It is Tax Day in America.  Do you owe any money or are you getting money back?  Did you submit your tax return online or through paper mail?  If you don’t live in the USA do you feel you pay too many taxes — or not enough — for the benefits you receive?


If we do not pay our fair share for the liberty we enjoy — how else should we pay for the government that helps run our lives? 

Supporting tax cuts has always seemed to favor the rich and punish the poor — even though this country was born from a taxation revolt of the common folk. 

The United States started collecting taxes in 1862 to pay for the Civil War and it seems like we’re still collecting taxes to pay for wars that have never been civil. 

I realize it isn’t a popular position to advocate the societal requirement for taxation, but I can’t think of a better way to get everyone to contribute to the betterment of everyone in the nation.

Today, The New York Times argues in an Op-Ed piece that we should remove the word “tax” from our vocabulary and use the idea of paying “dues” instead:

THE word “tax” was never pretty. But it has lately become the
ugliest word in the English language, right up there with its evil
twin, “death.” Even in time of war, ostensibly patriotic politicians
blithely pledge to slay any tax that rears its ghastly head. Public
officials dodge work they know desperately needs doing because of the
possibility that it may cause an increase in taxes.

It’s time to
take a page from the conservative playbook, the one where they reframe
the debate by changing the language — for instance, calling the “estate
tax” a “death tax,” or making equal rights for same-sex partners a
“protection of marriage” issue. I propose we stop saying “taxes” and
start calling them “dues.”

“Duty” or “Tax” — the idea is the same:  We need to pay for services and for infrastructure and we do that by reconciling our wishes against our wants each year on April 15.

I’m not sure if the current tax system is fair to everyone or not.  Does we each pay our fair share?  Or do those who can afford to hire a good tax accountant pay less? 

In 2006, the Internal Revenue Service cut the time spent auditing big business:

The Internal Revenue Service has cut deeply the time that it spends auditing the nation’s largest corporations, according to data made public yesterday.

The figures, obtained by Syracuse University
researchers, showed that the I.R.S. had reduced the time spent on each
audit by 21 percent in the last five years, to 958 hours from 1,210
hours. At the same time, the number of actual audits, which had
increased in the last two years, has fallen back to the level of 2002.

In 2008, the I.R.S. trend to leave big firms alone continued. Is that trend a product of important policing changes or necessary political pressure?

The I.R.S.’s scrutiny of the nation’s biggest companies is at a
20-year low, according to the study, conducted by Transactional Records
Access Clearinghouse, or TRAC, a research group affiliated with Syracuse University.

The study, made public Sunday, points to “a historic collapse in
audits.” It found that major corporations — defined as those with
assets of at least $250 million — have about a one in four chance of
being audited, down from about three in four in 1990.

For
Americans with incomes above $100,000, the chances of being audited in
2006 were 1 in 59. Above $1 million, the odds increased to 1 in 16.

Why do you think there is a trend to leave businesses alone?  Is it because individuals are easier to audit than big corporations?

Would a flat-tax be the fairest solution to make sure everyone paid their fair share of their duty to society

Or is there a better way to promise the continued prosperity of us all where everyone gets a fair shake by paying their fair share?

22 Comments

  1. A flat tax would run roughshod on people like me, working from home and having a ton of things that I spend money on just to keep the business going.
    Then you see sites like this one and you wonder why you give so much in taxes just to fight a war you’re against. Hmm.

  2. That’s a good point, Gordon, people who are self-employed would have a hard time with a truly flat tax. I suppose a choice would be nice: You can either do the deductions or you can choose a flat tax. Or would that cause more problems than solutions?

  3. I suppose that statistically speaking, they most likely would raise your audit rate because people who pay a flat tax (I almost wrote ‘flax tax’) would have no reason to be audited unless they randomly chose people to make sure everyone was reporting everything. Oh, IRS.

  4. Gordon —
    Right! The only reason they’d come after a flat-taxer is if they thought there was income that was not being reported and flat-taxed — and I’m sure there would be lots of people who might not report that income.
    On the other hand — I think I much prefer a VAT tax and other licensing fees and such over any income tax. If you buy extras, if you buy booze or smokes, if you move, if you drive… you pay big tax. If you buy food in a grocery store or medicine in a pharmacy… no tax.

  5. I agree with you, Donna! It seems like a flat-tax is predictable and fair. Estimating taxes on a quarterly basis for some folks is a tiring experience that takes up a lot of productive time.

  6. David,
    You mean bigger taxes than there are now? I hear that soon a pack of cigarettes might be $9 in New York State due to possible new taxes. Yikes!

  7. Hi David!
    I get taxed at source, so it’s never something that i have to actively give. i can’t complain about the percentage of tax though i would like to see that money working harder yes.

  8. David, we do have to file returns even though it is deducted at source. my outlay is adjusted based on the tax bracket i come under which depends on my total annual income from various sources.

  9. That sounds like the same cryptic system we have here, Dananjay. Can you deduct expenses and get money back? Do you ever owe more tax than you have withheld if you don’t have any extra income?

