on the bill that’s called a “tax,” and disregarding all those other fees they tack on)
• Gasoline tax (state) - 0.38% *
• Gasoline tax (federal) - 0.35% *
• Sales taxes - 3.07% *

* These amounts are educated guesses. I keep good records about some things, but I’m not the kind of person who saves a whole year of receipts.