The deadline for filing federal income taxes is later than usual this year. Tax Day was pushed back to April 18 to avoid coinciding with the District of Columbia’s Emancipation Day holiday.
However, Americans don’t just pay taxes one day out of the year. Taxes are a part of our everyday lives, whether we’re conscious of it or not. Many politicians prefer that we don’t notice how much we’re taxed. Taxes are often buried in the cost of products or subtly taken from our paychecks.
The largest and most recognized U.S. tax is the personal income tax. Federal tax rates on personal income range from 10% to 37%. Forty-one states layer on additional income taxes. In places like New York City, the top combined federal, state and local income tax rate exceeds 50%.
For young adults entering the job market, the first tax they may notice is the payroll tax. Looking at their pay stubs, they are often shocked to see 6.2% was taken out for Social Security and 1.45% for Medicare.
What they may not realize, though, is that their employers also paid that same amount in Social Security and Medicare taxes. Since that’s part of the cost of hiring someone, that amount is also built into the paycheck – in the form of lower wages. Effectively, the federal government takes a 15.3% cut of most workers’ wages just to fund entitlements, double what shows up on their pay stubs.