Category: u.s. economy
cigarettes, sugar and taxes...
By 1voxpopuli on Jun 5, 2010 | In u.s. economy
i'm going to keep the taxes in these examples as simple as possible...i will not include the plethora of other taxes that can eat up your dollar on any given day...
"In addition to personal income tax, sales tax, and property tax, there are other taxes that states may impose, including fuel tax, inheritance tax, and corporate income tax."
http://www.ustreas.gov/education/fact-sheets/taxes/state-local.shtml
the per capita income in the united states for 2009 was $39,138, according to the wall street journal...
that would put a single person in the 25% federal income tax bracket in that same year...a married couple making twice that amount, or $78,276, would be taxed similarly...
http://www.moneybluebook.com/2009-federal-income-tax-brackets-official-irs-tax-rates/
i found this link from cnn money...it shows that in 2005, state/local taxes ate up 10.1% of per capita income on average across the country...for sake of simplicity, we'll assume these taxes haven't gone up in the past few years...a generous assumption, to be sure...
http://money.cnn.com/pf/features/lists/taxesbystate2005/index.html
combining just federal, state, and local income taxes, that's a national average of 35 cents of every dollar, taken off the top...
$39,138/year = $752.65/week for 52 weeks...that's $150.53/day at a wage of $18.82/hour for a standard 40-hour workweek...
for our purposes here, i'm going to say $150/day is what we work for...that's $97.50 after federal/state/local income taxes...
today we'll buy cigarettes...
major brands are going for about $5/pack locally, taxes included, so i'm going to guess that, like most things around here, that's about average for the nation...
according to the united states treasury department, the federal tax on a pack of class a cigarettes is now $1.01/pack, as of april 1, 2009...
http://www.ttb.gov/tax_audit/atftaxes.shtml#Tobacco
http://www.ttb.gov/main_pages/schip-summary.shtml
additionally, states add excise tax...tobaccofreekids.org says that this brings the national average for cigarette excise tax up to $1.34/pack...
according to this forbes.com article, reported on by msnbc, the national average for sales tax at the end of 2009 was 8.629%...
http://www.msnbc.msn.com/id/35822798/ns/business-forbescom/?GT1=43001
for easier math, we'll say 8%...so, a pack of smokes costing $5, including tax, is a retail price of $3.38/pack...3.38 x 1.08 = 3.6504, or $3.66...add $1.34 in excise taxes and we spend $5 for it...
again, for the sake of simple math, let's now say we get a slight discount, a little more than a dime off the retail price per pack, when we buy a full carton...$32.73/carton...we'll stock up, and get two cartons...65.46 x 1.08 = 70.6968, or $70.70...excise taxes are $1.34/pack x 20 packs = $26.80...$97.50, total amount due...
we made $150 in salary today...we bought $65.46 worth of cigarettes, 2 cartons, at retail cost with it...$84.54, over 56% of our wages, went to taxes...
if we smoke a little less than a pack per day, 36 cartons annually, it would cost us 18 full days of labor to smoke for the year...8 days to pay for the cigarettes, and 10 days to pay for taxes...and, remember, this was calculated using a lower-than-average sales tax rate, and a 5-year old state/local income tax average...
the average salary of $39,138/year works out to $3261.50/month...83% of that amount is $2707.05...we work 18 out of an average of 21.67 workdays/month, or 83% of one full month, out of each year, to pay for $1178.28 worth of smokes ($65.46 for 2 cartons x 18 workdays = $1178.28 for 36 cartons, or one year's worth), at retail cost...56.5% of our labor for those 18 days, $1528.77 on top of that retail cost, goes toward taxes...
after doing the math, we quit...so, a few nicotine patches later, we decide to use a day's pay to stock up on sugar...
the following online article, from august 8, 2009, on a filipino news website, discusses the production cost of sugar in the philippines...
"With average Philippine production cost at 17 US cents a pound, currently the highest in the world, the sugar industry’s foreign exchange income, as it has been so historically, depends solely on the United States market."
http://www.malaya.com.ph/aug03/busi1.htm
so, why does it depend upon us...?
sugar tariff...
according to the article, "Under the most recent allocation given to 40 countries supplying the US with sugar, the Philippines was given a non-tariff quota of only 142,160 metric tons which the US buys at between $0.20 and $0.22 a pound."
it also states, "The price in the US is twice as much as in the world market."
although "non-tariff quotas", "tariff-rate quotas", etc., all vary in some ways, and vary nation-by-nation, since the united states federal government forces us to pay double the market price to import sugar from the philippines, a cost that is obviously passed onto the consumer, we will use this as our standard measure for our simplistic purposes here in order to make the point, and say that the average additional cost is 0.10/pound (no matter on what foreign soil it is grown), and for the sake of simplicity, we will call it all a "tariff"...
