The Tax Man

The Tax Man

Mark Lazar’s August 2021 Newsletter

There is no such thing as government funded—it’s all taxpayer funded. Unknown

Domestic equity indices continued to mark new highs through July, which exemplified how dueling narratives can both be true while the forward-looking market produces a clearly positive result. In this case, optimism bolstered by economic data and sentiment—gross domestic product (GDP) growth, employment, earnings and reduced inflationary fears among them—has managed to, for now, allay delta variant concerns.

The S&P 500 and NASDAQ both set seven all-time highs in July, while the Dow Jones Industrial Average recorded five. Under those glossy headline numbers, however, lies a more complex situation with wide disparities in performance between firm sizes, sectors, growth versus value, and commodities.


Item YTD Change
Dow Jones Ind Avg 14.14%
S&P 500 Index 17.02%
EAFE Foreign Index 8.08%
Barclays Agg Bond Index -.50%
10-Year Inflation Forecast 2.40%
2021 GDP Growth Forecast 6.7%
Unemployment Rate 5.9%

*Market index data as of 4/30/2021


When it comes to compulsory government tithing, there are numerous idioms, such as you can never escape death and taxes, taxes are the penalty for financial success, and taxes are what we pay for civilized society. While personal income taxes garners most of the spotlight, let’s take a moment to review the various taxes we pay on a daily basis.

(Personal) Income taxes: Uncle Sam will collect ~$2 trillion in personal income taxes this year. The federal tax system is both layered and progressive. While the top marginal tax rate is currently 37%, the effective, or average, rate is 14.6%


Rate Single Individuals Married Individuals Filing Jointly
10% Up to $9,950 Up to $19,900
12% $9,951 to $40,525 $19,901 to $81,050
22% $40,526 to $86,375 $81,051 to $172,750
24% $86,376 to $164,925 $172,751 to $329,850
32% $164,926 to $209,425 $329,851 to $418,850
35% $209,426 to $523,600 $418,851 to $628,300
37% $523,601 or more $628,301 or more

The Tax Foundation

In addition to federal levies, there are also state income taxes, which range from 0% (AL, TN, WY, FL, NH, SD, TX, WA, and NV) to a high of 13.3% in California. Total net state income tax revenue in 2020 was $441 billion.

Corporate taxes: Business taxes are both complex and a political lightening rod. Prior to the Tax Cuts and Jobs Act of 2017, at 37%, the US had the highest corporate tax rate of any developed country in the world. The TCJA reduced the corporate tax rate to 21%, putting it on par with the European OECD countries at 21.7%. Like a tariff, a corporate tax is ultimately paid by the consumer. Taxes are simply a line item on a company’s P&L statement, no different than cost of goods, labor, or general and administrative costs. At the end of the day, a company must be profitable in order to remain in business, and all costs must be factored into the retail price. The higher the corporate tax, the higher the cost to the consumer. At the end of the day, the consumer pays the corporate taxes, not the Monopoly Man. 

Property taxes: Property taxes are the penalty for owning stuff, and can be levied on items such as boats, automobiles, recreational vehicles, and business inventories. Rising home prices are great for the balance sheet, but the commensurate increase in property taxes can be painful.

Payroll taxes: Both employers and employees are responsible for payroll taxes. The current FICA tax rate for social security is 6.2% for the employer and 6.2% for the employee, totaling 12.4%. The Medicare tax is 1.45% for the employer, 1.45% for the employee, totaling 2.9%. This results in a combined employee/employer FICA tax rate of 15.3%. But wait, there’s more; for wage earners over $200K ($250K for joint filers) there’s an additional 0.9% Medicare surtax withheld, resulting in a top FICA tax rate of 16.2%.

Inheritance and gift taxes: AKA, the death tax, is a tax that arises from the death of a taxpayer, and is imposed on the transfer of any property or asset resulting from death. The current federal estate tax rate is 40%, and is imposed on estates exceeding $11.7M per person, $23.4M per couple. In addition to the federal estate tax, eighteen states also impose an inheritance tax, with a top rate of 16%.

Capital gains taxes: The capital gains tax is levied on profits from the sale or disposition of an asset purchased at a lower price, most commonly from the sale of stocks, bonds, and property. Current federal rates are generally 15–20%. In addition to federal taxes, most states tax gains as well, with California receiving the honors of being the highest at 13.3%.

Sales Taxes: Consumption taxes, also known as sales taxes, are levied at the point of purchase for specific goods and services. The combined state sales tax collected last year was over $513 billion.

Excise taxes: An excise tax is federal duty placed on specific goods or activities, such as gasoline, cigarettes, and gambling. The tax is applied to the cost of the associated product or service; meaning, the consumer pays it. Like Europe’s ubiquitous valued added tax (VAT), excise taxes lack the transparency of a sales tax.

Tariffs: A government-imposed tax on goods or services, which can be levied on either imports or exports. Policymakers use tariffs primarily to protect domestic industries and, secondarily, to raise revenues. Contrary to the previous Administration’s assertions, the consumer always pays the tax in the form of a higher prices.

Other taxes: Include license fees, tolls, and various miscellaneous taxes levied by the various states. In 2020 the total amount collected by the states for Other Taxes was ~$90 billion

While taxes are the price we pay for civilized society, Washington bureaucrats tend to fixate on one side of the budget; raising taxes, and never consider the other option; spending less. The Beatles’, George Harrison, had a few thoughts regarding compulsory government tithing; “If you drive a car, I’ll tax the street. If you try to sit, I’ll tax your seat. If you get too cold, cold, I’ll tax the heat. If you take a walk, I’ll tax your feet. Taxman.”

Mark Lazar, MBA
Senior Vice President-Investments
Certified Financial Planner™

Views expressed in this newsletter are the current opinion of the author, but not necessarily those of Raymond James & Associates. The author's opinions are subject to change without notice. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. The S&P 500 is an unmanaged index of 500 widely held stocks. The Dow Jones Industrial Average is an unmanaged index of 30 widely held securities. It is not possible to invest directly in an index. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Gross Domestic Product (GDP) is the annual market value of all goods and services produced domestically by the US. The information in this article is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indices. The index's three largest industries are materials, energy, and banks. The Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. Raymond James is not affiliated with any of the organizations listed above. Neither Raymond James Financial Services no any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated. Be advised that investments in real estate and in REITs have various risks, including possible lack of liquidity and devaluation based on adverse economic and regulatory changes. Additionally, investments in REIT's will fluctuate with the value of the underlying properties, and the price at redemption may be more or less than the original price paid. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes.