The Hidden Costs To You of Taxes, Government Loans, and Subsidies

Government needs taxes to pay for the military that protects us plus provide beneficial services (e.g. roads, social security, etc.) and unfortunately in some cases, wasteful services (e.g. outrageous pensions for government workers, lifetime welfare for people not handicapped, etc.). Whether or not a new tax directly imposes an additional tax burden for you to pay, it is like a hidden tax increase on everyone. A new tax on only the wealthy – you will pay a hidden tax for it too. A new tax only on corporations - you will pay a hidden tax on it too. Not paying any taxes before or after the new tax - you will pay a hidden tax on it too. How?

Whether some or all people or businesses actually pay the new tax, the impact is the same. They will have less money left to spend for other purposes and also less money to save. Less money to purchase goods or services. That depresses demand for goods and services which in turn means that less people are needed to provide those goods and services. The hidden cost of that to you is:

1. People will either be laid off and/or receive smaller or no raises
OR
2. New people that would otherwise have been hired will not be hired
OR
3. Prices will be raised to cover lost income which, if they stick, means that people will have less disposable income to buy other goods and services further accelerating and repeating this downward cycle.

Therefore, in reality, you've paid for the new tax too.

Suppose the extra tax only decreases savings and doesn't impact spending. Though an unlikely result of new taxes, it still is like a hidden tax on you. Less savings means less capital available to borrow start businesses, buy homes, or otherwise use credit to purchase goods or services. Less capital to borrow also has the impact of raising interest rates which makes loans more expensive to pay back and therefore reduces the amount of money left over to spend and/or invest. Therefore, the same three adverse results previously listed occur again.

What about the impact of government loans? More money loaned to government means less money available to loan to people and businesses. In addition to higher interest rates and therefore payback costs for loans, less loans will be granted to people and businesses. Less jobs created and pay raises occur. Also, the impact of higher payback loan costs reduces the amount of money people have to spend and invest. Therefore, the same three original, adverse results listed occur.

What about government subsidies? To pay for government subsidies, government has to tax you more and/or borrow more. We already listed the adverse impacts of that. All a government subsidy does is literally take the money out of your wallet to pay for something for you that you previously were unwilling to voluntarily pay for at its original price. The net effect is that you paid the original price anyway.