How to Hide Taxes from the Public

This time of year, one of the things that makes me cringe the most is hearing how happy people are about getting their refund check from the government.  They talk about this money as if it was manna from heaven that just suddenly appeared to them through no effort of their own.  It makes me want to shake them and say, “Yeah you got $500 or $1,000 back, but did you see how much you paid in taxes for the year!?!”  This got me thinking about how our system of tax collection is really set up to hide the true impact of taxes on most people, and I’m not just talking about income taxes.  Think about it…

  • Someone who gets $2,250 out of their $2,500 paycheck every two weeks doesn’t realize the government just took $6,500 from them. I bet they would cringe if the government asked them to send in a $6,500 check to them once a year.
  • Someone who buys a $0.99 cup of coffee (for a $1.07 including tax) each weekday during a year pays over $200 in tax each year. I bet if you asked them to fork over $200, they would get very upset.
  • Someone who pays an extra $300 a month into their mortgage escrow account to pay property taxes pays $3,600 in tax. I bet they would freak out if you asked them to write one check for that amount.

The reality is that our tax system is based in large part of voluntary compliance, and in order to make that compliance easy, the government uses businesses to help them collect taxes a little at a time.  As a result, no one seems to notice how much they are actually paying in taxes.  So as you complete your tax form this year, take a moment to add up all the taxes you paid.  A lot of it is all there if you itemize deductions – the federal tax you paid, the property tax you paid, the sales tax you paid.  Add it all up and see the total.  More importantly, when your friends start bragging about their tax refund, ask them to do the same thing.

Maybe you’ll feel you’re getting a bargain from the government based on the taxes you pay, maybe you’ll feel like you don’t. But either way, you’ll be looking at the actual bill instead of being happy about getting your own money back that you should have never loaned to the government in the first place.

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