Every day is tax time

Taxes are all around, but we may not realize it.

Kai Ryssdal: My accountant is a very nice guy, totally helpful. Of course, the half hour I spent with him today getting ready to file my taxes was still excruciating. Thirty minutes, though, is nothing. By some estimates Americans altogether spend billions of hours -- billions -- doing their income taxes. For all the stress April the 15th brings, though, there are lots of other taxes that don't take up much time at all. In fact, most of us barely notice them.

Marketplace's Eve Troeh reports that's no accident.

Eve Troeh: If you have not done your taxes yet, like me, you might wake up this week in a cold sweat over it. But that's a bit irrational, financially speaking. Because most of us pay more in other taxes than we do in income tax. If you look at life through tax glasses...

Katie Pratt: Well, every day is tax time.

Oh boy. Fun, right? Well Katie Pratt, a tax expert at Loyola Law School, does see the world that way -- taxes all around.
You might pay tax when you turn on the lights or brush you teeth. Or when you walk into your home -- property tax. There's the vehicle registration fee. About $80 a year for my old tan Chevy. That is a tax. But it's called a user fee. Pratt says no one really throws a fit over it.

Pratt: People object less to user fees because they can associate some benefit with the payment of the fee.

Cars need infrastructure -- traffic lights, emergency services, the licensing system. Makes sense for drivers to fund that.
And when I stop to fill up the tank, the tax on the gas goes to pay for roads. But it doesn't show up on the receipt.

Pratt: We all know, these days, to the penny how much a gallon of gas costs, but most people have no idea how much the excise taxes on gasoline are.

Excise tax. More than 18 cents per gallon from the feds, almost double that when you add California state gas tax, and a sales tax on top. All that's included in the sticker price, not listed separately. When I buy a few items in the mini market...

Troeh: So I got some gum, some juice, which I'm going to shake up and drink, and there's no tax.

In California, at least. But sales tax at restaurants, yes -- 35 cents on my $3.75 breakfast burrito.

Troeh: Can I get a receipt?

Pratt says we might pay thousands of dollars in sales taxes each year, but never feel the pinch.

Pratt: You're less aware of 'em because you're not filing sales tax returns. You're just paying it in dribs and drabs here and there.

And some taxes? Consumers actually want -- like the federal, state and local taxes piled onto cigarettes.

Pratt: You know, a thumb on the scale encouraging them to not smoke.

Government leaders have gotten more savvy with how they package and sell taxes, says Edward McCaffery. He studies tax behavior at the University of Southern California law school.

Edward McCaffery: The income tax is the worst possible tax from the government point of view. It's the most salient.

Meaning we feel it -- and resent it -- the most. We hate filling out the forms. We go "ouch" when we see that grand total at the end. "Double ouch" if we owe and have to write a check. But we pay much less attention if the money's taken out of our paychecks, like with Medicare or Social Security.

McCaffery: Most Americans, about 80 percent of Americans, pay more in payroll taxes than in the income tax.

Politicians figured out they could raise that without too much fuss. President Obama was the first in decades to lower payroll taxes -- move most Americans barely noticed, since it led to a trickle of extra cash instead of a lump sum rebate. The U.S. has also raised corporate taxes in lieu of income tax. McCaffery says we unwittingly pay those too because...

McCaffery: They have to pass that on.

So if I go for coffee...

Troeh: Could I get a grande nonfat latte...

The company's taxes may show up in higher prices, lower wages, or fewer employees.

McCaffery: You have to wait longer in line, and time is money, so that's a cost.

As it's become politically taboo to raise income tax, McCaffery says government relies more heavily on these other types of revenue. He says income tax has stayed about the same percentage of GDP since the 1940s.

McCaffery: While other taxes, more psychologically favored, more hidden, have been going up and up and up.

But sitting down to tally all that would take a lot longer than doing my income taxes.

I'm Eve Troeh for Marketplace.

About the author

Eve Troeh is News Director at WWNO-FM in New Orleans, La., helping build the first public radio news department in the station’s 40-year history. She reported for the Marketplace Sustainability Desk from 2010 to 2013.
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Great article! This presumption exemplifies what I wrote in my blog last november about "Cost of Living Creep" http://www.ryansbigpicture.blogspot.com/
Essentially the government and businesses understand the amount of disposable income the average worker collects and they continue to raise taxes or adjust cost of products to maximize their agendas and revenues while sacrificing citizens potential disposablke incomes. Check out my blog for more information.

