Showing Government's Burden

The following was originally published by Investor's Business Daily on April 4, 1997.

Voters need good information if they are to make good decisions. But when it comes to taxes and regulation, the information they have is often incomplete. Voters often don't know what the cost of government is.

But if firms start listening to one group's proposal, that may change.

Last year, the Mackinac Center for Public Policy, based in Midland, Michigan, put forth an intriguing idea: What if firms let their workers know the total costs of taxes and government-mandated programs?

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"Some of that information shows up on a person's payroll form, but those deductions don't tell the whole story," said Joe Lehman, a spokesman for Mackinac.

So Mackinac came up with a new idea: the Right To Know Payroll Form.

It lists federal and state income tax withheld and social security taxes. But it does much more.

This form also itemizes the cost, per worker, of workers' compensation and other government-mandated programs. It gives the "employer's" share of social security taxes.

And it lists the cost, per worker, for the firm to administer those taxes and regulations.

Each of these items is clearly marked as "government tax" or "government cost."

That's so workers know that these things aren't "free."

"We think this form lets business leaders help their employees become better citizens," said Lehman.

"The quality of any decision is based upon the quality of knowledge on which the decision is based," he added. "This form makes clear the costs of the government programs that are now hidden."

The center put together a kit that lets firms create these forms. It provides these kits free to any firm that asks. (It's also available online at

"It doesn't take a great deal of effort to do the analysis. In fact, firms already have much of this information," said Lehman. "We recommend that a firm calculate its costs once a year."

It has been a little less than a year since Mackinac put forth this idea. In that time, more than 1,000 private firms have contacted them about the idea.

Even some governments, which face mandates from higher authorities, are interested in the idea.

The state of Michigan has adopted the form for government workers. Some 60,000 state workers now know what government takes out of their paychecks.

And the states of Ohio and Kentucky are considering the notion.

Lehman says reaction to the form has been overwhelmingly positive.

"But we did have one newspaper that wrote that this was a bad idea because it would bias workers against government health and safety programs," he said.

Lehman doesn't think that charge is warranted.

"The Right To Know Payroll Form isn't anti-government or pro-government. It's just giving people information," he said.

But the Mackinac Center backs free enterprise, and Lehman admits the form makes clear that taxes and regulations placed on firms also affect workers.

"Still, it's perfectly possible that a worker can look at these numbers, see what government costs him, and conclude that he's getting a good deal. This is all just information. It doesn't tell you what conclusions to draw," he said.

Government studies show federal rules cost American firms almost $700 billion a year. But that's just the direct cost to comply. It doesn't count lost productivity or other indirect costs.

Firms with fewer than 20 workers pay an average of $5,532 per worker to comply with federal rules.

More than 90% of U. S. firms have 20 workers or less.

Add in other mandates, and it's clear government takes a big bite out of the private sector. That's money that firms could use for other purposes, including better pay for workers.

The payroll form helps workers understand the constraints firms face when they seek to increase pay.

It makes them more aware of how public policy affects jobs and pay.

And when workers see those costs on their paystubs they might conclude they're too high.

If so, they might become more active against new taxes and red tape. That would promote a business climate more favorable to jobs and growth.