There have been seven different presidents since I entered the work force in 1971. I have no idea how many times control of congress has changed. What I do know is that my taxes have never gone down, except under Reagan. I did notice a little dip for a few years when his tax reform package made it into law. That didn’t last long.

There has been non-stop political rhetoric for 30+ years from the professional money spenders in Washington about giving the average guy a break. That’s what they really do you know, spend other people’s money as a career. But, except for the temporary relief under Reagan, no matter who has been calling the shots, my taxes have gone up.

From my perspective, political affiliation of the decision makers makes no difference. No matter who has touted tax relief, I haven’t seen any change.

Right now, when you add up all of our taxes, (federal, state, local, FICA, Medicare, AMT), we, the middle class, are left with about 55-60 percent in take home pay. That doesn’t include estate taxes.  That seems steep no matter how much you make. Keep in mind that’s take home, before real estate taxes, gas taxes, sales taxes, cell phone taxes, road use taxes, you get the picture.

Do we really know how much we pay in total taxes? No! Most people can’t tell you what tax bracket they’re in.

In the 1990’s I ran, on average, 30 to 40 workshops a year for retired, or about to retire investors. Most were successful people. Most had jobs with responsibility and all earned a good living, good enough to have saved enough to require they seek help with their money.

At many of these workshops, I presented tax-free bonds as a safe vehicle for those in the higher tax brackets. In order to calculate the benefit of a tax-free investment you need to know what percentage you are paying in federal taxes. That allows you to calculate your taxable equivalent yield.
Without exception, not one person in any group had any idea what percentage they paid in federal income tax. Most thought if you had to write a check to mail in with your return, that was your tax. I’m not exaggerating.

Here’s how I look at my tax bill. I total all my income, including dividends and capital gains, and I divide that into the total tax owed on the back page of my 1040 form. Not the adjusted gross income, the actual total tax owed.

This is my real federal tax percentage. Mine has gone up steadily since the late eighties. Not just my tax amount, the percentage has gone up.

Despite detailed record keeping, maximizing the few deductions we still have, interest from two mortgages, I’m still getting crushed. In 2007, after all was said and done, my percentage was more then three times what it was twenty years ago. Believe me, my income has not tripled.

Speaking of deductions, what happened? Most of you reading this remember when we had all of our deductions taken away as a result of the tax reform of the 80’s, interest from car loans and credit cards stand out in my mind. In return, we were guaranteed two tax brackets, 15% and 28%. That was supposed to be it. It was as close to a flat rate tax as we have ever gotten.

Now we have brackets at 15%, 28%, 31%, 33% and as high as 41%, and the AMT and the Medicare tax, but none of the deductions we had before tax reform.

The craziest part of this story is that despite how much our professional spenders in Washington collect, they manage to spend more… a lot more. This year to the tune of about one trillion dollars. They take their jobs very seriously.

Elected officials who make a career of spending others money, taxpayers who have no idea how much they really pay in taxes, a tax code that requires a graduate degree to understand it, tax relief that always seems to end up costing us more and we are in worse fiscal shape now than 30 years ago.

In 1982, I bought my first house… three bedrooms, two baths, a nice lot in a nice neighborhood. Nothing flashy, just a nice house. Today that house is 6.5 times more expensive than it was in 1982. During that same period, my income tax percentage has tripled.

Even though I have done well for myself, my income hasn’t even begun to keep pace with the increase in the cost of that house, and it hasn’t kept pace with the increase in my tax percentage.

How’s the middle class doing? Dying a slow death.

Now we have another administration that’s talking about the needs of the middle class and all but guaranteeing another tax increase. I think I’d prefer if they focused on another group.  The middle class has had about all the help it can stand.

Source: Why Do Tax Cuts Always Cost Me Money?

More from Andrew at Investor’s Daily Edge:

We’re in a “damned if we do, damned if we don’t” economy. And there’s not a damn thing we can do about it.

Our economy floats on the whims of the American consumer. When they feel confident about the future, they spend. The more they spend, the better the economy does. This is oddly true even if 80 percent of the spending is on goods from Asia.

Right now the American consumer isn’t feeling so confident and the economy is suffering as a result.

But if we spend more, we go more into debt. We’re already spending more than we make. And the more we go into debt, the more money goes to paying off that debt…

Money the country doesn’t have. Money we as consumers don’t have. Money that should be going into productive assets, not into the hands of our cash-rich lenders in Asia.

We’ve been spending beyond our means for a while. But nobody cared much as the economy was booming and people were profiting from multiple bubbles.

