Tax on Sales Commission


As a long time sales professional it’s always a mixed bag of emotions when it comes to commission payments on sales.  The best way I can describe it is that feeling you got as a kid on Christmas morning when you were overly excited to open a gift, were handed a big box that you were sure contained the coolest toy, only to open it and realize it was a new outfit.  Sure, you could definitely use the new clothes and your parents did a great job of picking out the latest in kids’ fashion … but there is still that tinge of disappointment, that slight feeling of disbelief – “I can’t believe it … no Nintendo?!?”.  Nonetheless, you would sit paralyzed by confusion, putting on a happy face for your Christmas morning pictures, wondering “What the hell just happened!?”. 

Years later, I’m currently sitting here thinking the same thing.   I just got my first quarter sales commission check.  Here’s a quick look at the math …

Total Gross Commission earned:  $8329.01

Federal Taxes withheld:  $2082.26 (yep, that’s 25%!)

Social Security paid:  $516.40

Medicare:  $120.77

State of WI:  $541.39

Net Commission received:  $5068.20

That’s right, when all was said and done I had nearly %40 of my gross commission taken out in taxes.  Some initial thoughts that ran through my head:

* Didn’t I just read an article last week that said 50% of the country doesn’t pay any federal income tax?  Did I really just drop$2082.26 on federal income taxes for my first quarter commission check alone?

* Social Security.  Ha!  At just over 30, there’s absolutely no chance I’ll see that.  What’s the funding deficit on that magnificent program currently running at?

* Medicare.  Well I’m sure ObamaCare will sort this all out.  It is supposed to lower costs, right? 

* The lovely state of Wisconsin.  An unfriendly tax policy towards corporations and an increasingly unfriendly tax policy towards residents.  Add in cold miserable weather 5-6 months out of the year and … what the hell am I still doing here?

So there it is.  There are the thoughts running through my silly little mind as I hold my sales commission check.  Sure, my net $5068.20 is going to be very useful (see: Debt Snowball) … but I can’t help but wonder how useful the $3260.82 taken out in taxes will end up being? 

My confidence in how, where, when, why and how my taxes are spent is at an all time low.  I’m all for taxes (or as much as someone can be) – provided they are sensible, well thought out,  fair and effective.  

Granted, my tax burden is well below the outrageous taxation levels of some individuals and corporations (great article on this in yesterday’s Wall Street Journal).  But with the Bush tax cuts coming to an end, an increasingly hostile attitude towards corporate profits in multiple industries, increased tax penalties proposed on capital gains, and the discussion of a European style VAT tax (not to mention all the nickel and dime taxes States are using to plug budget holes) … I’m starting to think that Federal and State tax policies are not well thought out components of a fair/balanced national fiscal approach, but rather the too often ill-conceived reactionary noodlings of a small child that hasn’t learned to say “NO”. 

And the more the spotlight is shed on the current fiscal crisis of our Federal and State governments, the more I can’t help but feel a little frustrated.   A frustration that stems in part from this project.   The more I’ve focused on living within a budget,  controlling my expenses, living below my means to pay of debt … the more I think it reasonable to expect state and local governments to do the same.  The more I read the personal finance blogs of others, the money-saving tips and budgeting resources I see available on various financial websites, the news stories about individuals spending less and living more frugally … the more concerned I am at the disconnect between governments and those they govern. 

I for one would like to see the state of Wisconsin and Washington DC keep a monthly budget and debt tracking spreadsheet – a detailed glimpse into what’s going in and what’s going out. 

My apologies for the Sales Commission Tax induced rant.

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