Tuesday, September 11, 2007

The real cost of a coffee...

How much does that cappuccino cost you each morning?

If you go to one of the major coffee chains you are most likely paying about $4 for that morning beverage! As if that isn't ridiculous enough, keep in mind that you are paying that in AFTER tax dollars. What does that mean exactly? Let me break it down for you.

Cost of Coffee $4.00
Sales Tax (GST 6%) $0.24
Income Tax Rate 25%
Cost in Earned Dollars $5.30 ($4.00 + $0.24 x 1.25)

At a conservative 25% tax rate, it is costing you an extra $1.30 per $4 spent. So that $4 cup of coffee is actually costing you $5.30.

Now, lets say you are paying a higher tax rate of 40%.

Cost of Coffee $4.00
Sales Tax (GST 6%) $0.24
Income Tax Rate 40%
Cost in Earned Dollars $5.94 ($4.00 + $0.24 x 1.40)

That's almost $2.00 the government is making off of you on one cappuccino! Work out the percentage on that and it's 48.5% tax you are paying. Pretty crazy when you think of it in those terms and it gets even worse when you factor in items that have both PST and GST on them.

This post is mostly just to vent and hopefully educate people a little. Coffee is just a simple example that applies to a lot of people but if you do the math on gasoline, cigarettes, and junk food, you will surely be surprised on how much of your hard earned money the government makes without really doing a thing.

Taxes are the ultimate source of passive income. The worst part is, you have very little say as to where that tax money is spent too!