It's been said that death and taxes are the only two certainties of life. But while the former can happen any day of the year, the latter gets an extraordinary amount of attention in April.
While there are several different types of taxes that we have to pay, the two that get the most attention are incomes taxes, and payroll taxes. These two account for the vast majority of money that our employer takes out of our paycheck, and help determine whether we get a refund or owe money come April 15th.
To get the most basic sense for where your tax money goes in the United States, let's consider a single individual with no children earning the median U.S. wage in 2013 for this category: $53,222. Here's how that salary breaks down with taxes.
Two different columns are highlighted for a reason. What many employees may not realize is that their employer is required to set aside a certain amount of cash to pay their share of payroll taxes -- in this case, about 8.9% of one's salary.
But when you look at the gross salary you earn on your paystub, this figure often isn't included. Therefore, depending on how you look at it, the single, childless American taxpayer with a typical salary pays either 31.3% or 24.6% in taxes.
How does this stack up with the rest of the developed world?
There is no shortage of opinions as to whether or not our tax system is fair or just in the United States, and this article won't seek to answer that question. Instead, it's worth looking at how we compare to the rest of the developed world.
Every year, the Organization for Economic Cooperation and Development (OECD) publishes a study on the tax systems of its member countries. It is important to note that in figuring out how much of one's salary is taxed, the OECD includes the employer's portion of payroll taxes.
Taking the ten largest economies by GDP of OECD countries, here's where the USA stands, based on four different filing statuses.
It might be surprising to some that, compared to many other countries, the United States has a relatively low tax rate. Only Australia, South Korea, and Canada have tax rates that are consistently lower than those in the United States.
What this means for you
Of course, while the United State's ranking relative to other countries will stay the same, the actual amount that you pay in taxes will vary based upon your salary, filing status, and a number of other variables.
While paying your taxes is important, it's also worth investigating if there are major tax breaks that you could be missing out on. We've assembled several articles to help you find out -- with specific ones focusing on single filers, homeowners, retirees, the self-employed, those covering education costs, and those with children -- as well as commonly overlooked tax breaks.
No matter what your status is, a huge portion of your dollars are going to support Social Security for current retirees. If you want to make sure you get the most out of Social Security when retirement comes for you, I highly suggest checking out this "loophole" we found below.
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