The Real Worker Tax Burden
Workers don’t just pay federal and state income tax. Their actual burden includes direct taxes AND the costs created by both parties’ service to corporate interests. But the largest extraction happens before you ever see a paycheck.
The Invisible Tax: Profit Extraction at the Point of Production
Before your paycheck is calculated, corporate owners extract value you created as “profit.” This is functionally a tax on your labor - money deducted before you see it.
Consider a typical profitable corporation with a 10% net profit margin where labor costs represent 30% of revenue:
Current System:
- Company revenue: $1,000,000
- Workers receive: $300,000 (30%)
- Capital owners extract: $100,000 (10% profit)
- Other costs: $600,000
That 10% profit represents value workers created but didn’t receive. When you divide that extraction by what workers got paid, it’s effectively a 33% tax on labor itself.
As Worker Co-Owners:
- Company revenue: $1,000,000
- Workers receive full value: $400,000 (40%)
- No extraction to absentee owners: $0
- Other costs: $600,000
Workers would earn 33% more simply by eliminating the extraction tax.
Your Personal Impact
For a worker currently earning $60,000 in this company:
- Current wage: $60,000/year
- Value you actually create: $80,000/year
- Invisible extraction tax: $20,000/year
That’s $20,000 extracted annually before any government taxes. Over a 30-year career, that’s $600,000 in value taken from you - not counting the investment returns the capital owner receives on your extracted labor.
Why This Matters More Than Income Tax
For a $60,000 worker:
- Federal income tax: ~$8,000
- Profit extraction tax: $20,000
The invisible tax on your labor is 2.5 times larger than federal income tax. But because it’s taken before wage negotiations even begin, it’s invisible. You never see a line item that says “profit extraction: $20,000.”
Both parties protect this invisible tax. Republicans openly defend it as “returns on investment.” Democrats acknowledge worker exploitation but maintain the employer-employee structure that enables it. Neither party challenges the fundamental extraction - they only debate who pays for its consequences.
Direct Taxes
Workers pay federal income tax, state income tax in most states, FICA and payroll taxes (Republicans protect the cap benefiting wealthy), sales taxes that are regressive and hit workers hardest, and property taxes either directly or via rent.
Private Extraction (Functionally Taxes - Enabled by Both Parties)
The list of private extraction is extensive. Health insurance premiums cost families $12,000 or more annually. Republicans block single-payer while Democrats create subsidized extraction. Deductibles and co-pays add another $5,000 or more annually, as deregulation lets insurance companies deny coverage.
Childcare costs run $15,000 to $25,000 annually, and neither party provides a public option. Student loan payments burden millions because both parties protect predatory lending. Rent extraction above the cost of provision continues because both parties protect landlord interests. Interest on necessary debt remains high as deregulation enables predatory rates.
Utility price gouging occurs where Republican deregulation enables extraction, as we’ve seen with the Texas grid. Banking fees extract wealth because deregulation allows fee extraction.
Republican “Tax Cuts” That Actually Increase Worker Burden
Republican tax cuts often shift costs in ways that increase the total burden on workers. When they cut state funding, states raise sales tax, property tax, and fees, all regressive measures. When they deregulate utilities, monopolies raise prices and workers pay more. When they privatize services, workers pay private companies instead of taxes.
When they defund schools, either property taxes increase or education quality degrades. When they cut healthcare subsidies, workers pay more in premiums.
The Complete Burden
A worker making $60,000 faces extraction at every level:
What you create in value: $80,000
Invisible extraction (profit tax): -$20,000
Your wage: $60,000
Direct government taxes: -$12,000
Healthcare extraction: -$17,000
Childcare costs: -$15,000
Rent extraction: -$8,000
Other private extraction: -$5,000
What you actually keep: $3,000
You created $80,000 in value. You keep $3,000. That’s 96% extraction.
Under worker ownership and democratic socialist reform:
- Eliminate profit extraction: +$20,000
- Single-payer healthcare: +$17,000
- Public childcare: +$15,000
- Social housing at cost: +$5,000
Total improvement: +$57,000 (keeping $60,000 of the $80,000 you create)
This is why both parties’ corporate capture is not a minor issue. The current system extracts 96% of worker-created value through a combination of invisible profit taxes and privatized essential services that both parties protect. True reform means workers keep what they create.