Americans are being taxed in ways that many don’t even notice. Commonly referred to as “hidden taxes,” these tolls are built into the cost of certain products. Often, these taxes don’t even appear on a bill or receipt. Here are some of the five most common hidden taxes:
In 2012, the federal government collected almost $10 billion in taxes from the purchase of wine, beer, and other spirits. According to the Tax Foundation, Washington has the highest spirit excise-tax rate at $33.54 per gallon. Followed closely in rates are Oregon, Virginia, and Alabama. The lowest are found in Wyoming and New Hampshire where government-run stores don’t typically rely on taxes and impose markups instead.
Listed in the “Options for Reducing the Deficit: 2015 to 2024” from the Congressional Budget Office, increasing all taxes on alcoholic beverages to $16 per proof gallon would increase the tax on a six-pack of beer from 33 cents to 81 cents. The tax on a bottle of wine would increase from about 21 cents to 70 cents.
(2) Cell phones
Have you ever looked at the taxes listed on your cell phone bill? According to a study from the Tax Foundation, the average customer pays more than 18 percent in taxes and fees on their wireless bill, which is several times more than state sales-tax rates. In fact, American consumers pay around $17 billion in wireless taxes, fees, and other surcharges combined.
The states with the highest cell phone taxes and fees are Washington, Nebraska, and New York while Oregon, Nevada, and Idaho have the lowest, respectively.
Cigarettes are taxed similarly to alcohol.
Signed in 2009, the Children’s Health Insurance Program Reauthorization Act raised the federal tax rate for cigarettes from 39 cents per pack to $1.01. This tax was used to increase insurance coverage under the State Children’s Health Insurance Program. Currently, cigarettes are the most expensive in Chicago. The city tax, plus Cook County’s tax, plus Illinois’ state tax comes out to $6.16. (And that doesn’t even include the actual cost of a pack!)
Typically, gas taxes are used to provide revenue for road construction, maintenance, repair, and other improvements. However, in 2013, gas taxes and license fees paid for only 41.4 percent of state and local road spending. That percentage is falling over time as state gas rates don’t keep up with inflation.
As of January 2016, Pennsylvania imposes the highest state gas tax at 50.4 cents per gallon with Washington and New York closely behind. Alaskans pay the lowest rate at only 12.25 cents per gallon.
In the United States, license taxes are paid to the government for the privilege of being “certified” to do something (like cutting hair, scrapping metal, or practicing medicine). Since the 1950s, the number of jobs where workers are required to be licensed now encompasses more than a quarter of the working population.
According to a report from the Treasury, the White House Council of Economic Advisers, and the Department of Labor, occupational licensing, “creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job.”
Occupational licensing laws raise consumer prices; they don’t increase the overall quality of goods and services, but they do raise costs. For example, imposing more licensing requirements on dental hygienists increases the price of a dental visit by 7 to 11 percent.
Concealing taxes from the public by including them in the cost of goods and services is wrong. If taxes are going to be included in the first place, then in the name of transparency, they should be made clear on the receipt of purchase. What’s worse is that, most of the time, these taxes don’t accomplish their stated goals.
As mentioned before, gas taxes aren’t helping pay for road or bridge maintenance because local governments can’t keep up with inflation. Occupational licensing stifles competition and keeps otherwise high-paying jobs out of reach for the poor.
If the programs these funds are supposed to be funding are truly necessary, then it would be in the best interest of the government agencies behind them to: (1) be transparent with the taxpayer about where and what that money is funding, and (2) be responsible with said money by allocating taxes for their true and intended purpose.