Every year, the Tax Foundation compares the total amount of taxes paid in America and the amount of spending on the necessities of food, clothing, and shelter. In most recent years, the Tax Foundation has concluded that Americans spend more on taxes than on necessities — and 2015 is no different.
The Tax Foundation projections show a total of $4.85 trillion in taxes paid in 2015, divided between $3.28 trillion in federal taxes and $1.57 trillion collected at the state and local level. According to the Tax Foundation, total taxes are approximately 31% of the national income. Using data available from the Bureau of Economic Analysis (BEA), the Tax Foundation calculated approximately $4.3 trillion in spending for the basics with food at around $1.8 trillion, clothing at $0.3 trillion, and housing at $2.2 trillion.
Here's the real question: Is this spending comparison indicative of a problem or of a correct and equitable tax structure? Should any of us be outraged? Probably not, although there are reasons for concern.
Certainly, the trend is not promising. The gap between taxes and spending on the essentials in 2012 was approximately $150 billion, rising to almost $300 billion in 2014 and around $550 billion in 2015. It's hard to spin that as a positive development.
The Tax Foundation's report also says nothing about equity of taxes and spending. Certainly, the Tax Foundation can leave the impression that taxes are too high for all Americans by using aggregate values. More progressive sites such as the Center on Budget and Priority Policies (CBPP) call these values misleading, pointing out that with our progressive tax system, poorer Americans clearly pay a greater share of their income for the essentials and less in taxes.
Meanwhile, the wealthy pay more in taxes and while they may make more discretionary purchases in food, clothing and shelter, it isn't enough to make up the difference. Therefore the "average" (middle-class) American probably does not pay more in taxes than for the basics, and the lower income levels certainly do not.
This conclusion implies a higher amount of wealth transfer to help lower-income Americans with spending on their basics. Indeed, a graph created by the Tax Foundation shows a steady rise in transfer payments as a percentage of the cost of living, from 0.5% to nearly 35% in 2011. The Tax Foundation acknowledges some double-counting inflating the value, but the trend is still valid.
This illuminating graph and other explanations may be found in a 2012 article on the Tax Foundation website at http://taxfoundation.org/article/americans-paying-more-taxes-food-clothing-and-shelter. For example, the amount spent on taxes was roughly equal to that spent on food, clothing and shelter from 1929 until the 1990's, when the divergence began. Since then, taxes have increased disproportionately in a sawtooth pattern, with dips corresponding to economic crashes (2001 and 2007-2009).
If you have a budget — and you should have if you don’t — you can certainly figure out whether or not you paid more in taxes than you did in 2014, and can probably make a good estimate for 2015. What you do with that information is up to you.
You may well conclude that you pay too much in taxes, but use the exercise as an opportunity to analyze your spending on the basics. Are you getting the best value out of your dollar for your food, clothing, and housing payments? We'll just ignore the subject of whether you're getting your money's worth out of your taxes. Save your outrage for that topic.