Libertarian journalist Kristin Tate provides a look into the wild world of frivolous taxation, aimed at educating members of her own generation in the evils of big government.
In How Do I Tax Thee?, libertarian commentator and rising media star Kristin Tate takes us on a tour of the ways the government bleeds us dry in innumerable daily transactions and at various stages of life.
We all know the government taxes our pay: federal, state, and local taxes are withheld by employers, as are social security payments. But what about the many other ways the government drains money from our wallets? Have you studied your cell phone bill? Customers in New York State pay an average of 24.36% in federal, state and local taxes on their wireless bills. They’re also charged for obscure services they didn’t ask for and don’t understand like a universal service fund fee, an FCC compliance fee, a line service fee, and an emergency services fee. These aren’t taxes, strictly speaking. The government imposes these administrative and regulatory costs, and your wireless provider passes them along to you. But the effect is exactly the same.
What about your cable bill? Your power bill? Your water bill? The cost of a gallon of gas, a cab ride, a hotel stay and a movie ticket are all inflated by hidden fees. How much of what you pay at the pump, the box office, or the airport is really an indirect tax?
In a series of short, pointed, fact-laden, humorous chapters, Tate exposes the vast government shakedown that consumes up to half of your income—and also explains where these hidden fees and taxes come from.
|Publisher:||St. Martin's Publishing Group|
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THE FLEECING STARTS ON YOUR WAY TO WORK
Collecting more taxes than is absolutely necessary is legalized robbery.
— Calvin Coolidge
Do you like horror stories? I want to tell you my Tax Monster origin story. It was years ago and I was on my way to my first job — an entry-level position fetching coffee and writing scripts for mean producers at a cable news network in New York. My wide smiling face spelled the words "naive country girl; fresh out of college." I itched to make it in the Big Apple. I didn't know how to spot the Tax Monster yet. Hell, I barely knew how to feed myself, other than downing my usual Lucky Charms each morning. All I knew was that I was finally a "Working Girl" in New York (the Melanie Griffith kind, don't get smart) and ready to take on the world ... That is, until a ghoulish creep began lurking behind every corner I turned, with his hand out.
No, this was not one of New York City's ubiquitous panhandlers; this was a faceless monster who kept reaching into my pocket to take $1 here, $2 there, and 50 cents everywhere else. I didn't realize it, but I had just been introduced to the elusive Tax Monster. Whether you know it or not, you have encountered this ever-present pain in the ass on your way to work, too.
But I wasn't going to let one fire-breathing brute ruin my first day of work — I knew I was one of the fortunate millennials who had actually landed a full-time job out of college. My salary seemed to be enough that I probably wouldn't have to spend the next year begging for kombucha in Washington Square with all the NYU grads who majored in French.
MEET YOUR TRANSPORTATION TAX DOLLARS — NOT HARD AT WORK
The second I stepped into the subway station, my olfactory senses were bombarded by the lovely fragrances of stale urine, old lady perfume, and patchouli stank hanging low in the humid summer air. Ah, the New York City Subway — catch the feeling!
As I leapt over a rat dining on a slice of pizza, I thought, No one can ruin this day for me! Shortly after tempting the Devil, there he was again.
I clutched my wallet as I moved toward a turnstile. But the Tax Monster was in pursuit. Especially here on New York City's MTA (Metro Transit Authority), which loses more than $6 billion per year. How is this thing still in business? Great question.
Just as I was about to swipe my MetroCard, I noticed the MTA had raised the price for a ride (yet again, apparently) and my card was out of funds — Dammit! So much for arriving on time to my first day at work. I walked over to put more money on my MTA card while my train left the station without me. I checked my wallet and all I had was five bucks — now only good for one measly ride on the subway where a one-way trip costs $3.
Couldn't I have picked a better way to get to work?
Not really! The Tax Monster lurks behind every form of transportation these days. Elected officials around the country routinely pass public transportation fare hikes because they drive huge amounts of revenue to city coffers — meanwhile, these same politicians don't have to tell their constituents that they voted for a "tax" increase. This is just a "fare" increase ... Even though a fare increase is a tax increase, particularly for those who are dependent on the subway to get to work.
