Written by Michael Redfern   

What is the Total Cost to Us for our Federal, State, and Local governments in the United States today?

I am a college graduate, and I can not calculate how much my family pays in total taxes in the United States, but I believe it is around 75%. With all the news about the need to raise taxes, nobody has mentioned all the numerous different taxes we pay and their accumulated cost. I believe we would all be very interested to find out how much we really pay, but I’m not sure even an accountant or economics professor could figure it out. You will see what I mean when you read below.

Assumptions for a middle class family like mine:

A) A husband and wife, no children, but helping care for very old parents.vB) Both college graduates, and both make approximately $85,000/year each. Also own a small apartment building and have some rental income.

C) Own their house and still have a small mortgage, but total itemized deductions are not much more than the standard deductions now, so itemizing doesn’t help.

So taxes they have to pay:

1) Federal Income Tax = 35%

2) Employee's share of Fed. Soc. Security = 7.8%

3) Employer's share of Fed. Soc. Security = 7.8% (But employers could pay us more without this tax, so we are really paying this half too. Self employed must pay it all.)

4) Massachusetts State Income Tax = 6.5% - 12%. (Varies for different items.)

5) Massachusetts State Sales Tax = 5.5%.

6) Property Tax = $4,990/yr. for home plus $6,120/yr. for apartment building.

7) Driver's license/Vehicle/Trailer/Boat license Fees. Dog or cat license fees. Fishing and hunting license fees. Gun registration fees. Etc.

8) Government required Professional Annual License Fees for Engineers, Electricians, etc.

9) Building Permit fees. (I had to pay $50 for a permit to rebuild my front porch exactly the way it was. I had to pay $300 for a variance permit to put a shed in my back yard.)

10) Marriage Taxes, costing my wife and I, thousands of dollars per year more in taxes than if we just lived together unmarried.

11) Capital gains taxes on savings interest, stock gains, appreciation on real estate, etc.

12) Federal and State inheritance taxes to pass on what you already paid all the taxes on.

13) Road and bridge tolls, etc.

14) Taxes, deferred or otherwise, on savings accounts, IRAs, 401Ks, Social Security, etc.

My wife and I emptied our 401Ks, about $250,000 in each and moved the money from stocks to real estate just before the stock market started crashing, but since we were both in the highest tax bracket due to our salaries and taking out $500,000 in one year, the government took 49% of it or $245,000 of it. Fed. and State tax took 39% plus 10% penalty for early withdrawal. They also taxed the interest we earned on our savings account on the 51% that was left.

15) Extra Federal and State taxes are included in many things we buy with after tax dollars, such as gasoline, cigarettes, liquor, prescription drugs, etc.

16) Taxes are included in our water, sewer, garbage, gas, electric, heating oil, phone, & cable bills, etc.

17) Hidden taxes are built into everything we purchase. When you buy an automobile tire for example, the rubber was taxed when it was brought into this country, the shipping industry and dock workers were taxed when they delivered and unloaded the rubber, the corporations and the workers who made the rubber into tires were taxed, the truck that delivered the tire to the retail store was taxed, the gasoline used was taxed, then the retail store and the employees who sold the tire and the mechanic who installed the tire on your car were taxed. So perhaps 50% of the price you paid for that tire was directly due to taxes charged along the way before anyone could sell it to you. Then you have to pay a tax on the total sales price for the tire which includes all these increased costs due to previous taxes.

Even our groceries have been taxed many times along the way; the growers, shippers, store houses, grocery stores, and all their employees all pay taxes that are added to the cost of the food before we buy it. The farmers pay taxes. The shippers pay taxes. The grocery stores also pay property taxes on their stores, ware houses, and truck fleets, etc. The grocery store employees all have to pay taxes. There is double and triple taxation on almost every product you buy.

Another Example is rent: 50% of the rent is due to taxes the landlord has to pay on Electric bills, Gas bills, Water and Sewer bills, Real Estate property tax, the cost of city regulations requiring board of Health Inspections, Fire Inspections, Building Codes that require numerous building improvements, Federal, State, and City taxes the landlord has to pay on any income he makes, Constable and Court costs, Trash removal bills 50% of which are due to amount the trash removal company and its employees had to pay for taxes and on their gasoline, property taxes etc., Property Liability Insurance 50% of which are due to amount the insurance company and all it’s employees and it’s share holders had to pay for taxes., Capital Gains taxes the landlord has to pay on any profit he makes when he sells the building, required tax documents and legal documents that are so complicated that the landlord has to pay an accountant to provide, de-leading costs, and on and on, all part of the cost of our government. And this is why even the poorest pay 50% of their earnings on what could be called taxes or cost of government on everything they buy, including their rent.

