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This holiday season, save a place for Uncle Sam |
from NewsLink, Vol. 2, No. 1, Fall 1997
Is Uncle Sam on your holiday guest list this year? He'll be joining you for dinner even if you don't set a place for him. And he'll want larger portions than anyone else at your dinner table. The truth is, Uncle Sam is a larger presence than you may realize. The taxes you'll pay in order to celebrate the season may surprise you.
It is tempting to measure governmental presence by measuring the taxes that you explicitly pay for goods and services. However, there are many taxes you do not see, but still pay. Consider this: When you buy your holiday egg nog or turkey, you're not just paying for the cost of the eggs that went into the egg nog or the feed that went into the turkey. You're also absorbing, directly or indirectly, the taxes that the producers of these goods had to bear in order to bring their goods to market.
In Massachusetts, the average person pays about $11,027 a year in taxes, slightly higher than one-third (34.9%) of his or her income.1 In other words for every three dollars you spend, on average one dollar goes to Uncle Sam. The average holiday dinner of turkey, cranberries, pie and trimmings costs about $31.66.2 Given that there is no sales tax on food, about 30% or $9.50 goes to Uncle Sam, and only about $22.16 goes to the egg farmer, the turkey farmer and the other folks who produced the dinner. If you plan to offer your guests a cocktail before dinner, you might be interested to know that 65% of the price of the liquor goes to taxes.3 Are your holiday guests traveling from out of town? If they plan to fly, they'll be buying tickets for some other companions as well. About 40% of a round-trip airline ticket is taxes. While they may see only about 10% of the taxes, your guests are also paying for payroll taxes for the airlines employees, sales taxes, capital gains taxes, unemployment insurance taxes, workers compensation taxes, business license taxes, local income and property taxes, fuel taxes, and telephone excise taxes. If your holiday guests consist of a family of five, for example, they are really paying for themselves plus two tickets for Uncle Sam and his guest.
Maybe your guests are driving. Tell them to clear off plenty of space in the back seat for Uncle Sam. Over 54% of the price of a gallon of gasoline goes to various taxes. Then there's the annual excise tax on the car and the sales tax they paid when they purchased it.
Accommodations for your guests? If they're not staying with you, tell them to expect to pay about 43% of the price of their hotel room in taxes.
Maybe you and your guests will want to go out for dinner. When you're making your reservations, don't forget to include Uncle Sam. He's going to get about 32% of the bill.
Americans are, by nature, a generous people. That they have to pay so much in taxes in order to express their generosity testifies as much to the spirit of the season as it does to Uncle Sam's presence at the holiday table.
1 Tax Foundation, 1997.
2 American Farm Bureau Federation, 1996.
3 Estimates of the tax burden for particular goods are based on national level data (the national average tax burden was 35.2% of income), BHI calculations and calculations provided by Peter Ferrara of Americans for Tax Reform.
NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-1997. All rights reserved.