The old joke says that nothing is certain in life but death and taxes, and medical science has done a lot to forestall the former. Although nobody enjoys paying taxes, most people probably do not realize how they permeate our daily lives. Simply put, one way or another, we pay taxes on almost anything and everything we do.

To illustrate how the tax burden can be spread around, consider the "tax trail" on a few common daily items (For help with filing your taxes, check out 6 Sources For Free Tax Help.)

The taxes on a gallon of gas start as soon as the oil comes out of the well. Although negotiated contracts, sweetheart deals, kickbacks and cross-cutting legislative actions can dramatically muddy the waters when it comes to assessing an "average" royalty in many countries, the fact is that companies like Exxon Mobil (NYSE:XOM) and BP (NYSE:BP) owe the landowner and/or the state money whenever they remove oil and natural gas. In the United States for instance, companies pay a royalty of 12.5% on oil taken from onshore Federal lands, and that is an addition to so-called "bonus bids" that are paid upfront.

IN PICTURES: 9 Ways To Use A Tax Refund

If that oil travels through a pipeline to reach a refinery (and much of it does), there's more taxation there - states and municipalities will charge property tax on the pipelines, and some also charge tax based on the volume of oil or gas sent through the pipeline. What's more, pipeline tariffs are often restricted by law, which is in effect a tax as well.

Once the oil gets to the refinery, there's still more taxation that figures into the final pump price. Although excise tax is collected at different times and at different levels, the federal tax on gasoline amounts to a little over $0.18 per gallon, with states tacking on more tax (ranging from $0.07 to $0.30 per gallon depending upon the state). Don't forget, too, that many states tack on their regular sales tax every time you buy gasoline.

As the infomercials say, "but wait, there's more!" From the wellhead to the filling station, employers have to pay taxes on their employees' wages, property taxes on facilities, corporate income taxes and other incidental taxes like vehicle registration. While some of this does not necessarily pass on to the consumer (many economists have demonstrated the employees pay for their employer's taxes in the form of lower wages), most of it does. (For everything you need to know about the different types of tariffs and their effects on the local economy, see The Basics Of Tariffs And Trade Barriers.)

The tax trail for tobacco is similar in some respects to that of gasoline. Like gasoline, governments at all levels see tobacco as a honeypot for guilt-free taxation. As a result, the federal government charges an excise tax of $1.01 for each pack, while state taxes range from $0.17 (in Missouri) to $4.35 (in New York). Additionally there can be city taxes, which sits at $1.50 per pack in New York City. Along the way, of course, are the regular taxes that go into business - taxes on employee wages, taxes on property, taxes on income, taxes on diesel fuel and vehicles, and so on.

What makes the case of tobacco a little bizarre, though, is that money flows in two directions. The government as a subsidy program in place for tobacco farmers, a subsidy that paid over $200 million to farmers in 2009. That money, then, represents a tax on all citizens to pay farmers to grow a product that is then heavily taxed at federal, state and sometimes municipal levels. (Read more in Paying Uncle Sam: From Tobacco To $1 Trillion.)

Way back in 1975, Ronald Reagan commented that there were 151 taxes that went into the price of a loaf of bread, and that those taxes made up more than half of the cost. While much has changed since then, and I could not independently confirm all of the taxes that currently go into a loaf of bread, that quote is still true in spirit if not in detail.

Farmers may be eligible for subsidies, but they pay property taxes and income taxes. The trucker who takes the grain to market pays taxes for his license, his rig and his fuel. The grain elevator has property, employment, income and sales taxes. The miller, the bakery, the store and every other link in the chain has its own taxes as well, whether they are assessed on property, sales, income, wages, fuel or what have you.

IN PICTURES: 10 Ways To Cut Your Food Costs

The Bottom Line
Of course, it is juvenile to ignore the fact that taxes are necessary and governments need funds to pay for a wide variety of goods and services that typically cannot be fulfilled by private operators. However, many people do not realize just how much they pay in total taxes and how ubiquitous those taxes are. Income tax is tough to ignore every April and anybody who has paid a hotel or cable bill lately has seen how taxes inflate their total bill. But how often do people consider how much of the price of a gallon of gasoline goes into government hands, or how many taxable "steps" there are in getting from a wheat field to the bread aisle of Wal-Mart (NYSE:WMT)? Taxes certainly are unavoidable in a modern economy, and they are in fact almost anywhere or everywhere you care to look.

For the latest financial news, check out Water Cooler Finance: You're Never Too Old To Work.

Related Articles
  1. Economics

    Explaining Corporate Tax

    A corporate tax is a tax levied on the profits a corporation generates.
  2. Taxes

    The 5 Countries Without Income Taxes

    Discover information on some of the best countries to consider relocating to that offer the financial benefit of charging no income tax.
  3. Chart Advisor

    ChartAdvisor for October 2 2015

    Weekly technical summary of the major U.S. indexes.
  4. Chart Advisor

    Weakness In Biotech Will Likely Continue

    You can breathe easy with your biotech holdings--assuming you aren't counting on them to make you rich.
  5. Retirement

    How Much Can You Contribute to Your 401(k)?

    Given the fairly high compensation limits on these retirement plans, most workers can pitch in more than they currently do.
  6. Taxes

    Tax Haven Vs. Tax Shelters: Is There a Difference?

    Learn about the difference between tax havens and tax shelters, and how both are used to reduce tax liability or avoid paying taxes altogether.
  7. Economics

    Benefits of China Changing It's One Child Policy

    China's one-child policy is changing, and investors are looking for ways to cash in. The reform might not have the effects that many anticipate, however.
  8. Taxes

    Countries With The Highest & Lowest Corporate Tax Rates

    The United States is No. 2 in the world for its high corporate tax rate. There are ways around paying it, and many nations with lower rates are worse off.
  9. Entrepreneurship

    START-UP NY: How a Tax-Free Zone Would Work

    START-UP NY is an initiative designed to attract companies to New York State by giving them 10 years of tax breaks. Sounds good, but is it a success?
  10. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  1. Why is the Cayman Islands considered a tax haven?

    The Cayman Islands is one of the most well-known tax havens in the world. Unlike most countries, the Cayman Islands does ... Read Full Answer >>
  2. Why is Panama considered a tax haven?

    The Republic of Panama is considered one of the most well-established pure tax havens in the Caribbean due to extensive legislation ... Read Full Answer >>
  3. How do I get out of my annuity and transfer to a new one?

    If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
  4. Are Cafeteria plans exempt from Social Security?

    Typically, qualified benefits offered through cafeteria plans are exempt from Social Security taxes. However, certain types ... Read Full Answer >>
  5. Why is Andorra considered a tax haven?

    Andorra is one of many locations around the globe considered a tax haven because of its relatively lenient tax laws. However, ... Read Full Answer >>
  6. Do financial advisors prepare tax returns for clients?

    Financial advisors engage in a wide variety of financial areas, including tax return preparation and tax planning for their ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!