The Government Owns You
Let’s imagine you’re buying a new car (and we’ll have to imagine, because no one can afford one right now). In most states you pay sales tax—some states charge a luxury tax as well. On average, only 94 percent of the dollars you spend will actually go toward the car, with the remainder paid to the government. Mind you, you won’t be able to drive the car anywhere until you pay the government a further fee to register it.
And of course, the dealer has marked up the car over his wholesale cost so he can make money. Don’t be fooled when you see that a typical markup is between 2 percent and 5 percent—that’s the markup over the suggested retail price, not the dealer cost. The actual markup may be 25-45 percent over the manufacturer’s price.
The markup is so substantial because the dealer’s operating costs eat up most of his profit: Among other things, he has to pay a 21 percent corporate income tax on everything he earns. He also had to pay sales tax when he bought the car from the manufacturer. If he leases the dealership building, the price of his lease includes the property tax paid by the building’s owner. The cost of his employees includes the benefits he is required to give them, and it also includes the income tax his employees will pay—since their real salaries are only what’s left after they pay their taxes. All these costs are passed onto the consumer. Some of the costs represent real added value—the dealer helped you find the car, let you test-drive it, and warranties its quality. But about half of the markup—let’s say 15 percent of a 30 percent markup—is going to pay one or another form of taxes.
So we’re down to just over 80 percent of the dollars you spent going toward the actual car or value you received, with the rest going to the government.
The price charged by the manufacturer includes shipping the car to the dealer—and included in that cost is the tax paid on fuel, the tax paid by the employees of the shipping company, the cost of registering their own trucks, and the tax paid by the shipping company itself, just as in the case of the dealer. And the manufacturer is paying taxes in the same way—paying corporate tax, paying for the tax its employees will pay, and—crucially—paying sales tax on every component it receives to be put into the car: Every contractor making sub-assembles for the car (say, making the gauges or video screens or brake calipers or tires) is also having to charge for the costs incurred through corporate taxes and employee’s income taxes, and is in turn paying sales tax on the materials bought to make the sub-assemblies. All those costs get passed along to you.
Imagine the cumulative effect of 10 or a dozen stages of a manufacturing process where the government takes five or 10 percent at each stage.
The point of this exercise isn’t to arrive at an exact number. It’s to understand how taxes inflate the cost of everything you buy. You may well groan when you pay your tax bill and the government leaves you with 70 or 60 or 50 cents for every dollar you earned. But they’re also diluting the buying power of that remaining percentage by taxing the process of sale and manufacture, and that’s the real rip-off. The true costs are hidden. Corporations don’t pay taxes; you do.
The government then further dilutes the value of your money by printing new money. So how much buying power do you really end up with for every dollar you earned with your work? Forty cents or 30? It might be less than 20 cents.
This suggests we are not a free people, except in a very limited sense. We are indentured servants of the government. Slaves, if you like. We may choose what we do for a living, but the vast majority of our life’s work is not our own. It is stolen from us by a professional governing class who use our money to buy the votes that keep them in power. They also use our money to build themselves lavish homes, travel in chauffeur-driven cars and fly on private planes. We go to the office every day to pay for our congressman’s fancy health plan or his trip to the Davos summit on wealth redistribution. We get to keep the money we made on Friday: Monday through Thursday we’re just paying down the lease the government has on our lives.
Suppose you save up a lifetime of Fridays and want to pass the savings on to your children? The government will take a chunk of that, too.
Under the circumstances, it’s hard not to think of anything you might see in the news as just part of the circus designed to keep your mind off the bottom line. Because what would happen if we all took a moment to think about what’s really going on here? There was a time when we had revolutions over this sort of thing.
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