Reprinted from The Washington Times , 5am -- March 23, 1998
Americans drowning in rising tide of taxes
By Patrice Hill
THE WASHINGTON TIMES
Beltsville, Md.--Businessman Brian Kehoe sees the prices dropping on electronic equipment he purchases from Asia for his high-tech security business, but he doesn't see his cost of living going down.
"It's going up if only because a larger and larger share of what I pull down goes into taxes," said the young entrepreneur. He estimates that federal, state and local taxes take 40 percent of his business and personal income.
"You can't just step around that. It's monstrous. Just about all I get back for it is trouble and hassles," he said, noting that the quality of such key government services as roads and schools is going downhill even as the size of government continues to grow.
For all the reports heralding the lowest inflation since the 1960s, consumers are finding the price of many necessities continues to climb. Even as the bill for the shopping basket of goods used by the government to measure inflation barely rises, many find it no easier to make ends meet.
According to the Labor Department, U.S. housing costs rose 1.9 percent last year, while medical care increased 2.8 percent. College tuition and child care, meanwhile, soared by 5.1 percent, according to the Consumer Price Index (CPI).
While rising costs were largely offset last year by a 9.9 percent plunge in gas prices and price drops for technology goods, the index does not even measure what has become the biggest expense for most Americans -- the cost of maintaining a $1.7 trillion-a-year federal government and a myriad of state and local governments.
The government's CPI measures mostly incidental government expenses, such as fees for postage, college tuition, motor vehicle registration, toll roads and water, sewer and trash collection. The figures also encompass all sales, utility and other taxes levied at the time of purchase or use.
But they don't include the cost of the biggest government programs, such as defense, Social Security and Medicare, which typically consume up to a third of a taxpayer's paycheck.
Melvin Watson, a worker at the National Institutes of Health in Bethesda, Md., said he's had little trouble making ends meet with inflation running around 2 percent. He gets raises in the same range.
Still, he hasn't been able to get ahead. "You get a raise, but then everything in the area goes up too: mortgage, rent, lights, gas, food. Even though the stores have a lot of sales, the prices still go up."
One little-noticed area of significant increase is the higher fees and interest charges by banks, finance companies and credit card operators. With credit card debt at record levels, many consumers are getting slapped hard with stiffer penalties for late payments or for exceeding credit limits. Banks also are continuing to levy more and increased fees for their services on such things as checking accounts and use of automated teller machines.
Frances Tranmer, a postal service worker from Calvert County, Md., believes housing prices have become more reasonable, but she doubts consumers are getting enough value for the prices they pay for other things.
"I took my four granddaughters to a movie, and the $2 tickets were cheap, but once you got in the door, the popcorn and soda was $25," she laughed. "How are you going to tell a kid you can't have popcorn because it costs too much?"
Mrs. Tranmer said she aggressively hunts for sales -- "I'm an outlet mall maven" -- but still worries that retailers are marking up sticker prices on items, then offering deep "discounts."
"Heaven forbid I should need a new car," she said, reminiscing that her first car decades ago cost $3,600, but the Cadillac she drives today cost 10 times that amount.
The low-inflation economy clearly has a bright side: Americans have been enjoying a boon from prices dropping for gasoline and an array of other goods, thanks to stiff competition and the Asian financial crisis.
Imports -- from Indonesian-made sneakers and Japanese cars to Malaysian computer parts and South Korean electronics -- are getting cheaper. So are many high-tech goods made in the United States -- from computers to car phones -- as companies respond to intense competition.
"I think inflation is going down," said Ronnie Robbins, a Huntsville, Ala., stockbroker visiting Washington last month with his wife Janet.
"The price of electronics amazes me. We have a 25-inch television that seven years ago we paid $800 for. You can get the same one for $239 today. You can buy a computer for $1,000 today that cost you $2,500 last year."
Mrs. Robbins noted that the price of college tuition for their two children has been rising by about 6 percent a year, however.
Charles Lesser, a London resident working as a legislative aide on Capitol Hill, agreed that living in the United States is inexpensive compared with other countries.
"Prices for most everything are very cheap," especially housing, travel, food and clothes, he said.
Terry Buss, an economic development specialist for the Congressional Research Service, said the cost of health care and government continues to rise because of a lack of competition, but prices in most other areas have stayed the same or even declined.
"The price of a McDonald's hamburger is the same everywhere. It's a good indicator of how competitive things are. There's not a lot of inflation here," he said.
For retirees on fixed incomes, however, even a little bit of inflation can hurt.
"Frankly, all the big-ticket items cost more. Those are the things that really affect the pocketbook," said Lill Mether, a retired Montgomery County, Md. library assistant living on Social Security and a fixed county pension.
"Food prices have stayed low, and you can go to the thrift store to get clothes," but it takes two incomes to buy a house and a car, she said, noting that a car she bought 10 years ago for $8,000 costs $17,000 to replace today.
And for seniors on Medicare, like herself, burgeoning health care costs are still a problem. "A lot of people on Medicare can't afford the medications," which are not covered by the government, she said. "As you get older, medications can cost as much as food or more. There's no relief in sight."
For Mrs. Tranmer, the cost of a new car or a night at the movies with her granddaughters is just a reminder that, while prices change, some things stay the same.
She noted, "It was just as hard to make the payments then as it is now."
Copyright 1998 News World Communications, Inc.
Reprinted with permission of
The Washington Times.
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