The Cost of a Pencil

The other day my daughter and I were walking through the grocery store when she saw a pencil.  She asked me if she could have it.  Normally I like that kind of “toy” request; I can make the deal contingent on a poem, a math problem or a little story.

But this day I said “no”.

But daahhh-ad!  It’s only a dollar!  How long does it take you to earn a dollar.

So I bought her the pencil and when we got home I taught her about taxes.

It turns out that just accounting for my portion of the North Carolina sales tax, my federal income tax and then North Carolina income tax, the cost of that $1.00 pencil goes to $1.68.

I didn’t bother to go through the FICA, the gas tax, and the tax on the car that drove us to the grocery.  Just the three.

Think of that, 40.48% of my income, just accounting for those three taxes, are consumed to buy a simple pencil.

7 responses to “The Cost of a Pencil

  1. Think of it this way. Without taxes to fund research and regulatory efforts, lead paint never might have been banned in the US. The pencil you bought your daugher could very well have been cheaper, but maybe it’s worth a few extra cents to know you don’t have to worry about lead poisoning every time she starts chewing on one.

    • It is definitely fortunate that those regulatory bureaucrats were busy banning that lead paint. They might have otherwise spent the time outlawing the distribution of electricity.

    • Without taxes to fund research and regulatory efforts, lead paint never might have been banned in the US. The pencil you bought your daugher could very well have been cheaper, but maybe it’s worth a few extra cents to know you don’t have to worry about lead poisoning every time she starts chewing on one.

      Indeed.

      If a person seriously answers the question: “Are you 100% right all the time?” he has to answer no. So it is that when I look at my positions, my stance on smaller and smaller government more and more of the time is probably where I err most.There is a role for government; the state does have the proper scope and size to accomplish great things.

      Now, is that banning lead paint? Maybe. Is it pushing legislation that cleans our water and air? Again, maybe – probably yes.

      But it’s also important to point out that a $1 pencil costs significantly more than that buck. In fact, I suspect that we would be stunned to find out how much that pencil cost if there were no taxes embedded at all.

      • The larger point of dedc’s comment, I think, is that it’s a mistake to view taxes as an entirely extrinsic imposition on a pre-existing, natural Market.

        We need a functional society to make it worthwhile for someone to have a store, someone else to make pencils, and someone else to ship the pencils to be sold in the store. The state has to preserve that peace. If there were no taxes at all, there would be no state, and the pencil would never have been made.

        And the state has always set the background context for economic transactions– see Alexander Hamilton’s “Report on Manufactures”.

        Now, if you think that taxes are too high, make your case. You might be right!

        But “imagine there no countries… I wonder if you can?” isn’t really a policy critique. How much of the pencil cost is due to the manufacturer paying for electricity? Or transportation? Or raw materials? Picking out “taxes” as a somehow untrue unfair input into cost doesn’t make sense.

        • We need a functional society to make it worthwhile for someone to have a store, someone else to make pencils, and someone else to ship the pencils to be sold in the store. The state has to preserve that peace. If there were no taxes at all, there would be no state, and the pencil would never have been made.

          Oh, I agree.

          The state plays a critical role in making sure the rights that exist before the state are not trampled.

          But “imagine there no countries… I wonder if you can?” isn’t really a policy critique.

          Very true.

          How much of the pencil cost is due to the manufacturer paying for electricity? Or transportation? Or raw materials? Picking out “taxes” as a somehow untrue unfair input into cost doesn’t make sense.

          And you can keep going. Of that electricity cost, what portion of IT is tax? The transportation…how much of that is gasoline tax?

          My larger point isn’t that taxes aren’t important, or that they are high or low, but rather, “did you know that a $1 pencil really requires $1.68 to purchase?”

          And is that number high or low?

          • How much of the cost of the pencil is due to management pay, above historical and industry average, to the executives at the lumber company, the pencil-making company, the shipping company?

            A blog is as good a place as any for data-free musings, but all you’re doing here is saying that you don’t like taxes. Which is fine, no one does. But it’s not a great habit, intellectually, to take something you don’t like, then project negative qualities onto that thing.

            (Incidentally, I don’t get how your math works, on how the pencil costs extra because of federal income taxes. How do we determine which portion of your federal income taxes goes toward the pencil?).

          • A blog is as good a place as any for data-free musings, but all you’re doing here is saying that you don’t like taxes.

            Well….The post is all about a conversation I had with a 10 year old. Discussing embedded taxes is a tough enough exercise with an adult so I thought I’d really just start with the sales tax and then income taxes. I didn’t mention all the others because, well, because I felt they were a good introduction.

            But it’s not a great habit, intellectually, to take something you don’t like, then project negative qualities onto that thing.

            Hmm…All I did is point out the ratio of my income consumed by to purchase a pencil. There wasn’t an editorial comment at all.

            Incidentally, I don’t get how your math works, on how the pencil costs extra because of federal income taxes. How do we determine which portion of your federal income taxes goes toward the pencil?

            Indeed, the calculation is at the margin. But again, I’m describing an exercise between me and a child. I’m not yet prepared to noodle out where “extra-pencils” fall on the gradient of my brackets.

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