How Much Are You Really Paying?

Most Americans understand the taxes they see: income taxes deducted from paychecks, sales taxes added to purchases, and property taxes billed annually. What they don’t see, however, are the numerous hidden taxes and regulatory costs that quietly take even more from their income. These invisible costs add up to a staggering financial burden, particularly for Vermonters.

Visible Taxes: Just the Tip of the Iceberg

The taxes we recognize are already significant. For instance, the average American family in the middle-income bracket pays over $10,000 annually in federal income taxes. Add to that state and local taxes, and the numbers grow dramatically. Vermonters, with a state income tax rate ranging from 3.35% to 8.75%, face even higher burdens depending on their earnings (NerdWallet).

This doesn’t include payroll taxes for Social Security and Medicare, or property taxes that are among the highest in the nation for Vermont. Yet, even these visible taxes pale in comparison to the hidden ones lurking beneath the surface.

Hidden Taxes: The Costs No One Talks About

Hidden taxes are embedded in the cost of nearly everything we buy and use, making them harder to notice but no less real. For example:

• Excise Taxes: These taxes on specific goods, such as gasoline, alcohol, and tobacco, significantly inflate prices. For a six-pack of beer, taxes can make up to 43% of the cost (IPI).
• Corporate Tax Pass-Throughs: Businesses don’t truly pay taxes—they pass those costs on to consumers in the form of higher prices. This includes costs from federal, state, and local taxes, as well as compliance with regulations.
• Regulatory Costs: Federal regulations alone impose a massive financial burden, totaling over $2 trillion annually, which equates to roughly $15,000 per U.S. household (CEI).

These hidden taxes and regulatory costs disproportionately affect lower- and middle-income households, who pay a larger share of their income toward essentials like fuel, utilities, and food.

How Much Are You Actually Paying?

When visible and hidden taxes are combined, the average American pays a shocking amount of their income to the government. Estimates suggest that taxes and regulatory costs consume over 50% of the average person’s income (IPI). For Vermonters, this figure may be even higher due to aggressive energy policies and additional state-level fees.

For example, utility bills in Vermont include surcharges for energy efficiency programs mandated by the state, significantly raising costs. These fees, while intended to fund environmental initiatives, act as a hidden tax on every household.

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Why Hidden Taxes Are a Problem

Hidden taxes allow the government to raise revenue without increasing visible tax rates, making it easier to mask overspending and avoid public scrutiny. This system creates multiple problems:

1. Lack of Accountability: Most taxpayers have no idea how much they’re truly paying to fund government programs and services, making it harder to hold officials accountable.
2. Inflated Prices: Taxes and regulatory costs are passed on to consumers, driving up prices for goods and services.
3. Reduced Wages: Businesses facing high tax burdens may suppress wage growth or reduce benefits to offset expenses.
4. Economic Drag: Hidden taxes discourage investment and innovation, slowing economic growth and reducing opportunities for workers and entrepreneurs.

A Path to Transparency and Reform

The solution lies in simplifying the tax system and making all costs visible. Here’s how:

1. Consolidate Taxes:
   • Replace hidden taxes, fees, and surcharges with straightforward taxes like income or property taxes. For example, instead of embedding energy program costs in utility bills, fund these initiatives through a clear and direct tax line.
2. Increase Transparency:
   • Implement tools that allow taxpayers to see the total amount they pay in taxes, including regulatory costs. Public reporting of government spending should be accessible and easy to understand.
3. Streamline Regulations:
   • Simplify compliance mandates to reduce costs for businesses, which would lower prices for consumers.
4. Cap Spending:
   • Limit government spending to prevent excessive tax burdens and ensure programs are efficient and necessary.

Why This Matters

A transparent and simplified tax system would expose the true cost of government, empowering taxpayers to demand accountability and better services. Lowering hidden taxes and regulatory burdens would reduce prices, stimulate economic growth, and increase disposable income for families.

Most importantly, such a reform would end the government’s ability to quietly grow its spending without public awareness. By making the tax system open and honest, we could foster trust in public institutions and create a fairer economic environment for all.

Dave Soulia | FYIVT

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