The tax man cometh
Thoughts to ponder on Tax Day while you’re pulling your hair out or running to the mailbox:
No matter how big number the number is on the bottom of all our Forms 1040, it’s not going to be enough to pay the government’s bills. The United States this year will spend about $410 billion more than it takes in.
If we were to share that bill equally among individual taxpayers, it would come to an extra $3,000 each. This is an election year, so that’s not going to happen.
Instead, that $410 billion will go on the national credit card. The government will borrow it, mainly from lenders overseas, including the governments of China and Japan.
We’ve been running deficits for 40 years, in good times and bad, except for a short break in the 1990s. The interest on the national debt now comes to more than $430 billion a year — or two-thirds of what we spend on the Pentagon and the war in Iraq. Add in entitlement programs such as Social Security and Medicare, and only about 25 percent of the budget is left for everything else the government does.
If you’re getting off easy on tax day, some of your neighbors are getting off even easier — by cheating. The Internal Revenue Service estimates that about $345 billion in taxes goes uncollected each year. The biggest culprit: under-reporting of business and self-employment income.
IRS auditors round up only about $49 billion per year in underpaid taxes. There aren’t enough auditors to track down all the cheaters. Who says that crime doesn’t pay?
The federal government takes its bite in two main ways: income taxes and payroll taxes. Neither is as fair as it ought to be. The income tax is fairly progressive — it takes a larger percentage of money from the well-off than from the middle class, and practically nothing from the poor.
The best-paid fifth of Americans earn about 61 percent of the nation’s income, but pays 73 percent of its income taxes. The middle fifth earns 11 percent of the nation’s income but pays only 7 percent of the income tax bill.
That doesn’t mean the system is rational. It favors passive investing over real work — the work done by money over the work done by human hands and brains.
The millionaire heir to a family fortune, living on dividends from his stock portfolio, will pay a tax rate of 15 percent. Ditto for a hedge-fund manager earning millions a year. But a working family living on $70,000 per year from two jobs will pay a marginal rate of 25 percent.
While the income tax is progressive, the payroll tax is the opposite. It hits hardest at the poor and middle classes. The poorest fifth of working Americans pay 7.3 percent of their wages in payroll taxes, while the best-paid 1 percent of Americans pay just 2 percent in payroll taxes, according to the Tax Policy Center, a Washington think tank. That’s mainly because the payroll tax for Social Security stops after income hits $102,000.
The Bush tax cuts of early this decade went largely to the well-off. Now, both Democratic presidential candidates, Sens. Barack Obama of Illinois and Hillary Clinton of New York, say they want to end those breaks for the best-off Americans. Sen. John McCain of Arizona, the presumptive Republican nominee, says he’ll keep those breaks in place even though he voted against many of them.
Meanwhile, the Democrats are promising tax breaks to middle-class Americans. Mr. Obama is promising a $1,000 tax credit to offset payroll taxes and a mortgage credit for people who don’t itemize their deductions. He also wants to end income taxes for older Americans earning less than $50,000 a year. Mrs. Clinton promises a tax cut for people who save for retirement.
Either of the Democrats’ plans would make the tax system fairer, which is what most Americans want on Tax Day. And every other day.
You are aware that we are in a flood zone and our taxes aren’t due until May 19th, aren’t you?
This is from Peter Wehner of National Review:
This is the Politics of Meaning on steroids. If one views Americans as fundamentally needy children rather than competent citizens, one embraces the precepts of the nanny state — the state that (in Margaret Thatcher’s memorable phrase) takes too much from you in order to do too much for you. This provides an enormous opening for Senator McCain, who can frame this election as pitting a candidate who believes in self-government, against a candidate who believes in the nanny state.
If someone said, “I’m going to make you a slave for the morning, but you can have everything from what you do in the afternoon” you would let them know where they could go. 50% (income, forced retirement that you’ll never get back, sales, property, etc) taxation is just that — slavery. Only we have traded slavery of the weak and poor for the able and wealthy.
No one of us has the right to take money from any individual to pay for health-care or anything else. Government derives its collective right from its citizen’s individual rights. So how does a group of people, no matter how big, magically come up with the right to take money from anyone else?
