Like most Americans, I think more about my taxes at this time of year than I do at any other. At some level I think all of us would like our taxes to be lower. That doesn't necessarily mean they should be. But it does leave a question: Objectively speaking, are my taxes too high?
As near as I can tell, my true effective tax rate last year, after accounting for sales taxes, imputed property taxes and every other tax that I pay was about 46%. In other words, slightly less than half of every dollar I earn is going to pay some form of tax. In the aggregate, taxes are by far my family's largest expense.
So, about my taxes....are they too high or not?
The honest answer to my question is that I don't know.
There are a couple of ways of thinking about this which could shed some light on the issue. One is to look at the tax rates and see if they are so high as to cause me to make otherwise irrational decisions to avoid the taxes. If so, they are too high; otherwise they are not. By that standard, I tend to think that my taxes are not too high as I don't plan major life and career decisions based on how they affect my tax rates.
Another way of looking at this is to say that my taxes are too high if they are not as low as they could be consistent with maintaining an acceptable level of government. However, that just substitutes one unanswerable question for another. Obviously, my taxes could be lower and government could do less. Or my taxes could be higher and government could do more. But it is difficult to determine whether government should do more or less. This also leaves open the simpler question of whether my taxes are too high given what government is currently doing.
That naturally leads to another approach: I could try to compare the value of what I get from government with the amount of tax that I pay. However, while it is clear that I get many valuable direct and indirect benefits from government, valuing them accurately is not possible.
At the end of this, all I can really say is that I am not strongly motivated by the need to cut my federal or city taxes. State taxes, which had gotten too high, have already been cut by our new Democratic governor and don't need to be cut again. Federal taxes, on the other hand, probably need to increase somewhat.
Ultimately, I am satisfied enough that my tax rate is not too high to put this question aside until next year.