You would truly have to be a hermit and a non-participant from the current wage/tax model not to know that taxes in 2012 take a significant portion of the average income, and even then you might have to be mighty ignorant not to realize that. Online sources estimate that the average wage earner will pay about 30% of income in the form of some type of tax. If you are above average then you may pay as much as 57%.
The various taxes would include: Federal income tax, State & local income taxes, sales tax, Social
security and Medicaid, property tax, fuel taxes, estate taxes, fees, licenses, etc.
This is a long way from the estimated tax burden in 1900 of 5.9%. Most taxes of this time were ad-valorem taxes, that is to say, they were in the form of excise taxes and tariffs. These type of taxes would already be part of the price of the goods purchased and would nearly be invisible. In 1900 60% of the Federal revenue came from alcohol tax and 20% came from tobacco tax. So if you were a heavy drinker and smoker you would be paying more in taxes than someone who neither drank nor smoked.
In our little calculation to determine what the purchasing power of the average wage earner was in 1900 to 2012 dollars I am going to make this simple. I am not going to subtract anything from the 1900 wage for taxes because we are buying goods already with taxes in the price, this may not be entirely true in all cases and all taxes paid but I think it is close enough. For 2012 we will have to subtract 30%. So...
1900 average wage = $438
2012 average wage = $43,633 - (43633*.30) 13,099 = $30,534 after taxes.
Our ratio then would be 30534/438 = 70.
To apply this ratio to the lb of coffee that we looked at earlier that sold for 10.5 cents, 10.5 * 70 = $7.35 per lb in 2012 dollars, after taxes. That brings it a lot closer to the $4 per lb that we can buy the cheap stuff for at the local Walmart. Of course, if you pay more in taxes than 30% that would bring the purchasing power even closer. Keep this ratio in mind as we look at other goods from the 1901 Sears catalogue in future Way Back posts.
The various taxes would include: Federal income tax, State & local income taxes, sales tax, Social
security and Medicaid, property tax, fuel taxes, estate taxes, fees, licenses, etc.
This is a long way from the estimated tax burden in 1900 of 5.9%. Most taxes of this time were ad-valorem taxes, that is to say, they were in the form of excise taxes and tariffs. These type of taxes would already be part of the price of the goods purchased and would nearly be invisible. In 1900 60% of the Federal revenue came from alcohol tax and 20% came from tobacco tax. So if you were a heavy drinker and smoker you would be paying more in taxes than someone who neither drank nor smoked.
In our little calculation to determine what the purchasing power of the average wage earner was in 1900 to 2012 dollars I am going to make this simple. I am not going to subtract anything from the 1900 wage for taxes because we are buying goods already with taxes in the price, this may not be entirely true in all cases and all taxes paid but I think it is close enough. For 2012 we will have to subtract 30%. So...
1900 average wage = $438
2012 average wage = $43,633 - (43633*.30) 13,099 = $30,534 after taxes.
Our ratio then would be 30534/438 = 70.
To apply this ratio to the lb of coffee that we looked at earlier that sold for 10.5 cents, 10.5 * 70 = $7.35 per lb in 2012 dollars, after taxes. That brings it a lot closer to the $4 per lb that we can buy the cheap stuff for at the local Walmart. Of course, if you pay more in taxes than 30% that would bring the purchasing power even closer. Keep this ratio in mind as we look at other goods from the 1901 Sears catalogue in future Way Back posts.
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