  10. Greetings David,
    A very timely piece. Some may say I have a different perspective on the subject of taxes. I know I feel I have paid my fair share over the years. I have also been on the legislative side of it and have seen the need for more tax dollar just to maintain the normalcy we have all come to enjoy.
    With the skyrocketing petroleum prices, asphalt prices have gone through the roof. Trying to maintain infrastructure has caused many small communities to struggle and if it were not for Federal Tax influx from the Department of Transportation many communities would slowly digress back to dirt roads.
    Hard to drive those gas guzzling Hummers on a dirt road – They may have to wash them more! :-}

  11. There you are, Greg! I am so thrilled to see you here and I’m sorry you got caught in our transition and had to re-register.
    I’m with you on the absolute necessity of taxes to not only provide for the social welfare but to maintain our massive, national, infrastructure! Our bridges and roads and decaying and they are in need of constant maintenance and repair. It’s unfortunate so many people will not see that need. If we don’t pay now, we’ll pay later with lost lives… and even higher taxes.

  12. I have no problem paying taxes, as long as the money is being used for what it is intended. It is harder to determine that though, isn’t it.
    I think the tax return system in the US is bizarre. Why have each and every person complete a return? Why not put the onus of tax reporting on employers? Employers should be reporting to the tax authorities anyway and they should have the expertise to complete the whole convoluted process.
    In the UK, if you are just a regular joe and have a 9 to 5 job with no other income, you do not have to submit a return. Your employer reports to the tax authorities and it all works out beautifully. That makes much more sense to me.
    I think the whole 15th April Tax Day is a money making (and a subsequent tax generating) scheme! There’s another blunt opinion for you 😉
    That said, since living in the US, tax returns, (bizarrely enough, compared to my previous 2 country living experiences) have been sources of great income for me. For the last 4 years I have had thousands of dollars in refunds. And it takes me by surprise every year.

  13. I love the UK system, natzgal! Why not put the burden on the employer here in the USA? It seem so much simpler and fairer. The US Tax system is broken. Why should anyone get anything back at all? Why use the US Treasury as a yearly savings program? It doesn’t make sense. Let people keep their money in the first place if you’re only going to give it back in the end. Deductions are also legal and tricky — but are they fair to take in the best interests of the general welfare of the nation?

  14. Hi David,
    In Australia we have the “deductions” thing. We can’t deduct interest expenses on our own home (but we pay NO capital gains on it) but all those wealthy enough to own investment properties can deduct/negatively gear and pay capital gains tax.
    Our tax brackets have finally started to catch up with reality in the last few years. “Bracket creep” of inflation of wages meant that 5 years ago people on average incomes AU$52K were paying the top rate of tax!!! nearly 50%.
    Now anything close to that will be for those on AU$150K. But of course that means that there’s less revenue…. for our universal health system, free schooling and highly subsidised tertiary system and many other niceties – such as a very real and effective (but not generous “safety net”). Our infrastructure is suffering in the public sector (and no better in privatised enterprises…)
    I am on a low income now since I downshifted 5 years ago. I was irritated by taxes when I earned big $ (more in the wastage thereof rather than the collection factor…) because I knew that having and income and tax liability like mine are priveledges 90% of the world’s population would not mind doing a “problem swap” for.
    For me, a sensible system would be to know what a real “poverty line” looks like for an income and a given number of dependents and set the individual’s tax free threshold to that $ value. This may mean no tax or even some “reverse tax” as long as the overall income is below some threshold amount (ie it doesn’t flow upward!).
    What we have is a rather “heavily policed” welfare sector that looks at “worthiness” and every $ earned if you are unable to support yourself, but we have lots of “middle class welfare” (worst example is a “maternity bonus of about AU$5K for people having babies – regardless of income) rather than targeting variable payments appropriately.
    Of course there’s a political problem with this. You can’t bribe voters if they get to keep all their money. If more is taken, then it can come back as a “prize” for the skill (or hired skill) of the person playing the “tax game of refund luck”. The “conservative” government that implemented the “baby bonus” was doing some very “socialistic” social engineering and bribery. The same government has taken retired people over the age of 60 out of the tax system if they only have income from their private pensions. But most people in Australia have less than the old tax free threshold of $AU135K. Even the economic conservatives were concerned about the equity of this, the wealthiest laugh all the way to the bank. Of course which government could ever roll this one back???
    That is the ultimate catch 22 with tax cuts – they are so hard to reverse from an electoral survival POV.
    PS – many years ago a friend settled in the low tax Switzerland. Much to her dismay her much bigger take home pay got eaten away by health and unemployment insurance almost to the exact same percentage as the amount of tax she had paid in Australia.

  15. Thanks for that great insight into the Australian tax system, creativeRhino! I think you’re right that no matter where you live, the local system will find a way to make you pay up to live there.
    In New York State an “internet tax” law was just passed. That means if you buy something from the internet, you have to pay NY State tax on it now!
    States like Texas that do not collect a personal tax make it up in other ways like licensing fees and other value-added “taxes” that can add up rather quickly!