The City of Brockton, MA. charges a 8 unit apartment building for water as if it were a single family home using 8 times too much water, and charges the landlord a water and sewer rate that is much higher than a single family home owner pays. This cost is included in all rents, so in the end the poorest people in Brockton, the renters, end up paying almost double the cost for their water and sewer as a home owner does.

Even none physical things like the cost of health insurance and the cost of a college education are probably somewhere like 50% due to the cost of taxes along the way. The doctors, nurses, staff, accountants, lawyers, and doctor’s offices, clinics, and hospitals, and pharmaceutical companies, etc., all have to pay about 75% taxes on their earnings as I do. The teachers, college professors, colleges, text book companies, all have to pay about 75% taxes on their earnings.

In fact almost all government employees pay about as large a percent in taxes as I do, say 70%. So our government is actually paying government employees 30% of their salary, plus 70% that they then take back in federal, state, and local taxes. Interesting.

(There must be some way to calculate an approximate percentage for this additional tax cost to us, the consumers. I'd guess on average 50% or more of the cost of almost everything we buy is due to taxes along the way, but I would like someone to refine this guess.)

18) City and State fees for using required government services for your business, such as serving a tenant with an eviction letter or a notice to appear in court, both required to be delivered by a
Sheriff or Constable, and Housing Court fees. All these types of fees have drastically increased recently and are ways the local governments increase taxes.

19) Increased cost for drivers license renewal, and fines for parking, expired plates or inspection
stickers, etc. is another way local governments raise taxes.

20) Landlords are required to de-lead apartment buildings within 90 days of purchase and this tax is passed on to tenants. We paid $30,000 to de-lead a 6 unit building. These de-leading laws tax some of the poorest in this country who must rent, but pay de-leading costs in their rent.

21) Police confiscate cars and sometimes even houses & apartment buildings and auction them off to get extra tax money.

22) Many states collect hundreds of millions of dollars in additional taxes through the sale of state lottery tickets. The odds of winning, I have been told, are ridiculously unfair. I recently read that where the government rules force casinos and slot machines to pay back 90% of all the money they take in, the state lotteries only pay back 50% of the money they take in, making lottery tickets one of the worst gambling odds you can get anywhere. Yet the people buying most of the lottery tickets are usually the poorest people of the country, who can't afford to pay their rent, but they are so desperate to win that they buy these stupidity tax tickets.

23) Then for another large tax. There are all the costs that government regulations cost us in addition to the direct taxes. Such as through building codes and required security at air ports. While I agree that many of these things are highly desirable, and all were created for some good reason, these codes require hundreds of billions of dollars, perhaps trillions, to be spent by private industry to comply with government codes and regulations that we end up paying for in increased cost of all public buildings, housing and rents and increased cost of air line tickets, etc. This must be added to what our government costs us to get a true picture. I recently had to pay over $10,000 to install new railings on all our apartment building’s porches, $5,000 for a fence to surround our dumpster, and $1,000 to install lighted exit signs, etc.

24) Congress passes laws that cost us extra money. For example, they pay subsidies to farmers and companies to produce Ethanol from corn, and about 10% of our gasoline is now made from Ethanol. Aside from the fact that they have recently proved that Ethanol pollutes the ozone layer worst than gasoline, this law is driving up the cost of our food, not only corn products, but all the products that contain corn syrup, and other food items that are not being grown because it is more profitable for farmers to produce corn now, and because it has increased the cost of the types of fertilizers used to grow corn. It even increased the cost of beef, because corn is one of the main ingredients in cattle feed.

A lot of congresses bills end up transferring money to rich people and corporations and take more of it away from regular employed people. Another example is government $6,000 tax credits for buying an electric car. Aside from the fact that some studies have shown that electric cars pollute the planet as much as gasoline cars, because of the cost of making and disposing of the cars and their batteries, and because most of our electricity comes from coal burning plants, they are taking more taxes to pay for that. (There are thousands of ways that government laws and bills transfer money from the middle class employed to the rich and the corporations.)

Congress passed laws making banks give home mortgages to low income families. The banks made a fortune, because they got about $10,000 up front every time they sold a mortgage with nothing down and low interest rates for the first year, then selling the mortgage to someone else so that they had no liability, when they knew most of the loans would default. This caused the recent housing crisis, which cost my wife and I over $300,000 dollars. We had a house in Mass. that was appraised at $600,000 in 2005, but which we finally sold for $290,000 in late 2009. This cost us $310,000. We had actually put $600,000 into that building.

