Most people think the biggest challenge to affording life in America is the price of groceries, gas, or rent. But if you zoom out and look at the full picture, the biggest cost of living might actually be… taxes.
Let’s break it down with a simple example:
You earn $100,000 a year. Seems like a solid middle-class income, right?
Here’s what really happens to that money before and after it hits your bank account:
👨💼 Step 1: Employer Tax
Before you ever see a dollar, your employer already pays:
- $7,650 in payroll taxes (Social Security and Medicare)
💡 Total cost to your employer: $107,650
💵 Step 2: Your Paycheck Gets Taxed
From your $100,000 salary, you pay:
- Federal Income Tax: ~$11,000
- FICA Taxes (Social Security & Medicare): $7,650
- State Income Tax (avg. state): $5,000
🧾 Take-home pay: ~$76,350
🛒 Step 3: You Spend It — and Get Taxed Again
Of your spending:
- ~$30,000 of purchases are taxable
- At an ~8% sales tax, that’s $2,400 gone
- Add gas taxes, cell phone surcharges, utility taxes: another $1,000
🏠 Step 4: If You Own a Home
Let’s say you have a modest $350,000 home:
- Property tax (avg. 1.2%) = $4,200/year
📊 Final Tally
| Category | Amount |
|---|---|
| Federal Income Tax | $11,000 |
| FICA (SS + Medicare) | $7,650 |
| State Income Tax | $5,000 |
| Sales/Excise Taxes | $3,400 |
| Property Tax | $4,200 |
| Total Taxes | $31,250 |
| What’s Left | $68,750 |
🚨 The Same Dollar, Taxed Again and Again
It doesn’t stop there:
- If you invest and make gains, you pay capital gains tax
- If you die and pass on assets, there could be estate taxes
- Even Social Security benefits in retirement can be taxed
By the end of the cycle, a single dollar you earn might get taxed 4–5 times.
🎯 The Real “Cost of Living”
We often blame high prices for financial stress — and yes, inflation matters. But when nearly a third of your income goes to various taxes, it’s no wonder people feel squeezed.
If you’re feeling like you’re working harder and keeping less, you’re not imagining it. The tax burden is real — and it adds up.
Stay ahead of the markets. Subscribe to Breaking Metrics for in-depth analysis on key levels, sentiment trends, and the forces shaping stocks, crypto, and the economy. Fraywire+ Members get insights like this before anyone else. Don’t miss a beat—subscribe today, for free.
The information provided in this newsletter is for educational and informational purposes only. It does not constitute financial, investment, legal, or tax advice. The content is not personalized to the needs, objectives, or financial situation of any individual reader. All investments carry a high level of risk, including the potential for loss of principal. The market analysis, predictions, and opinions expressed are based on the information available at the time of writing and should not be considered as a guarantee of future performance.
Please conduct your own research and due diligence before making any investment decisions. It’s advisable to consult with a qualified professional regarding your specific circumstances before taking any action based on the information presented here. The author and publisher of this article disclaim any liability for any direct or incidental loss incurred by applying any of the information in this article, including but not limited to, any loss or damages resulting from errors, omissions, or inaccuracies in the information provided. Remember that past performance is not indicative of future results.
Stay ahead of markets news and sentiment with www.glideslope.ai.
You can find charts, data, tables, and much more on the Fraywire Market Portal for free
