People Spend Less When Taxes Are Hidden

It turns out that one of the principles of sound tax policy is transparency. Right now it’s hard, for a lot of reasons, for Americans to know exactly how much they pay in taxes. The federal income tax, for instance, is such a maze of deductions, rebates and refunds that most Americans would be hard pressed to put a dollar figure onto how much they actually paid in once their taxes are filed.
They can tell you how much of a return they got, of course, but not what they ended up paying. Which is exactly how the politicians like it. If you get a big refund, you tend to forget about the bigger chunk the government kept.
This is also the problem with embedded taxes as well. People don’t typically realize how much of their fuel purchases goes for taxes, or how much of the price of a product in a retail store is made up of the taxes on the production of that item. Because of that, most Americans are in the dark as to how much all this government is costing them.
This is exactly why our tax code needs to be simplified, and also why it became to complex in the first place. Politicians like that most Americans don’t have any idea how much they pay through all the various forms of taxation, but Americans should know. Not just because it might put all those campaign promises for more government services in a different light, but also because it would reduce the cost of complying with all the different tax codes.
Something that in and of itself is a major expense in terms of both time and money.