http://www.sice.oas.org/dictionary/TNTM_e.asp
for the average retail cost of a pound of sugar, i'll use our local price, which, depending upon the type and amount of sugar purchased, is roughly 75 cents/pound...every pound has been inflated by a 10-cent tariff, and we'll have to pay an additional 6 cents in sales tax...0.75 x 1.08 = 0.81...so, it costs 81 cents to walk out of the store with a pound of sugar, 16 cents, or nearly 20% of which, went to the sugar tariff and sales tax...
our nation's sugar habits changed about 3 decades ago...a combination of federal subsidies for corn and sugar tariffs have led to high-fructose corn syrup as a replacement for traditional sugar usage...according to the united states food and drug administration, cane/beet sugar usage per capita in the united states went from 96 lbs/year from the period of 1970-79 down to 65.6 pounds for the year 2000...
http://www.michaelpollan.com/article.php?id=52
http://en.wikipedia.org/wiki/High-fructose_corn_syrup#Use_as_a_replacement_for_sugar
http://en.wikipedia.org/wiki/Archer_Daniels_Midland#Agricultural_subsidies
http://www.washingtonpost.com/wp-dyn/content/graphic/2006/07/02/GR2006070200024.html
not all sugar is imported, and thus, subject to tariff, but the overwhelming majority of cane sugar we consume here must be grown outside the united states...so, let's say that we consume the y2k average of 65.6 pounds of sugar, annually...and, for the sake of our example, about 60 pounds of that sugar is subject to the sugar tariff, which is what we will buy for ourselves with our wages from today...that's about 2.5 cups of imported sugar/week for baking cookies, making tea, coffee and kool-aid, etc...additionally, we assist a retired relative, so we buy 60 more lbs. of sugar, as a gift, which has also been imported, doubling our sugar purchase at the store today to 120 pounds...
0.75 x 120 x 1.08 = $97.20...16 cents out of every pound went to the tariff and sales tax, or $19.20 of our purchase...
we worked for $150 today...we took home $97.50, after income taxes, and bought $78 of imported cane sugar, which isn't enough to take care of two americans' sugar consumption for one year...if we want to help our retired relative not have to run to the store for sugar, and take care of the bulk of our annual sugar use in one trip, as well, it costs us $71.70 in total taxes ($52.50 in income taxes, $12 for sugar tariff, and an additional $7.20 in sales tax) in order to get $78 (retail cost) of cane sugar, with 30 cents left over to show for our labor...
less than a year's worth of sugar for two will cost us one day of labor, with nearly 48% of that going to taxes...
if the entire picture were possible to put together, including every other type of tax that impacts the cost of goods/services in this nation, i'm certain we would find that the price of everything we buy is inflated over 100% by combined taxes...it really doesn't matter whether you buy in bulk, as in these examples, or not, because you will still have to use money that income tax has taken 35% of, on average, over the course of the year, and pay tariffs, excise taxes, sales taxes, etc., with each purchase, whether you realize you are paying a particular tax or not...
so, when they tell you that "tax freedom day" falls in april, don't believe it...that's just part of our tax burden...
and it's not stopping...social security is in the red as of 2010...former the comptroller general at the united states government accountability office from 1998-2008, david walker, has been saying for years that if this situation is not addressed it will necessitate the federal government doubling our income tax...obama has now forced a health care mandate upon us, which many states say will further economically burden them, forcing state taxes higher within years...our national debt is astronomical, and with the huge budget deficit, without cuts, we will soon have more taxes pushed upon us for expenditures besides social security and health care, e.g., interest on debt...and possibly, in addition to all of these other taxes, a new value-added tax included on top of each purchase...
http://www.usatoday.com/news/washington/2010-02-07-social-security-red-retirements_N.htm
http://www.cnn.com/2010/POLITICS/03/22/health.care.lawsuit/index.html?hpt=T1
http://www.cbsnews.com/8301-504365_162-20002197-504365.html
if you didn't consider yourself a slave before reading this, perhaps you do now...
http://www.rasmussenreports.com/public_content/business/taxes/april_2010/66_say_america_is_overtaxed
since it appears that taxation will only be getting worse, i suggest preparing as much as possible, while it's still relatively affordable...
http://morphinedreams.com/blog5.php/2008/10/19/survival-guide-1
http://www.americanpreppersnetwork.com/
http://mormonism.suite101.com/article.cfm/an_lds_guide_to_beginning_food_storage
