Your Other Largest Household Expense

A few days a go I did a couple of posts on lowering household expenses and how you can attack some of the largest expense to save yourself some money. In case you missed it, here are the largest expense categories of the typical American family from 2005, courtesy of US Department of Labor statistics.

1 - Shelter and associated expenses $15,167 (32.7%)

2 – Transportation $ 8,344 (18.0%)

3 – Food $ 5,931 (12.8%)

4 – Pensions and Social Security $ 4,823 (10.4%)

5 – Health care $ 2,664 ( 5.7%)

6 – Entertainment $ 2,388 ( 5.1%)

7 – Clothing $ 1,886 ( 4.1%)

Something's missing. What is it? Give up. Well for many people it is the largest expense category, for most of the rest, its in the top 3, yet for many people it gets completely overlooked much of the time. What is this major expense? Well, of course, it is taxes. You may just look at you paycheck to see what is taken out every month, but you'd be woefully underestimating how much the “Average American” pays in taxes every year.
Many taxes are hidden. Think about how much is really paid. There is employer matching of Social Security. You think the employer just takes that straight out of their bottom line? Guess again; they pass it on to their customers (you and me). There are gas, fuel and utility taxes, at the local, state and federal levels. Property taxes, which are borne by both renter and property owners. Sales taxes, B&O taxes on businesses, state income taxes, and capital gains taxes; it boggles the mind! There are just so many taxes. All the taxes paid by business are passed on to the consumer in some way or another, so don't be fooled into thinking that this tax or that doesn't, in some way, affect you. They affect all of us to some extent.
The upshot of all this is that there a about a million different tax reform organization, foundations and groups out there. Together they give some kind of picture about how much is paid by the “Average American” in taxes every year. The Tax Foundation has their Tax Freedom Day, the day when you stop working for the government and begin to line your own pocket. In 2007, it was April 30th. That works out to 32.8%. Hey, that's expense number1! Even if you give our taxing authorities the benefit of the doubt and this number is 20% too high, it would still come in at 26%, and fall neatly into slot number 2.
That's why I tend to rail a bit about taxes. The other expenses you can do something about. You can control taxes too, albeit to a lesser extent. but it requires much more effort and planning, in addition to a trip to your local polling place (or post office for a growing number of communities, where absentee is the new voting method of choice). I wouldn't care so much. After all the government provides many essential services that we desperately need, and should pay for. The problem is that they also provide many that we don't and shouldn't, in addition to being the model of inefficiency in many of the things they do.
Have a great, Debt Free weekend.