Income and property taxes are the tip of our tax iceberg.

I didn’t think much about this until I saw that for the past three years local, state and federal spending per household now exceeds the median household income. That spending is supported by ever increasing taxes in all kinds of forms — and, importantly, by more government borrowing, which bring even higher taxes for future generations.

I’ve also come to realize that corporate taxes are really similar to a value-added-tax (VAT). The VAT is the principal tax in many foreign countries.

Think about it. Everything that you buy is built from products that have innumerable and hidden taxes included in the price. At every level of production, the producer or service provider paid the accumulated taxes on the labor, goods, equipment, services and utilities required. You may have some appreciation of the latter when you see the taxes included in your monthly telephone and power bills. When you buy a product, you are paying for the taxes on the telephone and power bills of every firm that had something to do with getting that product to the store.

Look at the attached figure which illustrates some of the common levels of production needed for something we might buy. We see only the sales tax at the top of the pile. But that product went through the hands of many firms before it got to us. Each had its own tax. In fact, each is paying tax on the taxes included in the cost of everything below it.

Tax on tax on tax — ad infinitum

Sometimes there are more levels than in the figure, sometimes there are less. But it is hard to imagine what the lowest level is. Even the farmer or miner of raw materials has to pay for equipment, supplies, services and utilities, all of which are taxed — usually in many different ways.

To illustrate how taxes on taxes grow, suppose that eight steps were involved before the buyer finally pays taxes to have the product serviced. Suppose also that the value added at each step was twice its component costs. Further suppose that at each step only 3% of its price was for a tax. That 3% at each step ends up costing 6% more for the final buyer.

In the oversimplified illustration, if a corporation was involved at each step, and each paid 30% tax on 10% profit, the final tax cost would be 6% of the price that we, as consumers, pay. Corporations simply pass on such taxes to buyers. Those increased taxes we pay may make it tougher to compete with foreign companies which don't have such a tax. To the extent that high-level corporate officers' pay is based on volume, corporate taxes may actually add to their compensation. On the other hand, an officer showing reduced corporate taxes may also get higher compensation.

There are likely more than 100 kinds of taxes we pay, one way or another. Michael Snyder compiled a list of 97 different kinds of taxes. I was able to think of three more that apply to me.

So with all of this taxation, you’d think the government would be better funded — and yet, spending divided by the number of households is more than the median household gross income. We focus on a budget that covers how we spend our money — but clearly we need to pay more attention on how the government spends the money we give them. Political promises for more benefits may actually be far from an overall benefit as the cost of purchases, services and income taxes increase accordingly.

The American Revolution was over the British stamp tax of 1765 that required a tax on wills, deeds, newspapers, pamphlets and such. What a romp the patriots of those days would have today. They might focus on our having to print money to pay the interest on the national debt and "borrowing" from the Social Security Trust Fund. Or they might dig into the unfunded obligations of state and federal government for future pension and welfare promises.

Patrick Henry would really turn up the volume.