How Much Is Too Much?
What percentage of your income
goes to taxes, not just income taxes, but all taxes? Did you add the $2.10 sales
tax on the “Weird Al” Yankovic t-shirt you bought at the concert the other
night? Or the $5 Special Event Tax you paid with the concert ticket? The $9.27
in fuel taxes you burned on the 350 miles to and from the concert? The $6.80
hotel tax, $6.23 sales tax on the hotel room, $1.64 in sales taxes paid for
restaurant food, the $0.28 drive-through tax, and the $0.13 dine-in tax? Did you
realize you paid $31.10 in tax just going to a concert?
In reality, our personal tax burden is far greater than what
we pay in income taxes. A litany of Federal, State, and Local taxes are applied
to all kinds of personal transactions in addition to our income taxes. These
apply to hotel rooms, restaurants, phone, power, air travel, alcohol, property,
marriage, vehicles, and more. Actually, the list of special taxes is too long to
fit on one page.
If you own property, you know all about the recent property
tax fluctuations. Even if you rent, a portion of your monthly rent goes to
paying the property taxes.
Indiana has a 7% Sales Tax on all non-food items. However,
prepared foods, such as frozen dinners, are not considered “food" by the
government and subject to Sales Tax. If you have public water, then even your
tap water is taxed at 7%!
Every gallon of gasoline you buy in the State of Indiana has
the following taxes included in the price per gallon: 18.4 cents Federal Fuel
Tax, and 18 cents State Fuel Tax, 7% State Sales Tax, and a 1 cent Inspection
Fee. Considering the current price of gasoline, around $2.75 per gallon, that
equals roughly 54 cents per gallon in taxes! Those of you who drive diesels pay
roughly 73 cents per gallon in combined Federal and State taxes.
The publicly popular attack on smokers has led to combined
Federal and State taxes of over $2.00 per pack, in addition to the 7% Indiana
State Sales Tax. Also, the State sets the minimum price that can be charged for
cigarettes at the retail level.
There are Special Event Taxes for concerts, sporting events,
and shows. Some communities have a special tax rate if you use the drive-through
at a fast food restaurant.
Politicians are clever at hiding taxes by not calling it a
tax. They use names like “Fee”, “Surcharge”, “License”, or “Registration” (911
Service Fees, Special Event Fees, Vehicle Registrations, Wheel Surcharges, and
Hunting Licenses). Don’t be fooled, all are taxes by a different name!
Another tactic used by local politicians is to tax those products or services
not typically used by their constituents. They love to fleece “out-of-towners”
with hotel, restaurant, and event taxes. This is fine until you have to travel
some place and you are the “out-of-towner”!
Politicians have learned that introducing new taxes can be
detrimental to their careers, but not providing the pork for their constituents
can shorten their political lives just as quickly. Taxing small sectors of the
population, gets the money they need, while not offending a large enough voting
block to risk reelection.
Few of us look beyond the total on our receipts after making
a business transaction, but doing so will help you see these taxes. Read your
receipts, bills, and statements. Remember that just because it uses the term
“Fee,” doesn’t mean it isn’t a tax!
If you want to calculate your tax burden save every receipt
and pay stub for one month. Then add all of the taxes (including withholding)
from your receipts, bills, statements, and pay stubs. Prorate things like
property taxes, vehicle registration, or other taxes or fees not paid monthly.
Add it all together, divide that by your total income for the month, and
multiply by 100. That will be your tax burden. In reality, most of us pay over
50% of our income on taxes. Now ask yourself, “How much is TOO MUCH!”
NOTE: Businesses are subject to a huge amount of taxation. Those costs are
passed to us through increased prices for products. That burden, which we pay
indirectly, is not included in this total.
To learn more:
www.cato.org, or just Google, “How much
tax do we really pay?”