Most transportation-related taxes, fees, and fares, in New York as elsewhere, never fix our nation's crumbling infrastructure. Instead, the money usually goes toward paying bloated employee salaries in the transportation system or toward municipality "general funds" where the money can be spent on almost anything — transportation related or not. General funds consist of any revenues collected by the state or city that are not dedicated by law to a specific purpose, creating massive slush funds for bureaucrats to spend however they please.
As I hopped the next subway, the thought of a $3 ride struck me as a ripoff. But most major metropolitan cities today charge similar ticket rates: a one-way subway ride costs $2.75 in Boston, $2.25 in Chicago, and up to $6 in Washington, D.C., probably the most dangerous subway system in America. Many city dwellers like me just pay these expensive fares without thinking about it, but if you happen to travel by bus, train, or subway into work every day — aren't you curious why the cost of your ticket keeps going up? It's not because these transportation authorities are reinvesting in great technologies for the future (wouldn't that be a novel concept!). It's in significant part because taxpayers and riders have to subsidize the mistakes and inefficiencies of city departments and managers who have little accountability, as well as wildly above-market salaries, benefits, and pensions for transportation workers.
Take MTA salaries for starters. Average MTA workers (the vast majority of whom are bus and train operators, station agents, and cleaners) make a base salary of $90,000 before overtime. Cushy MTA employee salaries, benefits, and retirement packages cost New York City $10 billion annually — $2 billion more than the city rakes in from MetroCard sales each year.
Some MTA workers earn better salaries than CEOs of private companies. More than 8,000 of them earn over $100,000 per year; more than 50 earn over $200,000! And for what? Those trains are highly automated today. They nearly drive themselves. Most of us can wrap our heads around C-level executives making a six-figure salary, but I'm having a hard time wrapping my noggin around the fact that many MTA repairmen rake in well over $200,000 per year.
How on earth does this happen? The base pay for these repairmen is about $70,000 per year, but the majority end up earning nearly $150,000 more than that due to vast amounts of overtime pay. MTA workers alone racked up $1 billion in overtime pay in 2015!
Don't get me wrong. There's no problem with honest overtime work and compensation. The problem is that overtime at the MTA is not what it seems — it has morphed into a scam, and one that is also seen at transportation authorities in many other cities.
Here's how it works. Thanks to union rules, overtime pay at time-and-a-half (at least) is paid to MTA employees who work more than eight hours per shift. On some holidays like the Fourth of July, MTA employees take home overtime at five times the normal rate. Workers are well aware of these rules and they collaboratively take advantage of them to schedule their workweeks so they accumulate as many overtime hours as possible. (Why wouldn't they?!) So a subway operator who would normally operate five days per week for eight hours per day instead may operate three days per week for 13 to 14 hours per day. Routine abuse of this system leads to a significant salary bump over the course of a year.
High rates of unplanned absences make it even easier for drivers and conductors to cash out on overtime; MTA employees enjoy 21 annual vacation days (including their birthdays), 15 sick days, and a handful of "mental health" days. Meanwhile many workers take advantage of the Family Medical Leave Act, which allows drivers to take up to 60 more unplanned sick days a year.
One Long Island MTA repairman named Dominick Masiello pocketed over $250,000 in one year. Another genius named Dennis Reardon, a train conductor for the MTA, also cashed out big-time due to massive overtime accrued; Reardon tripled his salary, turning a base of $75,389 into a whopping $240,251! Yet another conductor named Benjamin Jankowski tripled his salary with $155,000 in perks and overtime.
If you live in a big city and think this is somebody else's problem, think again. Most of that money is coming from your ever-increasing subway and bus ticket costs. And since the MTA spends more than it collects from fares, the city literally inserts "MTA surcharges" into New York residents' utility bills and cab fares. To underline this point: You are not only paying for the MTA's inefficiencies when you pay for fare hikes and your city and state income taxes; you're paying for the MTA's inefficiencies when you pay your electricity bill. We'll discuss this in more detail later.
