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Every day is tax time

Eve Troeh Apr 9, 2012

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.

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