NCPA - National Center for Policy Analysis

Americans Pay More in Taxes than for Food, Clothing and Shelter

May 8, 2012

In 2012, Americans will pay approximately $4.041 trillion in taxes, which is $152 billion, or 3.9 percent, more than they will spend on housing, food and clothing.  Through looking at contemporary data and examining the trend of tax collections and expenditures on housing, food and clothing, we can compare the costs of government with the necessary costs individuals incur every year.  As a greater tax burden has been levied on some individuals, more government revenues have gone into programs that spend money on these essential goods.  These programs increase the share of necessary items bought by governments rather than individuals, says Kevin Duncan, an adjunct scholar at the Tax Foundation.

  • Between 1929 and the early 1980s, aggregate tax collections were less than total expenditures on housing, food and clothing.
  • From 1929 to 1980, tax liabilities grew from $10 billion to $751 billion, while expenditures on housing, food and clothing grew from $41.6 billion to $775.7 billion.
  • In 1982, total tax collections exceeded expenditures on those items.
  • The gap between tax collections and expenditures on essential goods reached a maximum in 2000, when Americans gave 19 percent more to the government than they spent on these items.
  • The growth in tax collections has halted due to economic contractions, such as the collapse of the "dot-com bubble" in 2001 and the 2007 financial crisis.

Transfer payments, or government social benefits, have grown to represent a substantial portion of money spent on living expenses, encompassing housing, food, clothing, health care and transportation.  This means that the government is picking up an increasing portion of the tab for these essential goods.  

  • For instance, in 1929 transfer payments represented only 0.5 percent of private expenditures on housing, food, clothing, health care and transportation.
  • By 1965, when Medicare began, this percentage had grown to about 11 percent.
  • Today it stands at close to 35 percent.

There are some restrictions inherent in comparing tax costs to expenditures on essential goods.  For example, a large share of tax revenues today are spent on transfer payments, which private individuals then spend on essential goods.  This leads to double counting, as the taxes that finance these programs and the increased consumption that those taxes fund are included in both tax and consumption figures, respectively.  Despite these limitations, the comparison of tax costs to the basic cost of living provides a useful illustration of the growing cost of government.

Source: Kevin Duncan, "Americans Paying More in Taxes than for Food, Clothing and Shelter," Tax Foundation, May 3, 2012.

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