Trying to figure out how much tax the (U.S.) government charges. Let’s say you are employed with a company that pays the corporate tax rate of 35%.
The company makes a profit of $10 million and has 150 employees. To make the calculation simple, assume all employees earn a salary of $60,000. Assume half the employees are single and half of them are heads of households. Each single employee will pay a tax of $9,900 and each head of household will pay about $8,200. So employees pay an income tax of about $1,350,000.
Company Revenue: $45,000,000
Cost of goods sold: $35,000,000
Sales/service tax paid by the company during manufacturing/operations (when buying goods or services) : $1,400,000 (8% of half of $35 million)
Company Profit: $10,000,000
Corporate Income Tax (@35%): $3,500,000
Employee salaries: $9,000,000
Tax paid by employees: $1,350,000
Money spent by employees: $5,400,000 (60% of their pre-tax salaries)
Sales tax paid by employees: $270,000 (5% of total money spent)
Total tax: 1.4 + 3.5 + 1.35 + 0.27 = $6.52 million
Is this too much? Or too little? How do we make sense of it?
From the point of view of the employee, let’s see what would have happened if there was zero tax on everything. If all these taxes did not exit, this money would go into the pockets of the individual employees.
$6.52 million divided by 150 employees is $43,466. So each employee’s salary would rise from $60,000 to $103,466. This is the true extent of the cost of government.
Whether the benefits of government exceed the costs is a matter of personal opinion.