We are pretty well aware of the taxes we must pay as U.S. citizens; income taxes, payroll taxes, sales taxes, property taxes, and gift and estate taxes, to name a few. We can easily see these taxes on our pay stubs, tax bills, and sales receipts. But there are other taxes imposed on us that you may not be aware of. They are “hidden taxes.” And when you add them together with visible taxes, you may be surprised about how high your taxes really are. Here’s the rundown on hidden taxes.
How Taxes Are Hidden
Taxes are hidden in many ways. For example, you see the payroll taxes that are deducted from your payroll check each pay period. What you do not see are the taxes that your employer pays. For example, in addition to income tax, your employer pays half of the Social Security tax as well as unemployment tax on your wages. Like all costs paid by your employer, these taxes get passed on to you as an employee (as a factor in compensation paid), as well as to shareholders and to clients and customers. And if you’re receiving dividends from a corporation, keep in mind that taxes have already been paid on that income.
But most hidden taxes are paid by consumers. Sometimes these taxes are disguised as fees, surcharges, tariffs, duties, assessments, dues, excises, levies, licenses, and tolls, among others. And sometimes they’re simply rolled into the price of goods and services and are either completely undisclosed or they appear somewhere in the fine print, which is often left unread by the consumer.
Planes, Trains, and Automobiles
Many hidden taxes are associated with travel. For example, when you pull up to the pump, you can clearly see the price for the gas, but the “taxes included” disclosure is usually posted somewhere else. How much of what you pay goes to tax revenue? Well, it varies by each state and its tax policy at the time, but it can range from 8¢ per gallon (Alaska) to 47.7¢ per gallon (California). (Source: Tax Foundation, Tax Data, February 25, 2011)
Taxes associated with traveling by air can include ticket excise tax, flight segment tax, arrival and departure fees, September 11 security fees, passenger facility fees, and–if your travel is international–agricultural inspection, customs, and immigration user fees. There are 16 or more fees that can add up to $61 (or 20% of your total cost) or more. (Source: Airlines for America, http://www.airlines.org/, 2012) And those are just the U.S. taxes; there can be foreign taxes as well.
Car rental, hotel, and meal taxes can also add up. The GBTA Foundation, the education and research foundation of the Global Business Travel Association (GBTA), reported from its 2011 annual study of the top 50 U.S. travel destination cities that the travel taxes and fees imposed on travel-related services increased the traveler’s cost an average of 56% over and above any general sales taxes paid, and that taxes for a single night at the national average room rate of $95.61 were $13.12. The combined lodging taxes levied by state, county, and city averaged 13.73%. (Source: News Release, July 21, 2011, http://www.gbta.org/).
Sin Taxes
A seemingly favorite way for government to tax is with the so-called “sin” taxes. Ostensibly, these taxes are imposed to reduce behavior that society considers unhealthy, immoral, or just undesirable in some way. That is why there is a tax on soda, alcohol, tobacco, gambling, and ammunition and firearms. According to the Alcohol and Tobacco Tax and Trade Bureau, revenue collected in 2011 for just some of the above-referenced items totaled approximately $26 billion. (Source: Statistical Release, December 1, 2011, http://www.ttb.gov/)
Why Are Taxes Hidden?
Not surprisingly, hidden taxes largely go unnoticed. The result may be that this can make it difficult for us to choose wisely the goods and services that we purchase, or to have a true accounting of our total tax burdens.
If you have questions, contact our Tax Experts: experts@henssler.com or 770-429-9166.
Disclosures:
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing.
