That 12.4 percent of every paycheck up to $90,000 is in reality 6.21 percent. For all but those who are self-employed, half of the payroll tax is paid by the employer and does not come out of the paycheck at all.
Obviously he was educated at government indoctrination centers. Hiring an employee has more costs than just the employee's compensation. When determining how much a person is worth to the business, the company must take all factors into consideration. The total cost of an employee, then, is SALARY+BENEFITS+TAXES+TRAINING+EQUIPMENT+SUPPLIES.
For example, let's say I want to hire someone and I need to pay them $35,000/year. What must I have budgeted for personnel to be able to make this salary? First, I have to add-in benefits. For arguments sake, let say it cost $550/month ($550/month * 12 months/year = $6,600/year) in health insurance and I match $1:$1 in retirement up to 5% of the salary ($35,000*.05 = $1,750/year). I also need to pay the 6.21% payroll tax or $2,174/year. So far, without trying to compute any amounts for training, equipment, and supplies cost, to hire someone for $35,000/year costs me: $45,524/year. Those are real dollars that I have to budget for to hire someone.
Tangent Alert
Now, on top of that, the state and federal government are going to take an income tax and the other half of the payroll tax out of that person's salary. So, according to the IRS, a person making $35,000 a year is taxed at a $1,460.00 plus 15% of the amount over 14,600 (married - filing jointly, no deductions, no other income source). That amounts to $4,520/ year in federal income taxes. We also have to subtract out the 6.21% portion of the employee's payroll tax which is still $2,174/year. Because I live in AL and am hiring someone here, I need to withhold AL State Income tax, which is $1,673. So the employee gets to keep $26,633 (of course, sales tax, gas tax, and other fees have not been removed yet...but you can expect the person to pay another $2,000 - $3,000 in other taxes).
Now isn't that just sad. It costs the employer $45,524/year and the employee only gets $26,633/year to spend. A little under $20,000 goes to insurance companies and government. When I look at these numbers, I am really shocked that we haven't revolted yet. Withholding sure saves the government a lot of hassle. Because people never get the money, they never feel like they own it. They don't feel the impact of the tax, so they don't react to the high level of taxation.
1 comment:
Hey, if you are going to talk about payroll taxes you need to list all of them. You forgot MEDICARE. You not only have to point out that we have property, sales and gas tax but what about all the user fees we now pay to government. Look on your phone and power bill for more state taxes. Close to 50% of what we make is now taxed.
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