The mere idea of such overtime schemes happening for a long time in any private sector company is ludicrous. You may think Masiello, Reardon, and Jankowski are anomalies — but stories like theirs are common in big city transportation departments. The problem, after all, is ultimately not with Masiello, Reardon, and Jankowski themselves, who were making money for their families within the boundaries of the rules. God bless them for that at least. The problem is management and city oversight that is so inefficient, and so apparently ambivalent about tax-paying citizens, it regularly allows employees to make three times their base salary and deflects the cost of their mismanagement to you.
This overtime racket is not unique to New York. In San Francisco the average base pay for a MUNI bus and cable car operator is roughly $60,000 ... But that's before a guaranteed bevy of overtime pay. Nearly 100 MUNI operators bring home more than $100,000 a year! In 2016, a bus driver earned $78,722 in overtime and brought home a total of $146,498 in pay. This is insane, but obviously the people in San Fran hardly pay attention to this issue, so the scheme continues.
Who knew driving buses, cable cars, and trains would be so lucrative? Put down the Rice-A-Roni; driving a MUNI bus is the ultimate San Francisco treat!
THE MTA'S BAILOUT PLAN STARS YOU!
Back to NYC's MTA nightmare. Rather than fixing their obvious budget, staffing, management, operation, pension, and overtime problems, NYC's elected officials recently chose to ignore these underlying issues. In 2015, the MTA faced yet another operating deficit just as ride-sharing services like Uber and Lyft were picking up steam in New York. Rather than working to reduce administrative bloat in the MTA, elected officials and state and city bureaucrats chose to address the deficit by ... drumroll please ... raising subway and bus fares, and slapping a 50-cent surcharge on all yellow cab rides.
They called it the "MTA bailout plan," and not only did it raise ticket prices, it also imposed a new 34-cent tax on every business for every $100 that businesses pay out to their employees. The tax applies to businesses in New York City as well as in surrounding counties. Yep, local politicians are trying to save the MTA by hammering businesses with payroll taxes, treating private businesses like "collection agencies for the state." If you believe you're not being affected by policies like this, think again. Companies pass the expense of such payroll taxes on to consumers. Take Con Edison, for example, which provides electricity to the vast majority of New Yorkers. Con Edison recoups the cost of the MTA tax by adding a 22-cent surcharge to its customers' electricity bills.
But it's more than just payroll taxes; the MTA gets money from several other hidden taxes on utility and phone companies. They include three levies — an MTA surcharge, sales tax, and excise tax — that add an average of 68 cents to New Yorkers' cell phone bills. Total taxes increase monthly NYC phone bills by as much as 37%. Meanwhile, electric bills in the city are about 30% more expensive due to similar "surcharges and fees."
Hey, New Yorkers, what did you get from this backroom deal? Your buses and subways still break down, and your trains are still crowded at rush hour. Nothing has changed, except that YOU get to pay more for your ride! And if you don't like it, too bad. New York politicians truly could not care less, so you'd better get a bicycle or a good pair of pumps.
The Tax Monster doesn't just live in New York. Ask Boston residents about their subway system, the clown show that is the Massachusetts Bay Transit Authority (MBTA). Furious protestors lined up in droves last year to complain when MBTA fares rose (yet again) by 9.3%. Of course, the MBTA transit agency board unanimously approved the price increase despite all the angry riders who swarmed their meeting and briefly drowned out the vote. Bean Towners have good reason to shout — the MBTA ticket prices keep going up and up with no end in sight. In 2014, the MBTA increased train and bus fares between 5 and 7%. Before that, a 2012 hike raised prices by an average of 23% system-wide.
Just like New York, the city of Boston uses the collected revenue from price hikes to subsidize eye-popping employee salaries. One MBTA worker, Mark Flaherty, earned over $327,000 in 2015.18 Despite having a base salary of $84,800 (which is still pretty damn high for a public employee), Flaherty collected well over that amount due to overtime pay. Think about what you could do with $327K! Would you buy a lake house? Or a Lamborghini? All you have to do is become a Boston bus driver! That same year, 59 other MBTA employees collected at least $100,000 above their base salary because of overtime.
