A Taxing Situation
This year, April 18th is the deadline for filing federal income tax forms. To many, it is the most dreaded day of the year. Like most Americans, I complain about paying my taxes, but feel the system is still fair. The Tax Foundation’s Fiscal Facts report shows that the top 10 percent of taxpayers pay more than 70 percent of all U.S. income taxes, while the bottom 50 percent account for only about 3 percent.
Americans historically hate paying taxes. In 1773, unhappy taxpayers dumped tea into Boston Harbor to protest taxation without representation, thus setting in motion our independence from Britain. However, once the U.S. government formed, its main source of revenue was to tax the very same items the British taxed for years. The graduated income tax we have today first appeared in 1862 to fund the Civil War. But it wasn’t until 1913 that the income tax became a permanent fixture, with the passage of the 16th Amendment to the Constitution giving Congress legal authority to tax income.
Today, regardless of one’s political views, few are happy with our elected representation or the return on our tax dollars. I happen to agree that our elected officials are out of touch with most taxpayers and govern based on a marketing plan to get re-elected, rather than common sense solutions, or fair representation of their constituents.
This year Tax Freedom Day® was held on April 12. The date represents how many days, (102), the average American will need to work to fulfill this year’s federal, state and local tax obligations. The date is some three weeks earlier than 2007 and reflects a shift toward a lower tax burden caused by the recession and Congress' extension of the Bush II-era tax cuts. Despite these tax reductions, most American’s will pay more in 2010 taxes then they will spend on housing, food and clothing combined.
Many believe our income tax system and bloated tax code, all 3,400,000 words, is too complex. By comparison, the Bible has around 774,700 words. Several income tax alternatives have been proposed to our marginal or graduated tax system where higher earners pay more. These include a Flat Tax of 15 percent that would do away with deductions and reduces the income tax form to a postcard. Another alternative would be a national sales tax, or Fair Tax as it’s called by supporters. The plan does away with the IRS and any need for the tax code and places a 23 percent national sales tax on anything purchased. Critics argue that these alternatives, although simplified, would place an undo burden on those who make less money.
Tax reduction is a goal for everyone, even politicians and the IRS will agree. However, until runaway government spending can be brought under control, the $14 trillion national debt will continue to grow at about $2 million per minute. So pay your taxes and think long and hard about whom you elect next November. 