Today is Tax Freedom Day, the day on which all Americans have earned enough to pay off their total taxes for the calendar year. In 2014, that amounts to 30.2 percent of their income.
Sure, the income tax is the bane of every American’s existence. Every American pays a predetermined percentage of their paycheck to the federal government — and we hate it. But at least it’s honest.
There is one thing worse than paying income taxes: a hidden tax. For the purpose of this article we will define a tax as any time there’s less money in your wallet because of the government. So on Tax Freedom Day, here are some ways the government sticks its hands in your pockets and you might not even realize it.
Corporate taxes
Politicians call for corporations to “pay their fair share,” but who really pays corporate taxes? The answer: everyone.
According to an article published by The Boston Herald and the Mercatus Center, corporations have three ways to pass on additional taxes. In the first option, companies could increase their prices. This offloads any additional tax burden directly to the consumer.
The second option is layoffs and/or lower wages for employees — but don’t think for a second it comes out of executive bonuses.
Lastly, corporations could pass on the additional costs in the form of lower dividends to stockholders — and this isn’t just ‘fat cats.’ Yes, rich people own a lot of stock, but try saving for retirement without solid market returns. This hits pension funds and 401(k)s alike. Keep in mind that more than half of Americans owned stock in 2012.
Social Security — again
Social Security may sound like a great program on paper. Workers contribute a percentage of their paycheck towards retirement and the employer is required to match it — or so it would seem.
According to a study conducted by the Congressional Budget Office in 2006, that’s not the case.
“CBO assumes — as do most economists — that employers’ share of payroll taxes is passed on to employees in the form of lower wages,” the report reads.
The problem is that employers have a budget and they know how much they can afford to spend on a particular position. No law is going to change that dynamic.
Obamacare
Obamacare, or the Affordable Care Act, is filled to the brim with unfunded regulations and corporate taxes alike.
According to a study published by The American Health Policy Institute, the law will cost large employers “between $4,800 to $5,900 per employee.” When the government mandates that large employers provide health insurance for their employees, the cost will obviously fall on the organization. That cost will then be passed on to the worker in the same manner as payroll taxes.
However, Obamacare also introduces a new hidden tax called cross subsidization.
The healthcare law requires that everyone buy insurance, and that the health of the consumer cannot be taken into consideration. It also limits how much more insurance companies can charge based on age. This represents two taxes. One on being healthy and another on being young.
Sorry, Millennials.
So if you are celebrating this tax freedom day, remember you’re never free from the taxes you don’t know about.