Why is overtime pay so high? Again, my problem is not with Mr. Flaherty, who is probably a hard-working guy who just knows how to use the rules to his advantage. Lax management, little oversight to control costly operating procedures ... and sometimes straight-up illegitimate conduct. A recent audit revealed that in 2015 the MBTA paid $32 million in overtime pay to employees who worked fewer than 40 hours a week. Union rules let workers collect overtime when they work over eight hours a day, so working three 10-hour days and collecting overtime allows employees to collect more than they would by working five 8-hour days.
Wouldn't you love to make a six-figure salary while working fewer than 40 hours a week? Audits have also revealed numerous cases of individuals approving their own overtime pay. Yet nothing is done about these issues, thanks to strong unions and management that hasn't been doing its job. And thanks to the fact that city government can raise fares to pay for its failings while facing barely a peep from the population that pays for these increases.
SUBWAY JANITORS: THE NEW DREAM JOB?
Want to make over $200,000 a year? No problem. Go work for the San Fran subway system as a janitor. I can't make this stuff up, folks. Liang Zhao Zhang may be America's luckiest janitor. He cleans the subway stations in downtown San Francisco. Zhang grossed $235,000 in 2015, four times more than his base pay; he did this by racking up lots of overtime hours. Each hour of overtime pays much more than a regular hour of work, so it's a great way to exploit the system. When you add up the ridiculously awesome benefits, Zhang cost San Francisco taxpayers more than $270,000 a year!
Hey, let's be fair. Maybe the dude just worked his ass off?
Uh, this isn't the first time Zhang made six figures. He has received $682,000 in pay and benefits over the past three years. How does this happen?! Once again, don't blame Zhang. It's due to gross incompetence at the management level.
In the private sector, ineffective department managers would be canned. But this is the government, where accountability is all too often in short supply. As these agencies continue to bleed money, they just raise the price of your bus, train, or subway tickets. Most people have become so desensitized to this hidden tax cluster-pluck, they just shrug their shoulders and accept the higher price. Hey, it's inflation, right? Prices for other stuff goes up, too.
Try using this logic on your boss and see if you get that next raise you've been angling for. Spoiler alert: It won't go well.
Don't accept the tired old excuse that it's inflation's fault. It's not. It's the fault of corruption and an inefficient use of taxpayer money. It's the fault of the local government agencies that operate these huge public transportation departments, which are apparently deemed "too big to fail" and get a taxpayer bailout every year to survive.
If NYC's MTA were a private company, it would have filed bankruptcy, cleaned house, and reorganized its operation years ago. Instead, as the MTA continues to lose billions of dollars annually, New York City and the state of New York keep propping the MTA up year after year by increasing taxpayer subsidies (in other words making us pay for their losses) — resulting in one of the worst run, most expensive, least productive transit systems in the world.
Will Elon Musk please finish the hyperloop already so we can be done with government-run public transportation forever?
THE TAXOLOGY OF TAXI RIDES
Maybe now you'll decide not to take the crowded subway or bus. Hopping in a taxi seems like a natural solution ... but you've probably noticed how damn expensive cab rides are these days. Would it shock you to learn that the Tax Monster is boosting taxi fares in more ways than one?
New York City has been home to a large-scale taxi service since 1898, and it didn't take long for city bureaucrats to start regulating the industry. In the 1920s city workers considered creating an MTA-style, publicly run taxi system as a solution to unlicensed drivers and rickety cabs causing problems. The mayor at the time, Jimmy Walker, looked into the "solution," with both ears and hands fully open.
Excerpted from "How Do I Tax Thee?"
Copyright © 2018 Kristin Tate.
Excerpted by permission of St. Martin's Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Introduction: The Taxman Owns You
PART I: THE BASICS
7. Cell Phones
9. Sharing Economy
PART II: ADVANCED ADULTING
13. Vacation Taxes
PART III: WHAT YOU CAN DO
17. Not a Single Penny
18. Pursuing Alternatives