A consumer's guide to taxes: how much do we really pay?

• Author: Nastas, George

For most Americans, tallying all the various taxes to which we are subject is a hopeless--and depressing--task

MOST AMERICANS complain that taxes are taking a larger bite out of their incomes than ever before. During the month of April, tax-filing time, they complain most bitterly. Yet, do workers know how much they really pay in combined Federal, state, and local taxes each year?

In 1960, middle-income Americans paid less than 30% of their earnings in local, state, and Federal taxes; today, that figure is up to 40%. Moreover, many middle- and upper-income families living in the states that have the highest rates, such as New York and California, pay nearly half their incomes in taxes. High taxes reflect the growth of government, at all levels, in the U.S. since World War II.

The following is a new and easily understood method of measuring the impact of taxes on the finances of American workers. Calculating how much extra middle-income workers must earn to purchase various goods and services--a new car, computer, annual college tuition for their children, or a year's supply of gasoline--after taxes are taken into account is a good measure of their impact. The main reason people work is to earn money to buy the things they want, but much of American workers' income is consumed by taxes. The question is, how much? Let us take as a standard example the purchase of a new car with a sticker price of $10,000. Because of taxes, the average worker will pay significantly more than $10,000 to purchase that automobile.

In an average-tax state, a middle-income worker with earnings of $34,000 must pay $17,038 to purchase a $10,000 car--$10,000 to buy it and $7,038 for sales tax and the income and payroll taxes on the earnings used to pay for the vehicle. He or she must work three and one-half months to buy the car, then two and one-half additional months to pay the taxes on the income used to purchase it. For self-employed middle-income workers, the true cost of that auto is $18,320, because they are subject to a 14.1% self-employment tax, to cover the employee and employer shares of Social Security and Medicare (FICA), on their incomes.

In a high-tax state, such as California, the pre-tax cost of the automobile is $18,776 for a wage earner and $20,186 for a self-employed worker. In a low-tax state, such as New Hampshire, it runs $15,540 and $16.-708, respectively. In the five states with the highest taxes, wage earners have to lay out roughly $2,000...