They tax you when you earn, they tax you when you buy and they tax you when you die. Whatever you do, the Taxman has his hand in your pocket. If they could figure out how to do it, theyíd tax you for bodily functions. So what do you get for all this tax money?
Tax time is coming around again. Iím reminded because I just placed my order for the 2007 version of TurboTax, which is a software application that guides me through federal and Pennsylvania tax return preparation. The damn tax code has become so complex, you really need either a good accountant or a tax package to get it right.
Taxes are everywhere, on everything. Federal income tax, Social Security, Medicare, federal death tax, Medicaid, state income tax, state sales tax, state death tax Ö let me catch my breath. Certain cities or counties get you for an income tax or a wage tax or maybe even a sales tax. Then there are the smaller but still irritating levies like federal and state gasoline taxes, the state automobile registration tax, the hotel room occupancy tax (talk about taxation without representation!) and the federal telephone taxes (check out your phone bill for the beloved Federal Subscriber Line Charge and the smaller, but still irritating Federal Universal Service Fee). And if you have a small business, well, I wonít get into that.
They tax you when you earn, they tax you when you buy and they tax you when you die. Whatever you do, the Taxman has his hand in your pocket. If they could figure out how to do it, theyíd tax you for bodily functions. Maybe a little meter on the toilet. Two cents per flush. Wireless, of course.
And think about the skillions of hours that are wasted on tax planning, preparation and collection. Tax attorneys, tax accountants, tax return software, IRS employees, state and local tax collectors, they are all working day and night on our taxes. While youíre sleeping innocently in your bed, an IRS computer is selecting you for an audit. And if you are in a hotel, youíre paying tax to sleep while that IRS computer is humming away. Your federal government at work.
I read somewhere that the top half of earners pay 96% of federal income taxes while the lower half pays 4%. The principle that a person with a larger income should pay more in taxes is fair, but 96% seems a bit extreme. Every citizen with a decent income, it seems to me, should pay something in taxes. Even if itís only a couple of bucks withheld from each paycheck, at least youíre holding up your end as best you can.
My personal choice would be for a flat income tax. No tax on the first twenty five grand, then 15% on everything after that. Or something similar. Allow a few deductibles such as spouse and children, mortgage and medical. Keep it really simple, so that a normal person could file their return without screaming. Thatís right, tax prep would become the no scream zone. Maybe even no cursing Ö okay, I lost my head. Anyway, I enjoy cursing at my return.
Itís interesting that our government has too much money and yet not enough. A duality that would interest a quantum mechanics researcher. Hereís the issue: the government needs more money to fund entitlements such as Social Security and Medicare, but a big tax increase might plunge the economy into recession. And recessions are not good for incumbent politicians.
The simple truth is that people should be allowed to keep the bulk of the money they earn. They know what they need better than a government bureaucrat. Plus, the more an entrepreneur can keep, the more likely she is to invest her money in a small business, and thatís what drives the economy. JFK knew that and so did Reagen and Bush 43.
Entitlements are out of control. Already Medicare has more money going out in benefits than tax payments coming in. Social Security is still in the black, but economists predict 2017 as the date it goes into the red. To fund these deficits, the government has to increase its borrowing, raise taxes or divert funds from other programs. These are not good alternatives, so why donít we actually try to fix these creaky old programs. To put it bluntly, they suck. No rational young person would invest his money in Social Security if he had a choice. Letís fix the damn thing! Unfortunately, itís not going to happen. Hereís a bold prediction ó theyíll eventually put together a bipartisan, blue ribbon, lip smacking panel of old pols and theyíll recommend Ö hold your breath Ö raising Social Security taxes.
Letís face it, we fifty plus citizens are pretty demanding. We coughed up money supporting prior generations, so we want our fair share of the benefits when we get older. Without these entitlements, many baby boomers will have a tough retirement. If you can afford to retire.
But letís be fair and look at it from the point of the twenty something working stiff. The ratio of retired persons to workers is getting worse year by year. A young guy or gal has forty or fifty years of ever increasing Social Security taxes to pay. They are not happy and I donít blame them. Especially if the benefits are cut back or the retirement age raised to, letís say, 112. Iím all for working with these youngsters so that we can cut them a fair deal. Just as long as you donít touch MY retirement benefits.
So how do we reduce taxes? The government has to find a way to fund Social Security, Medicare and other entitlements. Thatís the bulk of the federal budget. We certainly need the Defense and State departments and, to some degree, the regulatory agencies. That doesnít leave too much to cut, but there are a few items that make no sense.
Take agriculture subsidies. Why the frack do we pay farmers to NOT grow food? (Love the sound of the word frack ó got it from Battlestar Galactica)These subsidies go into the pockets of big, rich agriculture corporations. Itís not 1930, with Oakies starving on their little farms. Agriculture is Big Business, just like Insurance, Computers or Finance. Should we pay Microsoft to not develop software? No wisecracks, please, Iím just trying to make a point.
Then there are the natural disasters, like Katrina. Iím all for emergency aid, but the government went way overboard. I read that more than 80 billion dollars has already been committed. Now if you choose to live below sea level or on the coastline, okay, you can take a chance, but donít expect the taxpayer to rebuild your home if a flood washes it away. At least buy fracking flood insurance. Itís cheap (government subsidized, of course). Can you believe they are rebuilding New Orleans without improving the levies! Who pays when it floods again? Spell it t-a-x-p-a-y-e-r-s.
So we have to find a way to reduce the cost of providing necessary services, while eliminating the handouts. Thereís no solution unless entitlement programs are restructured, and Iíll discuss this in future posts.