Taxed to Death
Taxed to Death
It ain't over on April 15! If you stop, for example, for a $10 pizza on
Thursday night to celebrate being done with the IRS for another year, the
taxman will be right there to grab a slice or two. On top of paying the sales
tax, you'll also be picking up a major chunk of what the government charges
the pizza shop owner for local property taxes, unemployment insurance taxes,
federal payroll taxes, federal and state and local income taxes, and worker's
compensation taxes. Altogether, according to a study by the Americans for Tax
Reform, that comes to $3.80 on a $10 pizza for the omnipresent taxman.
If you pick up a Bud six-pack to go with the pizza, there's another 43 cents
of each beer dollar that goes straight to the taxman for excise taxes, income
taxes, property taxes, etc. For something stronger, say Jack Daniels, the
taxman's share is $7.20, on average, out of every $10. Go lighter and just
drink a Pepsi and it's 35 percent of what you pay that goes for taxes at all
levels. Add some Marlboros and it's 75 percent of the retail price that's
funneled directly into the state's coffers. Get home and hit the light switch
and another $26 out of every $100 on the electric bill goes for government
rather than electricity.
If you're flying the next day, the taxman is up early and waiting at the
airport, pocketing $40 on every $100 airline ticket. And he's there in the
hotel lobby when you land, snatching $43 on every $100 of the hotel bill. Go
out to dinner and it's another $28 of every $100 of the tab that ends up with
the government rather than with the restaurant, the farmers, truckers and
everyone else who worked together to produce the meal.
At each and every stop, in items large and small, the greedy hand of
government has its sticky fingers in every pocket. With bread, a recent study
by Price Waterhouse shows that 30 different taxes imposed on the production
and sale of a loaf of bread account for 27 percent of the average retail
price. Buy some new tires and it's $36 on every $100 that goes to the taxman.
On the price of a new car, an Americans for Tax Reform study shows that total
taxes reach 45 percent of the showroom sticker price. Add some gas and 54
percent of what you pay for a fill-up goes for 43 different federal, state
and local taxes rather than to the oil producer and retailer.
At the start of this nation's unique experiment with individual sovereignty
and limited government, "Taxation without representation is tyranny" was the
watchword of the American Revolution. For our Founding Fathers, a level of
taxation of only a few cents on a dollar, siphoned off to a faraway and
arrogant bureaucracy, was enough to ignite a revolution, enough to grab the
trusty musket off the wall. Today, in contrast, if we dare to startle the more panicky among us by buying a good rabbit gun, the government's there at
the cash register to check our papers and seize $46 on every $100.
All of this, of course, this immense pile of hidden taxation, is stacked on
top of our local property taxes and our local, state and federal income
taxes. The way out? Not so easy: act up and phone an IRS bureaucrat in D.C.
about out-of-control government and the taxman grabs another $1 on every $2
call; get drunk and it's another $43 or $72 of every $100 that gets shipped
off to the state, depending on whether it's Coors or Wild Turkey.
For the average family, all these taxes now eat up 38 percent of gross
income, a higher rate of taxation than ever before in the peacetime history
of the United States. By comparison, the typical two-income family in the
mid-1950s paid 28 percent of their income for taxes. We're now at the absurd
point where the typical family works until noon of every working day to
satisfy the taxman, paying more in taxes than they spend for food, clothing
and housing combined.
Today, with 480 different tax forms, 17,000 pages of laws and regulations and
a federal tax code that's over 7 million words (compared to 773,000 words in
the Holy Bible, both Testaments), nearly 60 percent of Americans are paying a
professional to help them negotiate the tax maze. Each year, the IRS sends
out 8 billion pages of forms and instructions, enough paper to stretch 28
times around the earth. To conform with this federal Rube Goldberg tax code,
Americans are spending 5.4 billion hours and $200 billion a year just in
compliance costs, not counting the taxes paid, i.e., more time and money than
it takes to produce every car, truck and van each year in the United States.
When the federal income tax was launched back in 1913, the tax was levied on
only the super-wealthy, the richest one-half of 1 percent of the population,
with a top tax rate of only 7 percent. Today, of course, the fears of the
early opponents of the tax have been more than fully realized. By the end of
Herbert Hoover's term, the top rate had jumped to 60 percent. By the time
Franklin D. Roosevelt was done, the top rate was over 90 percent and the tax
had been dramatically expanded to seize the incomes of the middle class for
the first time. In 1913, the average family had to work until January 30
before earning enough to satisfy the taxman at all levels. This year, the
average American family will work all the way through until May 12 in order
to earn enough to pay their federal, state and local tax bills.
"Compare this to the plight of medieval serfs," says economist Daniel J.
Mitchell. "They only had to give the lord of the manor a third of their
output and they were considered slaves. So what does that make us?"
* * * * *
Ralph Reiland is Associate Professor of Economics at Robert Morris College.
See also The Tax Foundation
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.