The author of the article simplifies uses lazy short cuts and actually gets it wrong on the corporate tax policy and price of goods.

The price of something is not directly related to the cost to make it. Instead the price of something is set by how much people are willing to pay for it.

A company that makes a widget that has a 10% tax increace on its profits could raise prices to cover the whole 10% of the tax increase but if it's competitor doesn't increase it's prices they will sell all the widgets gain market share and increase profits over the firm that raised prices too high to fast.

a 10% tax increase doesn't necessaryly directly transfer over to a 10% loss of service, increase in price, and loss of jobs. The company will maximize profits wheather there is a tax or not, if they make more money with fewer workers they will fire the workers whether there is a tax increase or not.

When I heard the promo for Every Day is Tax Time this morning, especially Edward McAffery's statement, "The income tax is the worst possible tax from the government point of view," I thought Hallelujah! At last Marketplace will devote some air time to true tax reform, the FairTax, HR-25/S-13. I was mistaken.

I commend you for including the explanation that when the corporate income tax rate is increased, the cost is passed on to the consumer, usually in higher prices at the cash register. The billions of hours Americans spend anguishing over their tax returns, worrying about whether they'll be audited, searching for records and documents pales in comparison to the estimated $451 BILLION individuals and businesses spend in compliance costs: to H&R Block, Jackson Hewitt, CPA's, entire tax departments, TurboTax....

Grassroots volunteers around the country are eager to educate the American people about the only true tax REFORM measure in Congress. FairTax is based on two years and $23 million in economic research at respected universities around the country. We have many avid, knowledgeable, articulate supporters who would be delighted to discuss FairTax with your listeners. There's a world of information at the FairTax web-site (www.FairTax.org), as well as groups on Facebook and LinkedIn.

When you plan another segment on income tax, especially the many shortcomings of the current system, hopelessly outdated, far too complex, manipulated by lobbyists and Congress to reward and punish, please consider offering information on a real alternative.

Thanks very much.

You just need to know one telling fact about the so-called "Fair Tax" advocated in the post above. For 2006, the last year we have good numbers for Warren Buffett, he paid a total tax rate (federal, state, local, including indirect corporate taxes) of 11% of his $8 million investment income and gains. The "Fair Tax" would have reduced that rate to 0.04%. That's what the so-called "Fair Tax" is all about: virtually eliminating taxes for the ultra-wealthy. -Pete http://fairsharetaxes.org

Let's compare ALL the taxes Mr. Romney paid in 2010 to those paid by a minimum-wage worker.

Adding together the taxes at every level of government for a single person making minimum wage ($14,500/yr) in 2010. (Note: She would not qualify for EIC or food stamps)

Fed income tax: $115
Payroll tax: $1109
State and city income tax (NY City): $420
Sales and gas taxes: $520
Share of real estate taxes, (70% is passed along to her as a renter): $1300
Most economists would also add in these 2 indirect taxes:
Share of employer paid payroll tax (reduces her compensation): $1109
Share of Corporate taxes (increased prices, reduced wages): $420

Total $4993.
% of income and estimated investment gains: 34%
% of Net-worth ($900): 500%

Do the same calculation for Mr. Romney: All taxes his taxes, including an estimate of his share of corporate taxes, are only 14% of his investment income and gains of ~$36,000,000
Federal Income Tax $2,976,345
Payroll (Social Security) Tax $29,151
Household Employment Tax $4,270
State & City Income Tax $500,000
State & Local Sales & Gas Taxes $50,000
Municiple Real Estate Taxes $226,356
Foreign Taxes $129,697
Estimated Indirect Corporate Taxes $1,115,000

Total Personal and Indirect Taxes $5,030,819
% of income and estimated investment gains 14%
% of Net-worth 2%

For much more, including a proposal for comprehensive tax reform which would have everyone pay their fair share, cut working-poor and middle-class taxes, reduce the deficit, improve the economy, and strengthen the nation as a force for good in the world, see ..


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