I wanted to compare what’s happened to households’ Federal taxes and payroll taxes between 1970 and 2020 and their effect on take-home pay. I first found out that the median income for the 63.4 million households in America in 1970 was $9,870. This median means half of the households earned more, and half earned less. I used the top tax bracket as an example for the high-earning couple, which was 70% for all income over $200,000.
I then went to the Bureau of Labor Statistics (BLS) and found the inflation rate between 1970 and 2019. I used 2019 as those were the rates that would be paid by Apr. of 2020. The rate of inflation was 558.91%. Using that inflation rate to increase my 1970 incomes for 2020 are as follows:
Because everyone’s deductions are different, I used these figures as their adjusted gross income. I also used the married filing jointly tax rates.
|1970 Median-Income||1970 High-Income|
|Adjusted Gross Income||$9,870||$200,000|
The overall tax rate was 21.9% for the median income and 54.5% for the top bracket of $200,000 2019 Payable in 2020.
|Adjusted Gross Income||$65,034||$1,317,822|
The overall tax rate for 2020 for the median income is 19%, and for the high-income couple, the overall tax rate is 33%. So the median income folks went from a 21.9% rate in 1970 to 19% in 2020, down 2.9 points and a 13.2 % reduction. In contrast, the high-income level couple went to an overall rate of 33%, down 21.5 points or a 39% reduction.
Expenses you didn’t have in 1970 that you had in 2020.
|Phone Bill||$70 per individual|
|Cable Bill||$50-$100 a month|
|Internet||$60 per month|
|Medical Plan||$456 for an individual and $1152 for a family plan|
*These are average figures for the U.S.
Suppose you take the low figures for an individual that amounts to $636 a month or $7632 a year; if you take a couple with two phones, cable, internet, and a family plan, that’s $1402 a month or $16,824 a year.
The high-earning couple has $883,329 left after taxes, and the median couple has $52,614. The $16,824 for the extra expenses for a couple uses up 1.9% of after-tax earnings for the high-earning couple and 31.9% for the median earning couple.
Remember, this median income of ($65,034) is the median income for the 128,500,000 households in America, so 64,500,000 families earn that or less.
My point in all this is, with a $23 trillion national debt, why did taxes go down at all? Why does the Social security tax stop at a max income of $132,900? Social Security and Medicare need more funding. And finally, you can see why many households are not feeling the American Dream.