PART 2: Want to Cut Taxes? Find Them First

Tax planning will be more successful when we’ve found the sources of pressure on household budgets. Some are obvious and others hidden.

In Part 1, we addressed actual taxes and tax sources, a category that includes many hidden expenses such as past-era Social Security tax brackets.

Second are government or regulated expenses that behave like taxes.

Health care is a good example. The average cost of employer-sponsored family health coverage has risen sharply since 2017. Family premiums, including both employee and employer contributions, average almost $27,000 annually, a stunning number and the reason why health care is the top concern of business owners for consecutive years.

Medicare Parts B and D premiums have increased substantially as well. Property-tax bills can rise even when the tax rate itself does not, if assessed home values have increased. Both are largely unavoidable claims against household income, and both are victims of government policies.

Third are expenses that are not taxes but compete for the same dollar.

Federal interest expense might be the biggest example that receives the least attention.

Net interest on the federal debt was roughly $263 billion in fiscal 2017. By fiscal 2025 it was about $970 billion and in 2026 reached $1 trillion. The cost of servicing the debt now makes up 15% of all US government spending, more than the government spends on national defense.

That money does not arrive in anyone's mailbox as an invoice. But it must be financed with tax revenue, additional borrowing or fewer dollars available for other government priorities. Like health care and state and local property tax revenue sharing.

There is also a broader cost. When the federal government must borrow enormous amounts of money, it competes for capital with businesses, homeowners and other borrowers. That does not mean federal borrowing alone determines mortgage rates or business-loan rates, but it does mean capital has a price, and government cannot consume more of it without consequences throughout the economy.

Planning for hidden taxes should go beyond tax brackets, Roth IRA conversions, and tax loss harvesting. That takes a tax strategist. Who is yours?

“Once you’ve paid the price for risk, you might as well stay around for the return” [David Booth, Dimensional Fund Advisors].