Taxation

I don't know about you, but if you go to the store and buy an item only to find out is substantially cheaper down the street I get a bit upset. That being said let's look at taxation.

For an individual non-homeowner making $50,000 per year, which is currently close to my own circumstance and is a relatively moderate income, taxation falls out as follows:

Real Income before Employer burden - $53825

Federal Income Tax $7000 - 13%
Social Security Tax (FICA) - $3100 - 6.2%
Employer Social Security Tax (FICA) - $3,100 - 6.2%
Medicare - $725 - 1.45%
Employer Medicare - $725 - 1.45%
California Income Tax - $2600 - 4.80%
California State Disability (yes this is a tax) - $520 - 1%
California Unemployment Tax - $434 - 1%

Ok, so off the real gross amount (including employer contributions) we are at somewhere around 35.1% leaving approximately $35,621 in our pocket for the year, but this is only the beginning. Now let's look at additional items.

Sales & Use Tax @ 9.25% on 1/3 of disposable income - $1,087 - 2.0%
Gas Tax assuming 15 gal/week - $500 - 1%
Cell Phone Tax (assuming about $100/mo Smart Phone) - $125.00 - .25%
Utility Tax (a rough estimate) - $125.00 - .25%
California Vehicle Registration (varies) - $500.00 - 1%
Various Excise Taxes (tires, monitors, etc.) - $125.00 - .25%
Portion attributed to a landlord's property taxes (assuming approximately $250,000 property basis) - $3500 - 7%

Now those are the bulk of involuntary taxes leaving us with $29,659 or about 44.9% gone to taxes.

Now for a just a couple of optional sin taxes:

Tobacco (1 pack per day) - $820 - 1.7%
Alcohol (proof tax 1 750ml distilled per week) - $125 - .25%

Something you might want to purchase (or be forced):

Comprehensive health insurance - $5000 - 10%

Many of the above are reasonable estimates and may vary on any given day, but you get the point. I've also missed quite a few taxes levied on companies and products before they reach the individuals hand.

The main question is what do the variety of government agencies do with your $24,166 every year and what could you do with it?

Here are some possibilities on how to shop better than at the government store:

Setup your own retirement plan:
$6200 per year (instead of Social Security) @ 5% annual return over 40 years gives you $830,000 in YOUR bank. When you retire it is earning $41,500 per year. This is a bit more than the approximately $14,400 Social Security will give you.

Use your Medicare funds to save for emergencies:
$1550 per year @ 5% annual return over 40 years gives you $207,000 in YOUR bank. Use it to buy private long term care or for minor emergencies over your 40 working years. Have your own slush fund.

Take your $5500 dollar share of Federal Income Tax (let's face it the Federal government needs some bullets for their guns, fancy buildings, Whitehouse china, and other administrative functions):
Create a college fund for your children. $5500 per year for 15 years @ 5% gives you $136,050 in YOUR bank. No children or scholarship material? Keep saving and in 40 years you will have $736,000 in YOUR bank.

So far I think you are doing pretty good on $50,000 per year, don't you? After 40 years of working you have $1,775,000 in YOUR bank and you haven't even had to make any change other than being able to shop outside the US government store.

Note: The above calculations are based on general assumptions.