People are essentially paying almost half of their income in taxes

[SimpleLife]

At least if you are in the typical 25+% tax brackets. If you're in the bottom, then not so much. But take a person with a six figure salary and assume they spend it all after taxes. Figure after the feds get their share of roughly 35% give or take, then your state takes another 13%, and your property taxes amount to about 5% of your income even though they are based on property value, and then you need to buy things to live, pay utilities etc. With a state sales tax of 10% this really begins to add up. If you are in an expensive part of the country, you are essentially paying 63% of your income either before or after taxes, to the federal, state, county and city governments.

[jennypenny]

I went through the mind-numbing exercise of looking for all of the taxes and fees we pay a couple of years ago. The list was long. It included the usual: federal tax, state tax, local tax, FICA, Medicare, Unemployment, real estate taxes, sales tax, and transfer taxes on real estate transactions (for me, 4 transactions in the last five years).

It also included taxes and mandatory government "fees" listed on many utility bills: cell phone, garbage bill, water bill, power bill, and my landline/internet/cable package (which included "PA State and Local Sales Tax" and mystery items like the Federal Universal Service Fee and a PA Gross Receipts Tax Surcharge fee).

Are we counting the annual fees to register cars or the occasional fees to renew drivers licenses or passports? Or taxes paid on airline tickets or rental cars in addition to sales taxes? I did when I compiled my list.

Taken individually, the taxes from the second list don't seem like much when tacked onto individual bills, but the sheer number of them adds up quickly. IMO, they are an unreasonably large percentage of an ERE-level retirement budget. I accept that getting rid of those items would eliminate the taxes. It still seems excessive and unfair to me, and I'm not usually a person who complains about paying taxes.

[GandK]

@SimpleLife: If you take pensioners out of the equation, I bet you're right.

TaxFreedom.org says the percentage of national income spent on federal, state and local taxes (whether from income or sales) is 31% in 2015. Taxation varies widely from state to state... North Dakota raises more than four times as much money per capita than New Hampshire does. Homeowners pay about 5% more in taxes than non-homeowners no matter where they live. (Lots more detailed tax info: JustFacts.com.)

Pensioners and low-income earners - the two groups who end up not owing federal income taxes - skew the percentage paid amount quite a bit for everyone else. Pensions are frequently not taxed at all, and investment income (most of which goes to people over 65) is currently taxed way less than labor income. Disability income is also not taxed (most disabled people are older), and for many, Social Security is not taxed. In short, I bet if I could find a nice chart about the percentage of taxes paid by over-65s versus other taxpayers, it would say they pay a total of about 15%, and everyone else pays an extra 5% to 10% to make up for what they do not pay.

Also, a lot of working people pay a very high percentage in taxes, as you point out, and it's not only the high-income folks who take a big hit. Self-employed people, for instance, pay much higher federal taxes because they have to pay twice as much in FICA and Medicare as everyone else (since they are both the employer and the employee).

[SimpleLife]

I think this alone makes a great argument for ER. The idea of working half the year just to pay the way for others (mind you, we need some tax revenue for operations, but there is much waste) who get free housing, cars, bus passes, heat, food, medical, cell phones, their every need met as a reward for failing in life. I listened to a podcast on madfientist where a couple who loved their jobs/business, etc. and were making money hand over first decided to quit and retire when they realized they were paying half their income in taxes. It really puts things in perspective for you; do you really NEED that $300 Coach hand bag, or would you rather stop being a slave to the system?

[Chad]

The federal tax brackets don't mean you pay the top bracket you fall into for all your money. Just because you hit the 25% doesn't mean that's the percent you pay for all your income. For instance, if you made roughly $80k your effective tax rate would be roughly 20%...not 25%.

Effective tax rate definition:
http://www.investopedia.com/terms/e/eff ... axrate.asp

Also, sales tax wouldn't be 10% of you total income, it would be 10% of the income you spend. So, you couldn't just add the 10% to your effective tax rate, as it would actually be a lower percent.

Also, most states are roughly 5% income taxes. Here is a chart showing average total state and local percentages:

http://taxfoundation.org/article/state- ... rates-2014

Obviously, the average is lumping in high earners with low earners.

Also, you would need to factor in deductions to get your true effective tax rate.

http://www.nowandfutures.com/taxes.html

The total average tax paid is closer to 43%, since the figures above do not distinguish between taxes on gross and net income, nor do they adjust for tax planning and many other factors. Note also that the Tax Foundation's numbers are closer to 30% for the actual "average" US citizen, although items like inflation, employer's share of Social Security and Medicare, and various fee estimates are not included to the best of our knowledge.

I'm not suggesting it wouldn't be nice to find ways to reduce this number, but let's at least use realistic numbers. I would definitely like to remove the fees on a lot of local things and add that number into the total local wage, income, etc. tax. These fees are just an increase in the tax rate without showing the increase.