Do You Know What Taxes You Pay?By: Joe Messerli
"Read my lips: No New Taxes!" -- George Bush Sr.
"I can make a firm pledge. Under my plan, no family making less than $200,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes." -- Barack Obama
Throughout American history, politicians have found ways to sneak taxes into our system using a number of underhanded methods. Some are put in without the people's awareness. Some are put in due to some special emergency such as a war or other national crisis. However, the most common way is to use the mantra of "taxing the rich". Make no mistake though--once a tax or fee gets passed by the government, it is almost never cut. And any politician who does so is crucified by the press and liberal politicians for "tax giveaways for the rich". In 1913 when the 16th Amendment first legalized the federal income tax, a tax of 1 percent on incomes was placed on the top 5 percent of income earners, thereby exempting 95 percent of Americans. Compare that to the tax system we have today.
As the country faces trillion dollar deficits and gets set to take on yet another trillion-dollar entitlement in health care, the question becomes, "How do we pay for all this unrestrained government spending?" The money for education, defense, social security, health care, police, etc. has to come from somewhere. We know from 200 years of American history that Congress will never reduce spending . So get ready for more taxes.
Do you really know how much in taxes you already pay? Do you know how you will directly and indirectly be hit with taxes in the future? Let's examine all the ways the United States government robs the people to pay for its unrestrained spending.
|Federal income tax||Tax paid to the federal government, based on a percentage of your income.||This has been as high as 70 percent of gross income, before Reagan reduced the rates in the 80s, causing an explosion of growth and tax revenues (yes, double the revenues with a top rate less than half of it's peak). Unfortunately, the tax is creeping back up to where it was, and guess what's happening to the economy in the process?|
|State income tax||Tax paid to the state government of your residence, based on a percentage of your income.||Liberal states such as California and New York impose the highest state taxes, sometimes in the double-digits.|
|Local income tax||Tax paid to the city or municipality of your residence, based on a percentage of your income.||This often becomes a permanent fixture in a city due to a supposedly one-time expense, such as to build a stadium for the local sports team.|
|Social security tax||Tax paid to the federal government that is supposed to be returned to you in your retirement, based no a percentage of your income up to a capped amount. Note: your employer matches the percentage you pay, which amounts to a double-reduction of your take-home pay. If your self-employed, you have to pay twice the social security tax.||The government doesn't actually save or invest this money for you; it spends ALL of it! It's basically a ponzi scheme like Madoff ran, where money from new investors (taxpayers) is given to seniors that are collecting benefits. When current taxpayers retire, the only source of funds to pay for the benefits will come from new, younger taxpayers. Unfortunately, due to longer life spans and the baby boom, the ponzi scheme is headed for bankruptcy within a couple decades. The most common liberal "solution": remove or raise the cap on the tax, so the percentage applies to a larger piece of income. Basically, it's another way of raising taxes without the government saying it's raising taxes.|
|Medicare tax||Tax paid to the federal government in the same way as the social security tax, except there is no cap.||Medicare, which pays for senior health care, is yet another government entitlement headed for bankruptcy in a couple decades. The current health bill making it's way through Congress plans to cut Medicare benefits by hundreds of billions of dollars over the next decade. In other words, benefits will be cut, but taxes won't.|
|Capital gains/Dividends tax||Taxes paid to the federal, state, and local government; based on a percentage of your income.||Dividend taxes amount to a form of "double" taxation. Corporations must pay a large percentage of their income, even before they distribute their earnings to actual taxpayers. So the income is taxed first on the corporation, and then a second time on the actual taxpayer.|
|Sales taxes||Tax paid by the final consumer to the state; based on a percentage of the purchase price of an item.||This applies to virtually all items your purchase. Cars, restaurant food, TVs, computers, clothing, books, sports equipment, and on and on.|
|Excise taxes||Federal or state taxes imposed on the manufacturer or distributor of "non-essential" consumer goods; based on some measurable unit, such as a gallon of gas.||Oil, gas, environmental output, communications, etc.; consumers are hit with these taxes directly or indirectly through higher prices.|
|Sin taxes||Special taxes imposed on consumers of certain items that usually are discouraged.||Alcohol, tobacco, gas-guzzling cars, and (coming soon) high-fat/high-sugar foods & drinks.|
|Government fees||Tolls, permits, fees, licenses, and other government charges that aren't called "taxes".||Bridge or road tolls, car license, marriage license, national/state park permit, hunting license, fishing license, parking meters, bike trail permit, dog license, court filing fee, and on and on.|
