The Hidden Tax That’s More Than $1 Trillion

Last year, Americans paid $989 billion in income taxes. Add to that sales taxes, property taxes, excise taxes, and other taxes, and the total tax burden comes to nearly 27 percent of national income. The Tax Foundation calculated that you work from the beginning of the year until April 9 just to pay off your taxes. Tax Freedom Day is moving alarmingly close to Tax Day. Yet taxes aren’t the whole picture when it comes to measuring the size of government.

The federal government spends far more than it taxes. Last year alone, the deficit was $1.4 trillion. This year’s deficit is expected to grow to around $1.8 trillion. Add in the burden of federal deficit spending, and we’re working until May 17 to pay for the growth of government (and that’s not even counting state and local deficit spending).

Yet even that’s not all. The hidden tax of federal regulation cost businesses and consumers an additional $1.187 trillion last year—none of which shows up in the federal budget. Regulation eats up an additional 8.3 percent of GDP. We have to work an additional 34 days to pay for the federal regulatory burden.

It’s tempting to brush off regulatory costs, since most of them are borne by businesses. But remember, businesses pass on their costs to consumers. We all pay for the cost of the regulatory state.

Added together, total taxes, federal deficit spending, and federal regulations push Cost of Government Day out to at least June 20. We don’t need to argue that government has grown too big—the data tells us as much beyond any doubt.

What to do about the hidden tax of regulation? Three things come to mind. One is disclosure. Our organization, the Competitive Enterprise Institute, issues the annual Ten Thousand Commandments report (online at, which tallies up federal regulatory costs every year.
Each year's federal budget, or the annual "Economic Report of the President," should include in-depth chapters exploring the regulatory state, along the lines of Ten Thousand Commandments. The more the public and policymakers know about regulatory costs, the more likely they are to do something about them. But disclosure alone is not enough.

Obsolete rules need to be removed from the books. Congress should task the Office of Management and Budget with identifying rules to eliminate each year. Congress should also implement its own bipartisan packages of cuts to be voted on, up or down, without amendment.

Sunset provisions are a relatively simple way to do away with obsolete regulations. Like a carton of milk, every new regulation should have an expiration date, beyond which it gets discarded unless renewed by Congress. With today’s rapid technological change, five years is a reasonable term for sunsetting.

Most important of all, Congress needs to reassume its lawmaking responsibilities. It passed 125 bills last year—but federal agencies passed 3,503 final rules. This "regulation without representation" should end.

The Constitution says, "All legislative powers herein granted shall be vested in a Congress." Cabinet departments and regulatory agencies are not part of Congress; they should answer to it via at least expedited approval of the most onerous rules.

Over-delegating its responsibilities to agencies lets Congress shift blame away from itself for excessive or unpopular regulations. The people's elected representatives should perform their rightful duty and approve all new laws, not 125 out of 3,503.

Tax Freedom Day and Cost of Government Day are moving later in the calendar with each passing year. It is well past time for a change of direction.