Robert A. Bonavito, CPA PC

How Payroll Taxes Affect Inequality

I'm going to talk about inequality from the standpoint of taxes.

Inequality has been around for over 3,000 years. But in the last 20 or 30 years, something in taxes has began to result inequality that many people don't talk about, and what it is, is payroll taxes.

If you look at the average couple, a lot of them start working at the age 15 at the fast-food restaurant or they worked at the pool, and then they work their whole life, and they retire at age 67.

Now, during that, that's 52 years of work. During those 52 years of work, every year they contribute about 23% of your payroll, their pay to payroll taxes, which is unemployment, disability, Social Security, Medicare, and this is tax.

When you have payroll taxes, it's tax for federal and state tax. So, when you calculate it, it's about 20% every year that this couple is paying into payroll taxes over 52 years.

Now, when they retire at age 67, of course, you're going to get something for that money, right? Because, you have paid them for 52 years, and that comes to about...It's, you know, paid out Social Security and Medicare, and it's paid out over 30 years.

The net present value after it's taxed because there's tax again, is about $300,000, which sounds good, right? But, if the government took that 20% and invested it in an efficient market rate vehicle, when they retired at age 67, that couple would have $6.7 million in the bank account.

So, now, if you just take the $300,000 and subtract it, there's $6,400,000 missing, and I'll tell you what. If you gave everybody who retired, or every family that retired $6.7 million inequality will be taken care of pretty quick.

So, that really is one of the things that when they talk about taxes, or inequality that they need to focus on, that money that disappears. I have some theories where it goes, but that's going be done in another video.

So if you have any questions about this video on payroll taxes, feel free to give me an email.

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