How much tax?
When you pay your income taxes, do you ever wonder exactly how much you pay in taxes each year? Not just income taxes, mind you, but all taxes such as sales, payroll, or utilities.
Indeed, it is often difficult to tell, because so many taxes like sales and utilities are paid in small amounts over time, and we often throw out the receipts and bills. To get a better idea how much an individual pays in total taxes, a gentleman that PII knows collected everything that listed a tax on it in 2003 -paycheck stubs, sales receipts, and phone, utility and cable bills. PII then totaled the numbers. Keep in mind that this is a man in his thirties who earned $39,500 last year, is not married and has no children. He rents an apartment, so he does not pay property taxes.
For 2003 he paid the following amounts in taxes: Federal Income, $4,333.40; State Income, $1,606; Social Security, $2,406.40; Medicare, $562.79; Sales, $193.72; Utility, $59.03; Phone, $176.39; Cable $61.49; and Car, $35.50. Income taxes take the biggest bite, with FICA (Social Security and Medicare) taxes running a not too distant second. In total, he paid $9,434.72 in taxes for 2003, or 23.9% of his income. That's more than one dollar in five that he sends to some form of government!
Yet this estimate misses some very important taxes, including the gasoline tax and regulations. Since the gasoline tax is not listed on the gasoline receipt, it was not included in this study. Thus, he underestimated the amount of taxes he paid. A study by researchers W. Mark Crain and Thomas D. Hopkins shows that the regulatory burden for American households is quite high. If those two were included, this gentleman's tax burden could easily be 25%, or one dollar in four.
So what does he get for all the taxes that he pays? Well, he gets the protection of the police, fire department, and military. He also gets to use the roads, although the gas tax pays for roads and the gas tax is not included in the initial estimate. But he received no Social Security or Medicare and no welfare or Medicaid. He has no children, so he does not use the public schools. Nor does he receive any farm subsidies, corporate welfare, or National Endowment for the Arts grants.
While no one would dispute that government must perform some functions, it is fair to ask how many of those functions are necessary. Do we really need the National Endowment for the Arts? Should he pay for the retirement and health care for those seniors who are not indigent? And even for those services that are necessary, it is fair to ask what we are getting for our money. For example, we've spent more and more tax money on education over the last thirty years, but, based on test scores, we seem to have little to show for it. If government is going to continue taking about one dollar in four out of our incomes, these concerns need to be made front and center.
* David Hogberg is a Research Analyst at the Public Interest Institute, Mt. Pleasant.