Bad tax day? Well, how about every day?
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Have you ever stopped to realize just how much tax you pay on a daily basis? Probably not. It's always the proverbial April 15 tax day that grabs your attention. One can expect to see the news cameras providing pictures of worried taxpayers lining up with tax returns in hand waiting to have them postmarked prior to the witching hour. Of course, it always occurs that tax payers, who happen to be interviewed as they exit the line, are often heard to exclaim, "Boy, I'm sure glad that's over for another year. Now I can relax." If only it were true. Sadly, the truth is that taxes are a daily occurrence and, unfortunately, the taxes paid by consumers add up to more than consumers realize. Would you believe that in every price you pay for almost any consumer good, the tax could very well add up to 50 percent of the cost, by some estimates? Spend $100 a week at the supermarket and you've just paid $50 of tax. Buy a tank of gasoline for your car each week --20 gallons at $1 a gallon -- and you've paid about $10 in taxes. Thus, on just these two items you have spent $60 a week for tax. And for 52 weeks of the year you'd end up paying $3,120 just for those two items. Of course, the amount of tax paid goes up depending on how much you buy each week. How might all of this happen, you may ask? Well, first of all, you must disabuse yourself of the notion that businesses pay taxes. They don't. Think about it. A business sells a product or a service. They might sell directly to the ultimate consumer, but most likely they sell to other businesses and or wholesalers and distributers. Each business takes in revenue and with the revenue it pays its expenses. Expenses include labor, material and a host of cost items called overhead and profit. |
The ISSUE: It's not just April 15 when the governments slip their hands into our pocketbooks. The WRITER: Mr. Marshall lives in Los Alamitos and is retired from the Fluor Corp. The overhead includes rent, utilities and all forms of taxes, fees and licenses that must be collected and sent to the local, state and federal governments. A large share of business costs are Social Security payroll taxes, for example. Corporate income taxes are also a big cost item. Every business in the chain of production pays those expenses and all others from revenue collected. It's easy to see that businesses simply pass through all of their Costs to those who buy the product or service. Ultimately, there is only one buyer who absorbs all of the costs. That's the consumer. The consumer pays for ev erything - all the costs a business incurs as a cost of doing business. When a business fails to pass through all of its costs to another business, wholesaler or the consumer, the business loses money and has a going out of business sale. While all this basic economics is straightforward enough in principle, the real question involves the method of how to calculate the amount of tax represented in the cost of any given item we buy. For specific industries, of course, a fairly accurate calculation can be made, but it takes many, many calculations and a considerable number of valid assumptions. |
Such questions of just how much tax is involved have been raised and various answers have been given. In a 1996 edition of the Sunday Parade magazine, a writer estimated the share of consumer prices taken in taxes and regulations. Based on her research, the Parade writer estimated that 9 percent of prices are attributed to federal regulations. About 18 percent is attributed to federal taxes. An additional 13 percent is for state and local regulations. That adds up to about 40 percent of all the prices we're charged at the cash register. Indirect tax costs increase the figure to 50 percent. Based on these estimates, then, it's easy to figure out just how much tax you are paying. How much have you spent in the past year? Half of that is tax. For your total tax burden don't forget to add in all of the personal pay roll taxes such as income, Social Security, workman's compensation, unem ployment insurance and disability taxes. For those who have gone through a public school, it's not likely you had any curriculum instruction in Econom ics 101 that explained how taxes are in cluded in every price. Even in the so- called "private schools" it's unlikely any discussions of taxation explained that businesses do not pay taxes, but rather that businesses are tax collectors for the government. Is all of this information shocking? It shouldn't be. It has always been this way. It couldn't be otherwise. |