There is a saying that two things cannot be avoided: death and taxes. Sometimes it feels as if we might experience “death by taxes.” However, we will leave the subject of death for another time.
But, how many actually understand what or how much they pay in taxes?
The most common discussion about taxes usually involves the income tax, which is probably the most identifiable tax that we pay. This tax may be withheld from a paycheck, it may be paid in an estimated quarterly installment, or for some it might only be paid when filing their annual tax returns.
Folks with large incomes pay a significant portion of their earnings in income taxes, others a moderate amount, and some nothing at all. For many Americans there was a reduction in the income tax this year and that was welcomed in many families.
Unfortunately, there are other taxes that we pay that are not so visible or identifiable. For the average American these taxes often exceed what is paid via the income tax. For the purposes of this column we will limit discussion to Social Security, Medicare, real estate taxes, sales taxes, fuel taxes and excise taxes.
Everyone who receives a paycheck has Social Security and Medicare taxes deducted from their income. Some would not call this a tax. However, the reality is that these deductions are used for the benefit of others.
There is a minuscule minority of people who will ever receive back in benefits the amount of money that is removed from their income. The current rate that is deducted from a worker’s paycheck is 7.65 percent while the employer is required to match this 7.65 percent. The self-employed are required to pay double the tax, or 15.3 percent. You might ask why this is a hidden tax. Every employer, or the self-employed, must recover this 7.65 percent by including it in their cost of doing business. The result is that when you purchase a service or goods you are also paying for this tax.
Probably the most hidden tax of all is the corporate income tax. This tax has recently been reduced, which has helped to trigger an economy that some describe as booming. The United States may see a 5 percent increase in gross domestic product for the second quarter.
Why is this happening? Economists are telling us that there are increased wages, renewed investment, stock repurchases and larger dividends.
Corporate taxes must be accounted for in the business plan as a cost of doing business. At every step before a service or product reaches its final consumer, there may be a corporate tax involved. When the corporate tax rate is decreased there is a corresponding decrease in overall costs. Less money into government coffers and more money into the economy results in better value for the consumer and additional economic stimulus. Price stability and even price reduction can be a part of the program.
There also are real estate taxes. Everyone who owns real estate pays real estate taxes. But what about those who rent? Do they avoid real estate taxes? The answer is no. Every rent payment includes an amount that the property owner uses to recover their cost of real estate taxes. In Rockland, a property valued at $250,000 pays the equivalent of about $465 per month in real estate taxes. In Camden, that number would be about $300 per month. A good part of the reason why it is so expensive to rent is revealed in the real estate tax liability of the owner.
We are all familiar with the sales tax. The Maine sales tax rate is 5.5 percent. All goods that are purchased with the exception of food are taxed at this rate. But how many people realize that when they go to restaurants (McDonald’s and Dunkin Donuts included) they are taxed at a higher rate of 7 percent. The same applies to lodging, whether it is a motel room, a campsite or a resort.
We do not get relief from taxes when we stop at the convenience store to purchase fuel for our vehicles because the tax has already been added to the pump price When paying $2.95 for a gallon of gasoline, the convenience store is making about 5-8 cents per gallon while the state and federal governments are making almost 50 cents per gallon. If you happen to use diesel fuel it is worse.
Last but not least in this discussion of hidden taxes is the excise tax. This tax is assessed for the privilege of owning a car, truck, boat or recreational vehicle.
Excuse a bit of sarcasm, but this tax is put in place to discourage you from owning new things. The excise tax is at its highest on new vehicles and decreases in amount with age. The best kept secret in New England is that a great majority of other states do not have excise taxes on vehicles.
By now one might get the idea that this writer feels that there is an excess in how much we the people are taxed. That would be a correct assumption.
If we complain that taxes are too high, we are given a choice of which programs or services should be cut. However, requiring government to be more efficient and to operate at a lower cost rarely happens.
The next time that you hear about a new tax increase, object, and let those folks know that you might just vote for someone else.
Another View is a weekly column written collaboratively by Dale Landrith of Camden, Ken Frederic of Bristol, Paul Ackerman of Martinsville and Jan Dolcater of Rockport.
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