The Government Owns You
Corporations don’t pay taxes; you do.
By Dan Gelernter
April 7, 2022
Let’s imagine you’re buying a new car (and we’ll have to imagine, because no one can afford one right now). In most states you pay sales tax—some states charge a luxury tax as well. On average, only 94 percent of the dollars you spend will actually go toward the car, with the remainder paid to the government. Mind you, you won’t be able to drive the car anywhere until you pay the government a further fee to register it.
And of course, the dealer has marked up the car over his wholesale cost so he can make money. Don’t be fooled when you see that a typical markup is between 2 percent and 5 percent—that’s the markup over the suggested retail price, not the dealer cost. The actual markup may be 25-45 percent over the manufacturer’s price.
The markup is so substantial because the dealer’s operating costs eat up most of his profit: Among other things, he has to pay a 21 percent corporate income tax on everything he earns. He also had to pay sales tax when he bought the car from the manufacturer. If he leases the dealership building, the price of his lease includes the property tax paid by the building’s owner. The cost of his employees includes the benefits he is required to give them, and it also includes the income tax his employees will pay—since their real salaries are only what’s left after they pay their taxes. All these costs are passed onto the consumer. Some of the costs represent real added value—the dealer helped you find the car, let you test-drive it, and warranties its quality. But about half of the markup—let’s say 15 percent of a 30 percent markup—is going to pay one or another form of taxes.
So we’re down to just over 80 percent of the dollars you spent going toward the actual car or value you received, with the rest going to the government.
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