The Country Thinker

Ohioans are among the most heav­ily taxed humans in his­tory, at an effec­tive rate of 70–80%.

In a let­ter in today’s Wall Street Jour­nal, Ted Phillips of Rich­mond, Vir­ginia noted the oft-​​cited sta­tis­tic that wealth­i­est 10% of Amer­i­cans pay 70% of income taxes. While I agree that America’s wealthy are long over­due for some tax relief, this sta­tis­tic is fre­quently used to sup­port the con­ser­v­a­tive argu­ment that the “poor” don’t pay taxes. Of all the argu­ments made by con­ser­v­a­tives that I dis­agree with, none is more patently false, or gets under my skin more than that one. We all pay taxes—rich, poor, and middle—and we all pay way too high of taxes.

To demon­strate my point, I’m going to walk through all (or at least most) of the taxes my fam­ily pays. As you will see, most of these taxes hit cit­i­zens of every socioe­co­nomic class, but not always equally. Some are pro­gres­sive, like income taxes. Some are regres­sive, like pay­roll and infla­tion taxes.

My fam­ily is a middle-​​of-​​the-​​spectrum Ohio “McFam­ily,” so taxes affect us in a very “typ­i­cal” way. When I am through, I think you will see that the tax bur­den on Amer­i­cans gen­er­ally, and Ohioans specif­i­cally, is oner­ous and immoral.

First, we pay fed­eral and state income taxes, as well as pay­roll taxes (around 13%). Our top rate is around 40% from these deducted taxes.

We pay 6.5% in sales taxes on pretty much every­thing we buy except food.

We pay prop­erty taxes (over $3000 a year) on our mod­est home.

We pay taxes on our monthly util­ity bills; phone/​internet, satel­lite, cell phone, etc. For exam­ple, our phone/​internet bun­dle costs about $68/​month, on which we pay an aston­ish­ing $22/​month in var­i­ous state and fed­eral taxes. That’s about $264 a year. Because of our 40% deducted tax rate, we need to earn $440 to pay $264 in taxes!

There are also product-​​specific taxes. For exam­ple, every gal­lon of gas and bot­tle of wine sold in Ohio is assessed state and fed­eral taxes.

There are user fees, such as high­way tolls and park admis­sion fees, and they’re all over the place. Take a close look at what you pay the next time you fly. We used sky miles for our recent vaca­tion, and still had to pay taxes on a “free” flight.

We pay driver’s license fees, car/​truck reg­is­tra­tions, as well as boat reg­is­tra­tions. The last one irks me badly. Although it is “only” $20 for a 3-​​year reg­is­tra­tion ($6.67/year), con­sider what we “get” for this fee: last year I received a Depart­ment of Water­craft cal­en­dar for each of my boats (three; two kayaks and a power boat). Postage for each was $2.35! My guess is that nearly the entire annual bud­get of ves­sel reg­is­tra­tion fees went to cal­en­dars last year. I tore mine up in a fit of rage and burned them; it wasn’t pro­duc­tive, but it was very cathar­tic. (Please, Gov­er­nor Kasich, close the Depart­ment of Watercraft!)

There are also fees for pro­fes­sional licenses—my wife is a licensed occu­pa­tional ther­a­pist, and I am an inac­tive mem­ber of the Florida bar.

There are taxes on cer­tain activ­i­ties, such as hunt­ing and fish­ing licenses.

There are stealth legal and reg­u­la­tory taxes, too, and they might be the most expen­sive of all. For exam­ple, every prod­uct you pur­chase from a pub­licly traded com­pany bears the costs of Sarbanes-​​Oxley com­pli­ance (thank you, Repub­li­cans), as well as the cost of SEC fil­ings. Every phar­ma­ceu­ti­cal prod­uct you buy bears the cost of FDA approval, as well as the cost of our ridicu­lous prod­uct lia­bil­ity laws. Reg­u­la­tory and legal taxes are the rea­son that Amer­i­can phar­ma­ceu­ti­cals are by far the most expen­sive in the world. I’m not say­ing we should ditch all reg­u­la­tions; I am merely not­ing that there is a price to pay for them, and in Amer­ica, the land of hyper-​​regulation, the cost is extremely high.

Then, of course, there is the infla­tion tax. Under cur­rent con­di­tions (dollar-​​whoring), it is an extremely regres­sive tax. The poor and seniors on fixed incomes are get­ting whacked with higher food and energy costs, while the “rich” are see­ing their stock port­fo­lios go through the roof. QE2 is arguably the largest wealth redis­tri­b­u­tion scheme in his­tory, fun­nel­ing tril­lions from the poor to the wealthy.

Any­how, I tried to put an esti­mate on how much an ordi­nary mid­dle class Ohio fam­ily like mine pays in taxes when all taxes are taken into account. The best I can do is to muster up a “guessti­mate.” I esti­mate that as a mid­dle class Ohio fam­ily, we pay an effec­tive tax rate of 70–80% of our income. That fig­ure is prob­a­bly spread pretty evenly among all income lev­els, and it makes mod­ern day Ohioans among the most heav­ily taxed humans in history.

(P.S. Have a nice day!)