High taxes: the largest expenses for U.S family

Taxes will probably continue to grow

As we mentioned in Finance 101, taxes are taking up roughly 30% of an average American family's expenses. Meanwhile, considering the current gap between US government debt and tax rates, which is at a historic peak level, we should expect that the tax rates will continue to grow in the upcoming years (feel free to refer back to our Finance 101 article to review these contents about tax expenses and U.S. government debt!).

The logic behind this is fairly straightforward: government debt represents the expenses of the near future. The higher the debt is, the more the government will need to pay - by then, the government would probably raise taxes to gather more fund for the debts.

Historically, the tax rates are higher!

Furthermore, it is also worth noting that, according to the 2018 annual reports from the trustees for the U.S. Social Security and Medicare trust funds, Medicare is facing a $37 trillion unfunded liability (liability = debt obligations that do not have sufficient funds set aside to pay them) over the next 75 years, meanwhile Social Security is facing a $13 trillion unfunded liability over the same time frame. Neither of these amounts are included in the U.S. gross general government debt, but are two indispensable aspects of everyone's life.

Therefore, you need to prepare ahead for yourself and your family. Financially, to cope with the potential increases in your tax bills, you should keep your wealth growing through investments, and optimize your tax structure to minimize your taxes. Besides, make sure that you and your family are well-insured, in case Medicare cannot help much in the future.