Tax Burden

by Don Boudreaux on August 14, 2007

in Myths and Fallacies, Standard of Living, Taxes

My George Mason University colleague, law professor Todd Zywicki, has a wonderful op-ed appearing in today’s edition of the Wall Street Journal.  (Unfortunately, a paid subscription to the WSJ is required to access this article.)  In this essay, Todd reports that the data show that the category of expenditure that has risen most, in both percentage terms and in absolute dollar terms, for the average American household over the past 30 years is taxes.

Here are the concluding paragraphs from Todd’s not-to-be-missed op-ed:

Although income only rose 75%, and expenditures for
the mortgage, car and health insurance rose by even less than that, the
tax bill increased by $13,086 — a whopping 140% increase. The
percentage of family income dedicated to health insurance, mortgage and
automobiles actually declined between the two periods.

During this period, the figures used by Ms. Warren and
Ms. Tyagi [in their book The Two Income Trap: Why Middle Class Mothers and Fathers are Going Broke] indicate that annual mortgage obligations increased by
$3,690, automobile obligations by $2,860 and health insurance payments
by $620 (a total increase of $7,170). Those increases are not trivial
— but they are swamped by the increase in tax obligations. To put this
in perspective, the increase in tax obligations is over three times as
large as the increase in the mortgage payments and almost double the
increase in the mortgage and automobile payments combined. Even the new
expenditure on child care is about a quarter less than the increase in

Overall, the typical family in the 2000s pays
substantially more in taxes than the combined expenses of their
mortgage, automobile and health insurance. And the change in the tax
obligation between the two periods is substantially greater than the
change in mortgage, automobile expenses and health-insurance costs

This suggests that the most important change in the
balance sheets of middle-class households over the past three decades
is a dramatically higher tax burden caused by the progressive nature of
the American tax system. In turn it follows that the most effective way
of alleviating the household budget crunch would be to adopt lower and
flatter tax rates that would reduce the government’s take. Another
possibility, advocated by Prof. Edward J. McCaffery of the University
of Southern California Law School, would eliminate the "secondary
earner bias" in the tax system, which causes all of the wife’s income
to effectively be taxed at a much higher marginal tax rate than the
husband’s. Any of these reforms seem sensible.

Lower and flatter marginal tax rates generally are not
advocated by those who dominate the American legal academy today. But
for those who want to consider serious strategies for preventing
bankruptcies, less money in Uncle Sam’s pockets may mean more money in


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