I've heard it said that voting and paying taxes are two of the major sacraments of citizenship. Having spent a significant part of the past week working on the machinations of the latter for several different family members, I am weary of the sacramental qualities of income taxes. It isn't that I think taxes are a bad thing. But our current system of taxation is both fundamentally wrong and, having said that, unbelievably convoluted.
Most of the commentators I read and hear are only interested in simplifying the income tax. A few propose getting rid of the income tax and replacing it with a sales tax, which I regard as simpler, but nearly as evil as an income tax from a number of points of view. And that puts aside the question of whether the necessary rate for the so-called "FairTax" is 23% (or 30% in the way we're used to thinking of sales taxes) or closer to 60%, as I understand is more realistically the case.
But for the moment, I want to address the complexity of the income taxes we currently are saddled with -- admittedly a minor issue in the scheme of things. (One might compare simplifying the income tax to rearranging the deck chairs on the Titanic. It is the wrong tax, and we should just rid ourselves of it, starting from the bottom of the income spectrum.)
I had several family members' returns to produce, and several states to deal with. One is an elderly relative in Pennsylvania. While I'd purchased TurboTax, I'd not installed it, and I thought that, since his return was relatively simple, I'd do it from the forms on the IRS and PA websites, and then, perhaps, check my work with TurboTax. I brought up the instructions, the schedules and the forms for both federal and state returns, and set to work. Printed out a worksheet or three. Remember, this was a pretty simple return: Social Security, a PBGC pension, another small pension, and a Vanguard account with a couple of mutual funds. Well, 3 hours later, I threw up my hands, and installed TurboTax. I was able to turn out the return in fairly short order, with the aid of paper copies of last year's return (the laptop on which I'd done it had been stolen, so all I had was the hardcopy).
I thought I'd use Turbo Tax to assemble things for the accountant we go to for our own tax returns. (We've never filed our own; my father-in-law did them, and after he died, we went to someone for 25 years who became a great friend; upon his death, his younger partner picked up the work, and we enjoy seeing him each year.) TT was a help, though there were a few things I knew I needed to provide for which I never did find the appropriate slot, so I reverted to the paper worksheets our accountant provided.
I don't know how many hours I spent, or and I don't know how to quantify the frustration and confusion. The IRS and PA worksheets were amazing in their complexity. I tried to think of the loopholes and conditions which they were designed to create and/or address, and decided they would tax my brain more than I was willing to deal with. I briefly explored the free tax return processing from a variety of vendors the IRS website provided links to, but quickly thought better of that, given that I had about a week to work with.
At one point, doing my elderly relative's returns, he appeared to owe some taxes, and I knew that couldn't possibly be right, so I did some backtracking and found my data entry problem.
I thought about the people who don't normally file taxes, who are filing this year in order to be eligible for the $300/$600 tax rebate, and imagined their difficulty dealing with these forms on their own. I thought of my friend who volunteers at a senior center, helping people with their tax returns -- I admit emailing him from the midst of my frustration with doing the Pennsylvania returns, asking for a consultation, even though I knew he wasn't familiar with that state's issues. I thought of the level of the good deed he does, as a volunteer helping others generate their tax returns. A real sacrament. A mitzvah. For dozens of people, I'd guess.
Obviously, the income taxes we're saddled with are ridiculously complex. The number of hours of human effort and frustration that they call for is outlandish. And certainly a good case could be made for simplification of the income tax.
But to make such a proposal is shortsighted, simplistic, unradical, unjust. We're used to income taxes, and we're used to complaining about them. We hear about "tax freedom day" -- the day in the year that represents the point at which the same percentage of the year has gone that our taxes represent of wages. And of course that date is generally pegged to taxes on wage income.
But there are better ways to tax ourselves than an income tax. And I'm not talking about the FairTax; it is no better and arguably worse. No. Not arguably. Just worse. Yes it is simpler, but the so-called "FairTax"
(a) it increases the taxes not just the on poor (and, yes, I do understand the "prebate") but on the bottom 90% or so of us;
(b) it severely burdens the poor, who bear enough burdens now and include a large proportion of America's children -- our future;
(c) it turns every retailer into a tax collector; and
(d) it burdens the economy -- and if there was a time when our economy could sustain that sort of damage without seriously hurting PEOPLE, we're surely not in one of those times now.
No, the tax reform I'm suggesting is a different one. An old idea and one superbly suited to the 21st century. Whether it would provide 40% or 80% or 100% of the revenue currently collected does not change the correctness of the prescription. Use the right tax first, and if it turns out to be insufficient, we'll still be reducing our reliance on the wrong taxes, to our common benefit.
Diagnosis: our economy is in trouble. We tax things we shouldn't tax, and we tax only lightly that which we should tax heavily.
Diagnosis: our environment is in trouble. We pollute it with excessive commuting.
Diagnosis: an unconscionable percentage of our children are being brought up in families with insufficient income to meet the family members' most simply defined needs, creating failure in school for large numbers of them, and limited opportunities in their futures.
Diagnosis: our cities are in trouble, with blighted downtowns, underused sites, too little housing in price ranges that the large majority of residents and workers can afford.
Prescription: a radical change in how we tax ourselves.
- Reduce our reliance on wage taxes, starting at the bottom of the income spectrum.
- Reduce our reliance on sales taxes.
- Reduce our reliance on taxes on buildings.
- Increase our reliance on taxes which relate to things provided by nature and by the investments of the community.
Therein lies the route to fiscal health, widely shared prosperity, and to a healthy economy which rewards productive activity and discourages speculation and pollution.
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