“Either of the Democrats’ plans would make the tax system fairer, which is what most Americans want on Tax Day”
Get a candidate to rein in waste and fraud first and then we can get to the point of talking about a fair tax system. The more you take in just increases the chance of both. Democrooks just want to raise taxes to buy votes. There is nothing fair about that. I’m always amazed when the people say “tax the rich” Hey dummy, someday you might be rich.
I continue to worry about where the trend on “taxing the rich” is taking us. Right now, the top 50% of income earners pay approximately 97% of the income taxes. With politicians pandering for votes by promising to take more from the rich, how long will it be before the people in the 60 percentile, 70 percentile, 80 percentile or 95 percentlle vote to have the remaining citizens pay all of the income taxes? What happens as we vote for fewer and fewer of our citizens to carry more and more of the load, while those at the bottom demand more and more free services? Are we going to get to a point in ten years or twenty years that the vast majority of Americans feel that all education, healthcare, utilities and food are “rights?”
How can people who demand that other people pay the bill for their care and comfort, add the demand that “the rich” pay for the care and feeding of anybody else who wants to slip into the country?
I fear that the individual strength and independent character of Americans is fading away and we are becoming a country of soft, weak spined people who are unable to stand on their own two feet and raise their own famililes. It may be our downfall.
The editorial board and most commenters don’t seem to recognize the evolution federal taxation has experienced. As the editorial points out, federal taxes are no longer expected to cover expenditures. The thousands of pages of federal tax code now have three purposes; all of which violate the spirit and often the letter of the U.S. Constitution.
1. Redistribute wealth and assets according to arbitrary and emotion based sense of “fairness.”
2. Control or modify the behavior of the people through rewards and penalties in the tax code.
3. Secure the advantage of incumbency through “earned” income credit, earmarks, pork, entitlements, and welfare.
The results penalize overtime work, earnings growth, and advancement while compensating non productive behaviors. The tax code fosters class envy and demonizes success. It encourages off shore tax cheating accounts and black market commerce.
The ruse is working well, however. “Entitlements and welfare are spread among HHS, HUD, Agriculture, Commerce, and other departments while Army, Navy, Air Force, etc are lumped into one “defense spending” bucket in DOD. Socialists decry hunger, homelessness, health care, and poverty in calling for more government spending and taxation.
Do the math. The federal Ponzi schemes are about to implode.
The only way Democrats or Republicans can make the tax structure simpler is by supporting and enacting the Fair Tax Act. There is only one Democrat sponsor of the bill in the House. Neither Democratic presidential candidate is on record for simplifying taxes. The only things they are willing to do is fiddle with minutia in an attempt to buy votes.
I hope that all of you Democrats paid more taxes today than you owed, and if you didn’t, than you are all big fat hypocrites.
Every year around this time we seem to get Libertarians whining about how terrible their tax burden is. Get over it people. It is the price of civilization- if you don’t like it move to Haiti or some other third world country that has no income tax at all. (No government services either). The Europeans, Japanese, Australians and Canadians all pay more taxes than us and somehow manage to keep their budget from exploding as well.
It is possible to favor a reasonable public/private split without being called a socialist. We had higher taxes in both the 1950’s and 1990’s and experienced better growth then than now. That said, the next administration will have to walk a narrow line between raising taxes and lowering spending.
The whole point of the editorial and todays cartoon is how we are borrowing ourselves silly rather than face the consequences of our own decisions. We wanted the war- now we have to pay for it, along with all of our other obligations. The national debt now stands at 9.4 TRILLION dollars, and the true debt, including all outstanding unpaid obligations like social security is a staggerring 55.7 Trillion and counting, or $185,000 for every man, woman and child now alive. This ticking time bomb will make today’s choices look like nothing compared with what our children will have to face.
How many times have taxes been raised to pay off the national debt? And, how many times has that same tax increase actually gone to fund new programs instead of paying off the national debt?
We had 50 years of democrat congresses, 6 yaers of republican congresses, and two more years of democrates. Maybe it’s time to dump both of them and try something new!