Photo: Flickr / Spidere
How much are you paying in taxes today? Probably more than you think.Regardless of tax bracket or hometown, most Americans shell out surprising amounts on taxes every day.
The average person regularly pays taxes on gas, prepared food, clothes and alcohol, most likely without giving it a second thought.
Some of these charges are itemized on receipts; others are not. Most Americans also pay taxes on transportation (public or private), communications, and the supply of electricity, natural gas and water.
And while such taxes may add only 27 cents here or 58 cents there, those taxes on a deli sandwich, daily commute and cell-phone bill can add more than 10 per cent a day to purchases—easily more than $500 a year in some cities.
Tax rates vary widely by state and city. In Washington D.C., drinkers pay 62 cents tax on a $7 glass of wine in a bar, while in L.A., these taxes will run you less than a penny. Drivers in Chicago pay 50 cents a gallon in gasoline tax; in Houston they pay just 20 cents a gallon. There is no national sales tax, but proposals for federal value-added (VAT) tax are floated regularly.
Five states don’t levy sales taxes at all: Alaska, Delaware, Montana, New Hampshire and Oregon. Other states recently have proposed new taxes to help deal with budget shortfalls, such as one introduced in January in California on Internet purchases from out-of-state retailers. Last year, Colorado instituted a 2.9 per cent sales tax on candy, soda, software, and such “nonessential” restaurant items as napkins and silverware.
If you’re buying something imported, depending on the country of origin and item, there may be federal tariffs of as much as 20 per cent or customs duties already baked into the price. In response to an EU ban on U.S. hormone-treated beef, for example, the United States in 1999 levied a 100 per cent tax on a variety of imported items including mineral water, truffles, ham, chocolate, cheeses and sausages.
To get an idea of just how much the average person spends on just some of these overlooked taxes, TFT did its own study of five major U.S. cities: Washington, Chicago, New York, Houston and Los Angeles. We couldn’t include everything, of course, but we put together lists of common taxes – general sales tax, excise tax, restaurant tax, utilities and other taxes specific to a metro area (D.C. levies a 5 cent tax on paper and plastic bags, for example)
To easily compare one city to another, we chose a hypothetical “basket” of goods: a ready-made sandwich ($7) and a soft drink ($2.50) for lunch, plus a glass of wine ($7.00) after work, for a total of $19.50. While New Yorkers and Chicagoans don’t drive as much as citizens of L.A. or Houston, we calculated in a drive of 29 miles, the U.S. average according to the Department of Transportation. We based our figures on a Honda Accord, which gets about 25 miles to the gallon, and used $3.89 as the price per gallon for gas, which was the national average on April 25, according to AAA. That means the total price for gas in our example is $4.51.
Here’s how our cities ranked.
Sandwich: 75 cents
Soda: 8 cents
Wine: 77 cents
Gas: 58 cents
Total Tax on Basket of Goods: $2.18
The City of Big Shoulders has one of the highest sales tax rates in the country: 9.75 per cent for all nonperishable goods. Food, medicines and medical appliances are subject to an additional 2 per cent tax. Prepared food and beverages purchased downtown (an area that’s very generously defined) get an additional 1 per cent tax. Throughout the city, there’s a 3 per cent tax on what the locals call “pop.”
If Chicagoans prefer drinking something stronger, there’s a labyrinthine tax system for alcohol. It’s $1.16 per gallon of beer and $2.98 per gallon of liquor with an alcohol content of 14 per cent or less. For booze between 14 and 20 per cent in alcohol, the tax is $5.98 per gallon. Beyond 20 per cent alcohol content, the tax rate is dependent upon the proof. That means the total taxes on a 750 milliliter bottle of 80-proof liquor breaks down to $2.14 in federal tax; $1.69 in state tax; $0.40 in county tax and $0.53 in Chicago city taxes, for a grand total of $4.76, according to the The Civic Federation.
Drivers pay extra taxes of $0.50 per gallon of gas and $0.58 per gallon of diesel, on top of the 9.75 per cent general merchandise tax. Prepared food tax includes both the general merchandise tax plus another 1.25 per cent restaurant tax, for a total of 11 per cent. Any musical, theatrical or other cultural event with a capacity of more than 750 people is subject to a 5 per cent tax; other recreational events, such as professional sports games, get a 9 per cent tax. Illinois residents must also declare purchases made online, as well as major purchases made from out-of-state sellers.
