This is a Public Service Announcement for most Americans who don’t realize taxes are their largest expense. That’s because the government has become an expert in collecting and disguising taxes. Tax Freedom Day arrived on April 17th this year, which ironically, was the same day Federal Income Taxes were due. The average American paid 29.2% of their income in total Federal, State and Local taxes.
The Sneak Attack
Whether it’s called an excise, assessment, fee, duty, levy, license, permit, toll, penalty, fine or even a mandate, it’s still a tax. The dozens of carefully crafted names for taxes try to disguise the fact the Government forces you to pay.
Hiding taxes by adding them to utility bills is a common method of disguise. Another common method is adding them to everyone’s paychecks and taking out the money before anyone realizes it’s gone. There are even taxes hidden within other taxes, as is the case with assessments added to property taxes.
This week, the Supreme Court ruled the Federal Government can force people to buy health insurance from a private insurer, because it is essentially a tax. Immediately after the ruling, the Government launched a campaign to tell voters it’s not a tax, it’s a benefit. This benefit will cost the uninsured the greater of $695 or 2.5% of income. I would assume most people who are uninsured can’t afford the extra $695 per year. For those who have health insurance, the costs will be going up.
The Class Attack
Long before the mythical days of Robin Hood, there has been class warfare. In a just nation, the tax burden should be spread among the citizenry, with the wealthy shouldering a larger burden than the impoverished. That is why we have progressive income tax rates. Politicians who are rallying to “Tax the Rich”, are disregarding the fact the rich already pay most of the taxes. They know this appeals to the populous and are pandering for votes. Meanwhile, they are cutting back-room deals with the rich, to solicit campaign contributions and help them skirt their taxes.
- Top 1% of earners paid 36.73% of income tax collected
- Top 5% of earners paid 58.66% of income tax collected
- Bottom 50% of earners paid 2.25% of income tax collected
Source: National Taxpayers Union
The Panic Attack
All levels of government are masters of using a crisis to force tax increases. Like any entity, they are supposed to manage reserves and fund liabilities to ensure they can meet their future obligations. But, they don’t. They operate in complete denial of bond interest and pension liabilities, until the deficits become a crisis. Then, they raise taxes and the cycle continues. If taxes can’t be raised, it all blows up.
This week, the City of Stockton, CA sought bankruptcy protection. This makes it the largest city by population in the U.S. to declare bankruptcy. There were many contributing causes for the bankruptcy, including dwindling revenue and accounting errors. But, the biggest contributors to the deficit were employee retirement benefits and interest on municipal bonds. The City of Stockton pays more on health care for retired employees than for its current employees. Retired employees will take a huge cut in their benefits under bankruptcy.
The Bottom Line
The bottom line is that the government is like a kid in a candy store, only with our wallet. They will never act responsibly until they are held accountable by the voters. Right now, that’s not happening fast enough for my tastes.
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
Sir Winston Churchill – Prime Minister of the U.K.