With all the talk about “The Middle Class” in this past election, I thought it might be useful to take a look at the tax situation of the middle class, to see how we folks have been faring.

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?