To help stop the housing slide the Feds lowered interest rates to help people refinance, and to borrow money for businesses. (The unintended consequences of this was that now our life savings only earns about 1% interest when it used to earn 5%. This is costing us a lot of money and really hurts retired people that were counting on getting 5% on their life savings.)

25) Then, as a small time landlord, I have to spend about 12 hours per week keeping records to comply with all the government regulations and tax reporting requirements. I also have to keep up on Commercial Mortgage Contracts, Sanitary codes, De-leading laws, Housing Court Eviction procedures, Tenant Leases, Electrical codes, Building codes, Fire codes, Health Codes, and most confusing of all Federal, State, and Local Tax codes. It will make your head spin, and it is practically a college education in itself. This cost me a lot of time, and time is money.

26) Take a look at just Government Pensions: All government employees, including police, firemen, teachers, all military personal, transportation department employees, and all 10,000 government agency personal, get pensions that I must pay for as a tax payer, yet I don’t get a pension. My sister who worked for State of Texas will get 80% of her highest salary paid for the rest of her life. My wife’s sister who is a teacher in New York state will get 80% of her highest salary paid for the rest of her life. This is good, but Congress also passed a law that gives all Congressmen who serve only 8 years a life time pension. And Congress passed a law creating 401Ks, that let all corporations and private employers stop giving pensions.

I don’t know anyone who has $2 Million in their 409 K, yet that is what I read it takes to equal to a Senator’s life time pension. If you work for a small company like Mac Donald’s, or Duncan Doughnuts, or any small company you get no pension and often no benefits. If you work for a large corporation you get no pension, but they might contribute about $1,200/yr. to your 401K. If you are self employed as a painter, carpenter, plumber, electrician, landscaper, etc. you get no pension or 401 K contribution. In fact many companies only hire people for about 35 hours per week so that they don’t have to pay any benefits at all.

But everyone who works must pay for all of those government employee pensions. So how long can this last, when all government employees are getting life time pensions paid for by more than half the country who are no longer getting a pension. I believe the correct answer is to require all employers of say more than 30 employees to offer pensions again and get rid of 401K accounts. Or else what will we do with 100 Million old people who can’t afford to retire ever. Employ 95 year olds. And why do the Congressmen need pensions anyway, when all of them are millionaires?

27) I'm sure there are many other ways the government finds to tax us that I have missed, but I'm also pretty sure that this adds up to more than 75% taxes I am paying, but I can't figure out what my government is really costing me today. Can you? Can anyone?

I also believe, that even the poorest in this Country are being taxed over 60%, once you understand the questions I am trying to ask. I'm doubting that there is one person in this entire country, not even the President, who could give an accurate answer to how much we are being taxed in total.

So lets take a similar look at one of the poorer families, that have two children and their total income is only $36,000/yr. They rent an apartment with all utilities included. They end up paying almost no federal or state income tax and get their withheld taxes back each year. In fact, I heard on the news recently that 49% of Americans pay no federal income tax because they don’t make enough. That is a very sad fact.

Now I maintain that half of everything they buy, including, their groceries, their rent, their car, clothing, etc., 50% of that cost was to pay for taxes along the way. Additionally, the renters pay a 5% sales tax on most things they buy. They pay even higher taxes on cigarettes, alcohol, gasoline, and other things. They pay toll road fees, etc. So I conclude that even our poorer families pay almost 60% of their income due to the cost of government.

Conclusion: Perhaps the answer to my question is complicated enough to make a PhD Thesis.

Give me your best guess at this moment for our total cost. After reading this, do you think it is at least 75% ? Yet our Fed., State, and Local governments are all yelling again that they need more taxes. And we increase the national debt and the interest due on it by trillions each year, because even taking 75% from us, they are spending much more. Shouldn’t we all at least understand what it is costing us?

I believe that most people are starting to understand that Congress is completely owned by the corporations, insurance companies, banks, oil companies, wall street, and special interest groups, due to the hundreds of millions of dollars the lobbyist give to Congress each year. They have transferred more wealth to the top 1% in the last 10 years than we have seen since 1920. I don’t see how we end this. My first problem has been that nobody I ask about this subject guesses we pay as much as I think we do and they don’t seem to care. A frustrated tax payer.