Tuesday, January 3, 2006

Taxing the Patience

Democracy is a government where you can say what you think even if you don't think. ~Author Unknown

My income tax software arrived the other day. I do not have a very complicated financial situation, but things have gotten to be so complex that some assistance is required if you want to stay legal yet not over pay your alloted tax requirement. There is, of course, an easier way, but no one seems really to want it.
Bob Dole, when he ran for President, learned a lesson that, as an old experienced politician, he should have known well: What people say they want and what they really want are two very different things.
Dole proposed a flat income tax, creating a system where you could complete your annual taxes by sending in a post card. IRS staffing could be slashed, everyone would be taxed at the same rate, there would be no tax loopholes, and everyone (except those who’ve used loopholes to pay nothing for years) would be looking at a lower tax rate. You can't make it much simpler than that.
Americans complain about taxes more than they complain about the weather. To hear the average person talk, they are being taxed into abject poverty. One co-worker of mine once announced that he was paying federal income tax at a 50% rate. I pointed out that the highest tax rate was 39%, and that was applied only to the very rich. Since I had a rough idea of what he made, I asked when his wife started making a six figure salary. Well, she didn't, and, like most people, after deductions, he was paying about 27%. He didn't gripe about taxes in my presence after that.
U.S. citizens want all the benefits of government, but they keep wanting someone else to pay for it. I don't mind paying taxes, but I do object to having to support a monstrous Internal Revenue to catch the cheats.
I am also really tired of paying sales taxes, which in Alabama are ridiculously high, to make up for all the tax breaks that have been given to corporations to relocate. If everyone was paying their share, I wouldn't be paying 10% more for everything I purchase. A community in our area is crowing about landing a Wal-Mart, which they managed to do by forgiving their share of sales taxes for the next umpty-two years. Will anyone be surprised when this town raises sales taxes a few years from now to make up the shortfall?
And is any tax more recessive than sales tax? It clobbers low income groups and isn’t exactly kind to us middle-income folks, either. Yet, there’s no deduction in that morass of special-interest gimme-gimme’s that Congress has stuck in the tax code for sales taxes. There used to be, but that got “simplified” away.
There have been all these “tax code” simplifications, primarily by Republican presidents and Congresses. Generally, these have led to more deductions for the wealthy and less for the middle class (that’s the “simplifying” part). Income tax rate reductions come with increases in other taxes, like social security or excise taxes. If Ronald Reagan had done any more to “simplify” my taxes, I'd have had to declare bankruptcy.
And yet, when Mr. Dole comes along and suggests a fair taxation system that hits everyone the same and cuts down on the federal bureaucracy, his supporters desert him in droves. Why? Well, Dole is a Republican, the party which draws much of its support from the wealthy and from large corporations. These are groups that do NOT want a simple tax system. They want all those deductions and (more importantly) all those hokey tax credits that reduce their taxes to virtually nothing. To ensure that they kept these perks, they tried to convince the average taxpayer that he or she would pay more under Dole's plan because they would lose the mortgage deduction and medical deductions.
Charities jumped on the bandwagon, afraid that everyone would stop giving if they couldn't deduct the contribution. Seems to be a sad commentary on both the charities and the givers, don’t you think?
So Mr. Dole began to backtrack. He would allow the mortgage deduction. There would be some other deductions allowed, including one for charitable donations. Before you knew it, he had practically reinvented the 1040 form.
You can't fool all the people all the time, but you can fool enough them into thinking that a convoluted system of taxation that protects special interests is good because it allows them to deduct the cost of work shoes.
It's a pity, too. I think Bob Dole would have a been a good president.

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