The rich were getting richer. But the middle class was also seemingly enjoying the fruits of an expanding economy – moving into bigger houses and spending more on everything.

But their incomes had become stagnant. It couldn’t last. And it didn’t.

Conspicuous consumption has retreated under mountains of debt and growing doubt about the future.

Several forces are at work, not the least of which has been the economy’s inability over the last three-and-a-half decades to appreciably reward households with growing income.

Annual Growth Rate of Real Income Across the Family Income Distribution: 1947 to 1973 versus 1973 to 2005

Source: U.S. Census Bureau, Historical Income Tables, Tables F-2, F-3 and F-6. Downloaded from http://www.census.gov/hhes/www/income/histinc/ incfamdet
on Feb. 26, 2008

The 50’s and 60’s brought great economic growth to the country. But it also benefitted Americans across the entire spectrum of economic classes – from the very poor to the very rich. The slowest-growing group back then? It was the top five percent. Their income grew by 2.3 percent – about a third slower than how the poorest fifth of the population fared.

From 1973 to 2005, the top five percent maintained the income growth rate they had managed in the previous couple of decades. Problem is, the other income groups fell way behind – led by the poorest income group whose income didn’t grow at all in real money terms.

The middle income group also saw a real slowdown in income growth from annual rates approaching three percent to rates of 0.4-1 percent.

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INTERNAL ENDORSEMENT The Great CEO Tip-Off… I’ve found a signal so accurate, that it’s almost like the CEO of a major corporation came up and told you “Our business is in trouble, now short our stock and make tons of money”. This signal has preceded the downfall of… Heinz which fell 23% in 2002… Dynergy which dropped 49% in 2002… Citigroup which plummeted 32% in 2008… National City Corp which fell 41% in 2008… Alliant Energy which fell 25% in 2002… And just this year alone, this ‘Red Flag’ predicted winners with 92% accuracy. So what is this ‘Red Flag’? Why does it lead to lower stock prices? And how can you find out which companies may be on the verge of doing it? I’ll Explain Everything to You Here.

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This clash of trends – stagnant income verses rising medical, education and housing expenses – should have ended the economic good times far before it did. It lasted this long because…

• The women. They entered the work force in increasing numbers beginning in the 70’s. It took a double-income family to maintain the lifestyle that a single-income family had so recently been able to afford.
• Deflation from imports. Very cheap gas from the Middle East (thanks to an undisciplined OPEC) and cheap goods from Asia (thanks to low wages that must have had Karl Marx rolling over in his grave) kept things affordable in the 80’s and 90’s.
• Credit card nation. Before there were credit cards, there were lay-away plans. If you couldn’t afford it, the store would take it off the shelves and “lay it away” until you saved up the money. Credit cards let people buy what they couldn’t afford. It also established a consumer mindset about cash which facilitated the housing boom, bubble and then crash.
• The housing equity windfall. Americans, especially the middle class, avoided facing their diminished status brought on by decades of underwhelming income growth by turning their houses into cash machines. Easy credit greased the way. Thank you, Alan.

It is a great irony that as the U.S. grew into the undisputed richest and most powerful country in the world, its middle class turned into an endangered species.

The prerogatives of a middle-class lifestyle are a nice home and car, medical care, and education for your children. This is not greed. This is the American Dream. The best thing about it is that supposedly you don’t have to be rich. A ticket into the middle class is all you need.

That dream is now drowning in debt.

Spending beyond your means isn’t some freakish trait of the American middle class. It scares the hell out of the Europeans or Chinese. The notion that American households don’t mind debt is preposterous.

Have you ever had a conversation with somebody who said, “Sure, I’m buried in credit card debt and under water with my mortgage but I don’t mind. I’m going to continue to spend to my heart’s content.”

It’s precisely because the middle class is deeply worried about its debt (and the economy) that they have substantially reduced spending. And it’s going to stay that way until the value of the houses they live in and the incomes they make start to go up again.

Politicians of both political parties have turned a blind eye to the fate of the American middle class for too long. It’s time the government steps up to the plate.

They should do so because the fate of American retailers relies on reviving the middle class. Except for low-end retailers like Mickie D’s, Wal-Mart (NYSE:WMT) and the super stores, the entire sector is suffering mightily from the wanton disabling of the American Middle Class.

Then there’s this: the American Dream will die if they don’t do something and do it sooner rather than later.

Harvard political scientist Samuel Huntingdon wrote: “Critics say that America is a lie because its reality falls so far short of its ideals. America is not a lie, it is a disappointment. And it can be a disappointment only because it is also a hope.”

There’s still hope for the American Dream. But it’s getting late.

Source: Is the American Dream Fading?