We Do Bear the Cost of Big Government

By Dominic Pino

Thursday, July 10, 2025

This post is in response to We’re Putting Lunch on the Credit Card

By Mark Antonio Wright

 

Mark writes, “The American people are not feeling (at the moment, that is) the effects — the very real pain — of Big Government because they’re not paying Big Taxes.”

 

Just because taxes don’t match government spending does not mean Americans are not bearing the cost of big government. First, it’s not as though there are no taxes. Americans still do pay, on average, about one-third of their income to the government. That’s lower than in other rich countries, but it’s not free, or close to free.

 

Mark is correct that many don’t think of it that way because of tax withholding throughout the year, and the illusory tax refund that many people receive. But last time I checked, people are pretty upset about housing prices. Why are they so high? Big government. Zoning and land use rules, tariffs on building supplies, labor regulations, energy efficiency requirements, government mortgage insurance, government-backed mortgage securities, government-sponsored entities in housing finance, and a steady diet of government demand subsidies work together to push prices of housing up.

 

People seem to sense that health care costs are high. Government is everywhere you look: telling insurance companies what they have to cover, directing payments to hospitals through scams like the Medicaid provider tax, creating bad incentives in Obamacare exchanges that have reduced the quality of plans, paying hospitals more than clinics for Medicare services, constraining the supply of doctors and nurses with licensing rules and immigration restrictions, creating certificate-of-need laws that prevent new hospital construction, tying health insurance to employment through the tax code — the list goes on.

 

Government floods higher education with endless cash, driving up prices as universities scoop up what’s given to them. Government-backed accreditation rules make it very difficult to start new universities, constraining competition and cushioning failed schools. Government subsidies encourage people to get degrees that won’t pay well, burdening them with missed opportunities over their lifetimes.

 

Gasoline is just about the same everywhere, yet it has very different prices in different regions. Why? Big government. Blocking pipeline construction, effectively prohibiting water transportation of oil and petroleum products through the Jones Act, and making it nearly impossible to build new refineries means that it’s very hard to get gasoline to all the places it needs to go, creating major price discrepancies throughout the country.

 

Sugar, steel, shoes, shipping, solar panels, tomatoes, baby formula, infrastructure projects — the government intentionally makes those products and many others more expensive to benefit relatively small industries with political connections. Americans bear those costs.

 

The federal regulatory state imposes about $2 trillion in costs on the U.S. economy each year. That’s $2 trillion worth of paperwork, administrative rulemaking, unfair trials; it’s dividends that never get distributed, workers who never get paid, ideas that never get to market because government is standing in the way; it’s almost $16,000 per household in costs that continue on autopilot as the regulatory code only gets bigger.

 

Americans seemed to notice the silent tax of inflation when it surged for the first time in nearly 40 years in 2021 and 2022. The pressure from massive government deficits imposes costs directly borne by Americans, who are crowded out by the government when they try to borrow money.

 

State and local governments, often driven by public-sector unions, have in many places made pension promises that they cannot keep, shifting the costs to citizens through higher taxes or lower quality public services. Government-backed union monopolies in our ports keep them inefficient and raise transportation costs.

 

Business profits are double-taxed, first by the corporate tax, then again when what’s left is distributed to shareholders. Until the reconciliation bill, capital investments were punished relative to labor investments with sometimes decades-long depreciation schedules where businesses were taxed on profits they didn’t make.

 

Government pays people not to work, whether with generous retirement benefits or welfare checks. The NGO complex spawned by government has created millions of low-productivity jobs. Both of these reduce the productive potential of the economy, a cost borne by all.

 

I could go on, but suffice it to say, Americans certainly bear the costs of big government. Mark thinks raising taxes on top of all of that would be a good idea to drive the point home. I think Americans are already burdened enough by big government, and slowing economic growth with tax increases would only make all of these pain points more severe.