April 15, which is tax day in the United States, is a good time of year to remind people just how much they are paying for government.  In 2018, the tax filing deadline for the 2017 federal tax return is on April 17, 2018.  This is because April 15 is on a Sunday, and, believe it or not, Monday is considered to be a holiday.

There is a major problem though with just focusing on the tax filing deadline day and federal income taxes in particular.  The first major problem is that nearly half of Americans don’t actually owe anything in federal income taxes each year, so it is not that big of a deal to them.  In fact, many Americans look forward to April (or earlier) when they can get their tax refund.  They often don’t consider the money that has already been taken out of their paycheck.

The second major problem with just focusing on federal income taxes is that it does not account for all of the other federal taxes we pay.  Your income tax returns take payroll taxes into account, but for most people with a W-2, the payroll taxes are not a factor on their tax return.  It becomes a major factor for people who are considered self-employed and owe both the employee and employer portion, which is 15.3% before getting hit with regular income taxes.

Of course, the federal income tax does not account for the many other taxes that we pay such as corporate taxes, excise taxes, fees, and tariffs.  Many of these taxes we do not pay for directly, but we end up paying for them indirectly through lower wages, higher prices, and fewer consumer choices.  We also do directly pay many taxes including on such things as gasoline, hotels, cell phones, and cable.  An inclusive list would be hundreds of items long.

The third major problem with just focusing on federal income taxes is that it ignores state and local taxes.  Many people do get hit with a state income tax, but property taxes and sales taxes take a huge chunk out of people’s wallets.  You are also faced with many of the same excise taxes as from the federal level.  While libertarians favor decentralization, state and local governments still take out a huge piece out of the average American family’s budget.

The fourth major problem with just focusing on federal income taxes is that it doesn’t account for the other costs of government: mainly, regulation, inflation, and debt.  The regulation aspect is impossible to calculate, but we can factor in inflation and debt by looking at government spending (instead of government tax collections).

Government spending is the real level of taxation, as its spending is consuming (and mostly misallocating) resources.  If the government borrows $100 billion to spend on a new government program, this money is being consumed for the sake of the new government program.  It otherwise would have been spent, or saved, or invested, by a private party.  It would have been subject to consumer demand in the marketplace.  If capital is invested in a project that produces losses, then it will eventually be reallocated to a better use.  This is not so with government spending.  Even with government transfers, it is a misallocation and a deterrent to productivity.

The tax filing deadline is a good opportunity to bring up the subject of taxation and government spending, but we should not just focus on federal income taxes.

I think libertarians often miss the opportunity to show people just how expensive government is.  You can focus all day long on an unfair tax (aren’t they all?), and you can focus on government boondoggles.  But this still does not give people a sense of just how much they are paying.

Sometimes we need to step back and look at the big picture.  Sometimes we just need to point out the math to people, especially those who are advocating for even more government spending and more taxation.

Terence Jeffrey is a fiscal conservative who is good at stepping back and looking at the big picture.  Here is one such article from 2014 in which he points out that total government spending at all levels exceeded the median family income.

According to this website, for FY 2018, total U.S. government spending is estimated to be $7.13 trillion.  That is $4.17 trillion of federal spending, $1.82 trillion in state spending, and $1.86 trillion in local spending.  You have to take out about $0.7 trillion in intergovernmental transfers for the numbers to add up because you can’t count it twice if one level of government hands money over to another level of government to be spent.

There are currently about 126 million American households.  The estimates can vary a little, but this seems to be close enough to accurate for our purpose here.

This means that, on average, each American household is paying over $56,000 for the cost of government (not including regulation).  That is every year.  You can do the math on your own.  Take 7.13 trillion divided by 126 million.  If your calculator doesn’t hold that many digits, you may have to take off some zeros from each set of numbers to make it work.

All I had to do to come up with that number is use a search engine for a couple of numbers, and then do some basic math.  Most people are capable of doing this, but they don’t.  Ask people how much they think the average American family pays for the cost of government.  See if they can get in the same ballpark as that number of $56,000 and change.

This is especially important when you are communicating with someone who is advocating another government spending program or increased spending on some program.  Ask the person this question.  After you tell them the answer, ask how much more the average American family should pay each and every year.  Should it be $70,000 per year towards government at all levels?

Also, get people to imagine what they would do with this money.  Imagine if government at all levels were cut in half.  Sure, there are some government programs in which you would lose out on and maybe have to make up the difference.  But if government were cut in half , then the average household would have an extra $28,000 each year at their own discretion.  That is more than some people make in a year, even with full-time work.

Even for a family already making $80,000 per year (before income taxes), an extra $28,000 per year is a huge sum of money.

What would you do with an extra $28,000 per year?  Even if it were “only” $20,000 per year, what would you do with it?

Would you take your family on a dream vacation that you thought was never possible to afford?  Would you put away extra money for retirement?  Would you set up that emergency fund that you could never quite get to?  Would you donate some of it to your favorite charity?  Would you have one parent stay at home with the kids instead of having to send them off to daycare?  Would you use the money to buy a nicer house?  Would you use the money to help a friend or relative in need?

Maybe you would use the extra money for a combination of many of these types of things.

Even if many seemingly critical government programs were cut, would we really be worse off?  If every American family had an extra $28,000 at their disposal each year, then they wouldn’t need government help.  In addition, you would see much greater charity than what already exists, as American families would all of a sudden have extra money at the margin.

These do not even have to be libertarian arguments, but they are arguments that libertarians should utilize.  If all levels of government were cut in half, government would still be way too big.  We would still be very far away from anything resembling minarchism.  Yet, a cut in half would be a dramatic improvement in our lives.  Our living standards would explode.  Remember, this is $28,000 per year.  You could take that dream family vacation one year, and then save the entire $28,000 the next year for retirement.

In conclusion, tax filing day is good for a discussion on taxes and government spending.  But libertarians, and even just fiscal conservatives, should push the discussion towards the total cost of government.  The total cost is almost unbelievable.  It is actually amazing that our living standards are as high as they are, in spite of government spending.