Electricity use in Chicago is taxed at 0.94 cents for the first 2,000 kWh to 0.50 cents for use in excess of 20,000,000 KWH. Natural gas taxes in the Windy City are not to exceed 13 per cent.
Sandwich: 70 cents
Bag: 5 cents
Wine: 70 cents
Gas: 27 cents
Total Tax: $1.72
D.C.’s sales tax laws are relatively simple: basic rate is 6 per cent. Restaurant meals, take-out food and alcoholic drinks purchased for on-site consumption are taxed at 10 per cent. Factor in 12 per cent for taxes when parking in a lot. Alcohol purchased for consumption elsewhere (for example, bought at a wine shop) is subject to 9 per cent tax.
Drivers in the District pay an additional 23.5 cents per gallon of gasoline and 20 cents per gallon of diesel, on top of the 6 per cent overall sales tax rate. Groceries and meds are tax-free — but the District charges a 5-cent fee on all paper and plastic bags issued at supermarkets, pharmacies, liquor and convenience stores, plus street vendors. Four-fifths of the proceeds from the bag tax are designated for cleaning the Anacostia River.
Residential accounts for gas, electric and phone companies include 10 per cent public utility tax.
Sandwich: 62 cents
Wine: 62 cents
Gas: 28 cents
Total tax: $1.52
New York State has a 4 per cent sales tax; within the five boroughs of New York City, the total sales tax is 8.875 per cent. The city keeps it simple and levies the same tax rate on what it defines as “most tangible personal property,” including furniture, alcohol and electronics. Prepared food also falls under this tax rate, as does food eaten at a restaurant. Of NYC’s sales tax, 0.375 per cent goes toward the Metropolitan Transit Authority, the operator of the city’s subway and buses. If you own a car, parking is pricey: on top of the general state sales tax of 4 per cent, the city tacks on an additional 6 per cent tax on fees charged by parking garages—with another 8 per cent surtax for lots in Manhattan. Residents of that borough may be eligible for an exemption, though; meaning parking tax for Manhattanites comes to a total of 10.375 rather than the full 18.375 per cent.
Not all the news is bad: April 1 through March 31, 2012, all clothing and footwear items that cost less than $55 are exempt from all sales tax. Shoes and clothes costing less than $110 are exempt from NYC sales tax, for a tax rate of 4 per cent.
In New York City, gas and electric delivery is taxed at 4.5 per cent; plus there are other taxes inherent in the delivery charge itself. Telecoms have other fees in addition to utility charges.
Sandwich: 58 cents
Wine: 58 cents
Gas: 23 cents
Total tax: $1.39
Maybe everything really is bigger in Texas. In Houston, at least, sales taxes are comparable to those in New York and Chicago: The general sales and use tax there is 8.25 per cent, including prepared food. Meds and food are exempt. At the pump, you’ll pay an extra 20 cents per gallon in gas or diesel. State beer and wine tax is $0.20 per gallon. A mixed drink purchased in a restaurant is taxed at 14 per cent, however—there’s a bill in Texas that would mandate publishing this tax rate on restaurant receipts. In general, hard liquor is taxed at $2.04 per gallon.
In Houston, gas, electric and telecoms providers may collect taxes, also at the 8.25 per cent tax rate.
Sandwich: 68 cents
Wine: 1 cent
Gas: 41 cents
Total tax: $ 1.10
California’s general sales and use tax is 8.25 per cent; but with county and municipal taxes (known officially as “district taxes”), this often reaches the 10 range. In Los Angeles County, sales and use tax is 9.75 per cent.
Food is taxed according to the “80/80” rule: if 80 per cent of a business’ gross income comes from food receipts (not including alcohol and carbonated beverages) then 80 per cent of the food is taxable. Hot drinks and bakery items are exempt, unless they were sold as part of a package with taxable items.
Beer and wine are subject to 20 cents per gallon tax in California. Hard liquor costs an extra $3.30 in taxes per gallon. Keep in mind though, when ordering a drink at a bar in Los Angeles, generally the price is inclusive of tax. And cruising around in your convertible will cost you 35.3 cents per gallon in gasoline tax — the second-highest gas tax rate in the nation.
Angelenos pay utility user taxes on communications, gas and electric. Rates vary. Some residents may be subject to a Telephone Users Tax of 9 per cent.