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The following commentary appeared in the winter 2000 issue of IMPACT!, the Mackinac Center for Public Policy's quarterly newsletter. It was adapted, with permission, from an article that originally appeared in the February 1998 issue of The Freeman, a publication of the Foundation for Economic Education.
When Congress takes up the issue of tax relief, too often the debate concentrates only on money. That is, the arguments about taxes, pro and con, focus solely on the money due to the federal government each April 15. This shows the shortsightedness of the political class in determining the laws under which you and I must live.
Whether haggling over the details of estate taxes, sin taxes, or capital gains taxes—not to mention the income tax—denizens of Washington, D. C., underestimate the average American's tax burden. Discussion at each end of Pennsylvania Avenue assumes those are the only levies he pays in exchange for the government he receives. In reality, state and local taxes (especially property and sales taxes) add to our crushing tax obligations.
But even factoring in these charges, there are still other ways government taxes us. We would do well to remember—especially when politicians of all stripes grandstand on "tax relief"—that many (if not most) activities of government impose onerous burdens. They aren't direct payments to a government treasury, but they are nonetheless taxes on our time, our labor, our freedom.
Take the IRS code itself. The government requires citizens to conduct its tax collection, making people bookkeepers for the federal leviathan. Even the simplest 1040 form requires time-consuming labor without hint of remuneration—a classic unfunded mandate. And the sheer complexity of a tax code that runs to thousands of pages means that Americans are forced to spend untold time and money to pay their annual tribute.
A slew of such implicit taxes, kept off the government's balance sheet, are to be found in every facet of daily life:
Regulations. The rules government mandates for us are hidden taxes. A law, after all is a tax on behavior. The government is as likely to overtax through laws and regulations as it is through more traditional levies on our paychecks. These hidden taxes are insidious precisely because we don't always notice them. They don't show up as actual payment to the Treasury. Yet they still are costs we incur to do the government's bidding. The shop owner who must install a ramp to comply with the Americans With Disabilities Act pays a real price.
The legal system. Our out-of-control tort system allows people to play a roulette game of legalized extortion. The tax? Our constant exposure to the legal harassment of frivolous lawsuits. Not only does government fail to protect businesses and individuals from the truly frivolous suits, but the vague and inexact laws Congress passes often encourage them. Moreover, we are taxed in the marketplace, where the problems of the tort system translate into higher prices for nearly all products and services.
Price supports. Price-support policies on sugar and other agricultural products drive up the prices we pay for virtually every meal. Citizens pay the tax for this corporate welfare at the cash register.
The Postal Service. The Postal Service constantly congratulates itself for taking no federal tax money. Its operating costs aren't figured into the annual budget, but are covered by revenue from the sale of stamps. So where's the tax? In the artificially high price of stamps. Those self-congratulatory claims are misleading because the government reserves to the Postal Service a monopoly on first-class mail delivery. As a result, the price we pay for postage is far higher than it likely would be in an unfettered market.
The monetary system. Washington also reserves to itself the monopoly on currency: competing private currencies are illegal. While this may seem esoteric, what it means is that we have no choice but to use the government's money. The least government can do is guarantee a stable value of money, as a gold standard would accomplish. It doesn't. Inflation—and anxiety about future inflation—can be a deadly hidden tax on savings and investment, robbing people decades down the road.
We suffer many other taxes in our everyday endeavors. We need licenses to drive, licenses to operate many kinds of business, and permits to build on our own property. Each usually involves a fee in addition to the hassle of petitioning the appropriate authority for approval. When you have to take time off from work to stand in line to pay the government for a stamped slip of paper in order to continue—well, working—you are being taxed on several levels.
A tax isn't necessarily money we give the government. Rather, a tax is a way for the government to control us. Taxes of all types make us the servants of the state, both when we send tribute to Washington or when we work to satisfy regulatory mandates.
Taxes, it is said, are the price we pay to live in an orderly society. Fair enough. Just don't forget that this "price" includes far more than the coins we drop in Uncle Sam's coffers.
For information on how more citizens can see for themselves the true costs of government, see the Mackinac Center's Right-to-Know Payroll Form , which lists the often-hidden expenses employers incur to keep workers on the payroll.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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