|Tariffs||A tax levied on imported goods.||This is a double-edged sword: it raises the cost of imported goods (since prices are typically increased to cover the tax), and foreign governments usually retaliate by taxing imports of our products sold overseas, meaning a loss of profits and jobs in America.|
|Property taxes||State taxes charged to people who own real property; usually charged as a percentage of the tax-appraisal value of the property.||Personal residence, vacation home, rental property, land, and other real property.|
|Special "one-time" surcharges||Special one-time taxes that are levied at the federal, state, and local levels; they're often attached to a new law, budget bill, or special government project.||Sports stadium tax; new elementary school assessment; bridge/road repair assessments; tax to pay for a war (often clouded in language such as a "patriot tax"). Many of these supposedly one-time charges become permanent fixtures of the tax system. For example, the new health reform bill includes a special "surcharge" on millionaires to pay for it.|
|Corporate taxes||Federal and state taxes that are charged to corporations themselves (as opposed to the owners of the business...who are taxed additionally).||This can amount to almost half of all earnings. Every dollar taken from a corporation is a dollar that can't be distributed to owners or used to expand & hire new workers. Alternatively, it might just be added to the price of the good or service provided by the corporation, which means the consumer absorbs the tax.|
|Other business taxes||Additional payroll and operating expenses charged to all businesses.||Federal & state unemployment tax, operating permits, etc.|
|Windfall taxes||This is an increasingly popular kind of tax that is assessed on businesses that are thought to be earning "excessive" profits. An objective measure for "excessive" is rarely cited, but it allows the government to tax a target of populist anger.||Taxes on oil companies, pharmaceutical companies, health insurance companies, etc.; do you think these taxes have any effect on the prices of gas, prescription drugs, or health insurance?|
|Inheritance taxes||A one-time tax assessed as a percentage of a person's estate when they die.||This can be as high as 50 or 60 percent of everything a person owns, taken in one swoop.|
|Cap & trade taxes (coming soon)||A tax assessed on companies that are engaged in an activity that negatively affects the environment (such as power plants, waste incineration facilities, etc.).||This coming legislation may amount to the biggest tax increase in history, as virtually every manufacturer or energy-producer could be hit, with the costs being passed on to consumers.|
|Internet taxes (coming soon)||A tax on web transactions, emails, interstate purchases, etc.||The internet currently doesn't generate tax revenue, despite it's widespread use. Don't think politicians haven't noticed. It may start out as something tiny, such as 1 cent per $100 spent on ebay-type transactions. But remember, the federal income tax also started out as 1 percent of the richest 5 percent only.|
|Gift taxes||Taxes charged to the recipients of gifts.||This was originally put in place as a safeguard for the inheritance tax, so that a person couldn't "give" their whole estate to others the year before they died. It's ensnared those people plus many other generous citizens.|
|Special penalties and charges||This is another play on words, using "penalty" instead of "tax".||For example, the current health reform bill levies a "penalty" of several thousand dollars on anyone who doesn't buy health insurance.|
|Miscellaneous taxes||There are so many other types of government taxes, seen and unseen, that it's impractical to list them all. This a final catch-all category.||Hotel charges (which are sometimes 20 percent of the room charge!), government agency charges (check your cable or cell phone bills for examples), plastic surgery tax, medical product tax, medical research tax, pharmaceutical tax (these latter examples are part of the health "reform" bill).|
With a $14 trillion dollar deficit that is projected to double in 5-10 years, and a ridiculously-expensive health "reform" bill on the way, the government will use every method possible to come up with new ways to steal money from citizens. Keep in mind all the taxes above along with other underhanded ways to raise taxes (e.g. letting tax cuts "expire", removing tax deductions, taxing the "rich" without making the cutoff inflation-adjusted, etc.). To put the deficit in perspective, know that in 2008 the federal government collected only $2.5 trillion in tax revenues, and it will likely be substantially less in 2009 due to the recession. With a debt projected to hit $20-$25 trillion in 5-10 years, and a government that isn't even trying to curb spending, does anyone see a problem?
To protest the out of control tax-and-spend government, join the Tea Party Movement.
For an alternative to various forms of proposed government-controlled health care, see my 20-pt plan for solving the problems.
Related LinksPros and Cons of Taxing the Rich
Why do increased income tax rates lower revenue?
Americans for Tax Reform
Bar Stool Economics
Did I miss anything? Email any additional ideas and comments to Joe Messerli at [email protected] .
Last Updated: 01/07/2012