The number one tax that comes to my mind is the payroll tax for Social Security which consists of two portions, FICA at 6.2% and Medicare at 1.45% for a total of 7.65%. Some of you might say WOW, that means that they take 7.65% of my gross payroll earnings and deduct this whopping percentage from my pay and pay it to the tax man. Yes, that’s exactly what they do but in effect you are paying yourself. You are being required to save money so that you will have a retirement pension and to save money so that you can have a Medicare health care plan when you retire. But you say, by the time I’m ready to retire the Social Security fund will be exhausted and there won’t be anything left. That has of course been an ongoing concern for a very long time and preservation of the Social Security Fund is always a political pot boiler at election times; so if this is one of your concerns perhaps while you are being thankful for this tax that is supposed to help support you when you reach retirement age you might also be thankful for the right to vote and use that right each and every election to voice your opinion.
Next, I would have to say that Unemployment Taxes have saved countless lives when they are paid out to unemployed and displaced workers. Now unemployment taxes are handled differently from state to state and in some states the employee does not pay into this fund through taxes but in others the employee does pay into the fund. It should go without saying that hard working people in this country need to know that in the event they lose their livelihood through no fault of their own that they have at least a small window of time to regroup and hopefully to find new employment. That window is provided by unemployment benefit payments.
It is important to note also that not only the employee but also the employer pays into these tax funds for future benefit of their employees. In some cases the employer pays a substantially larger portion of the unemployment taxes required.
Is it stretching your tolerance levels to say we should be thankful for these taxes? Of course it is as none of us really like paying taxes. I’m sure we all think that given the opportunity to opt out of having that 7.65% withheld from every pay for Social Security Tax we would opt out and invest it in our own little nest egg. But how many of us are truly disciplined enough to do that? And some might think that they would put their unemployment tax in a little emergency fund for a rainy day. But how many of us are truly disciplined enough to do that? In a perfect world everyone would save enough money to retire but in a perfect world everyone would also have money left to save after they paid all their living expenses.
To put the issue completely into perspective just consider how many retired people will be sitting down to a Thanksgiving meal this year that was paid for by their Social Security Tax benefits that they might not have had if they had been given the choice to pay or not to pay their Social Security taxes. And how many people who are unemployed right now will be sitting down to a Thanksgiving meal this year paid for by their Unemployment Tax benefits. I’m guessing they might think that there are some Taxes to be Thankful for…
Not all taxes are bad. Not all investments are good. Not everything is black or white. Not all things turn out like they should. But I’m guessing there is a lesson in this taxing fact – in most cases you must pay taxes if you want to eventually get some benefits back.
Join me in the forum and share your thoughts on taxes and on being thankful and as always, I hope you’re enjoying Tax Facts on the Taxing Subject of Taxes.
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