Taxation per capita.
The Cost of Government.—The cost of maintaining the national government and all its activities is now about four billion dollars per year, in other words about forty dollars per annum for every man, woman, and child in the country. The cost of maintaining state and local government varies in different parts of the country, but it would be safe enough to put it down as three billion dollars more, or thirty dollars per head. In round figures, therefore, the average tax payment every year for each individual in the United States is at least seventy dollars.[[211]]
The extent of the burden upon the income-earner.
Bear in mind, however, that only a small part of the whole population is earning the income which enables these taxes to be paid. When we eliminate all the children, all the women who are not employed in any income-earning occupation, all the public officials who are paid out of taxes, all the delinquents, cripples, paupers, unemployed, and so on—when we subtract all these from the total it will be found that only one person in five is an actual income-earner. From the earnings of these twenty million people the entire seven billions in taxes must be paid; there is no other source from which the taxes can come. A little mental arithmetic will readily demonstrate, therefore, that every income-earner in the United States pays, on the average, at least $350 per year in taxes of one sort or another, in other words about a dollar a day.[[212]]
Everyone is a taxpayer, directly or indirectly.
Who Pays the Taxes?—“Oh yes”, someone will say, “but most people earn small incomes and pay no taxes at all, or almost none. The heavy taxes are paid by wealthy men and women who own property and have large incomes.” That is misleading. People who own property and earn large incomes are the ones who actually hand the collector his tax-money, to be sure; but they merely give him, for the most part, money which they have collected from others. The owner of an apartment house collects taxes from his tenants in the form of rent; the storekeeper collects taxes in the price of his goods; the lawyer and the doctor collect taxes when they charge fees. Taxes are an element in the cost of everything, an element just as certain as interest, wages, or profit. Everyone who rents a house, buys goods, or hires any form of service pays taxes. If you analyze the various items which make up the price of a suit of clothes, for example, you will find that they usually come in this order of importance; wages, cost of materials, taxes, profits, interest.[[213]] The chief factors which make up the rent of a house are interest, taxes, and profits in the order named. Hence it is that while landlords, merchants, manufacturers, and others make the direct payment of taxes to the government, they in turn pass the burden to tenants and consumers.[[214]]
The way in which taxes are shifted.
The Incidence of Taxation.—Taxes, therefore, do not usually stay where they are levied. They are shifted from one shoulder to another until they finally reach someone, usually the ultimate consumer, who cannot unload the burden upon anybody else. This ultimate resting-place of a tax is called its incidence, and an important thing about any tax is to discover just what its incidence is; for the justice or injustice of taxation depends upon the ability of the actual taxpayer to bear the burden and not upon the wealth of the ostensible taxpayer. If the government were to levy a tax of one cent per loaf upon bread, there would be a storm of protest because everybody would recognize it as a direct tax upon one of the necessities of life. But a tariff duty on wheat, or a property tax on flour mills or bakeries, is just as certainly a tax on bread and is paid ultimately by those who buy it. The chief difference is that in the latter case the payment is made by the consumer without his knowing it.
Relation of taxes to rents and prices.
Most people pay taxes unknowingly. Their taxes are concealed in rents or prices, and they complain bitterly that these things are high. It does not occur to the average American wage-earner that if taxes were lower, rents and prices would be lower, and that if there were no taxes, it would be exactly the equivalent to finding every morning, on coming down to breakfast, a crisp, new dollar-bill on his plate. Demagogues tell us that trusts, and profiteers, and other forms of organized avarice are responsible for high prices; but one of the biggest factors in the high-cost-of-living is the high-cost-of-government.