Ever wonder how much you really pay in taxes?
As a CPA and tax preparer, I have often contemplated the overall effect of taxes on my clients. Not just federal and state income taxes, but all taxes.
Social security and Medicare taxes are a major component of most folks’ total tax burden. If you work, you pay these taxes. Employees pay 7.65 percent of their gross wages and their employers match that amount. Self-employed individuals pay 15.3 percent of the net income from their business activities.
In Natchez, not only do we pay the general sales tax of 7 percent on most of our purchases, but like many communities, we have local sales taxes such as our hotel and restaurant taxes. While a resident may not stay at a local hotel and pay the additional 3 percent sales tax plus $2 per night fee, they will more than likely pay similar taxes and fees when they make an overnight trip out of town.
If you purchase a hamburger and fries at your favorite fast food location, you will pay the 7 percent general sales tax plus an additional 1.5 percent restaurant tax.
If you own a home, you will pay real estate taxes on the assessed value of the property.
Car tags are a combination of property taxes and fees. When you purchase fuel for your car or truck, you pay federal and state excise taxes for each gallon of fuel pumped. The current federal rate is 18.4 cents per gallon while the Mississippi rate is 18.8 cents per gallon.
Most of us have either a home phone or a cell phone and many of us have both. The excise taxes and fees can total several hundred dollars per year for an average consumer.
Hunting and fishing are big recreational activities in our area. Did you know a tax of 10 percent of the sales price is imposed on the manufacturer on many articles of sport fishing equipment? If you hunt, your rifle, shotgun or bow had a 11 percent tax imposed.
You may not be directly paying these excise taxes, but indirectly you do because these taxes are embedded in the cost of the product.
These are just a few examples of the taxes that we pay each and every day. There are many others such as liquor taxes, tobacco taxes, gambling taxes, etc.
But, back to the question: How much do we really pay in taxes?
Unfortunately, it is a difficult question to answer, but let’s give it a shot.
Assume a fictional couple in Natchez. The husband owns a small logging operation and nets $35,000 per year. The wife works as a teacher and has annual W-2 wages of $40,000. They have no savings and no investment income.
They have one child in middle school and own a modest home which cost them $100,000. They own two vehicles.
Their estimated income taxes, payroll taxes, self-employment taxes, sales taxes, property taxes and fuel taxes would total approximately $18,480 or 24.64 percent of their total income. This does not include many of the other excise taxes and fees that they would be paying daily.
Regardless of where you live, political affiliation or economic status, taxes have a major impact on all of our lives.
Wes Gore is a certified public accountant and a partner at Silas Simmons, LLP in Natchez. He can be reached at 601-442-7411.