Why tax reform is elusive
I just finished my taxes (mostly) and frankly it's beyond me why meaningful tax reform and simplification is not the big burning political issue these days. You'd think the public would be clamoring for it.
I think there are two factors at work here. First, many people have no idea what a nightmare the tax code has become. It has long ago become so complicated that almost no one does it themselves anymore. They simply hand it off to some accountant or H&R Crock and a few weeks later they find out what their refund is going to be. If people were forced to wade through the morass of filing tax returns, there would be a national outcry.
Secondly, most people are out of touch with the size of the tax burden they shoulder. Quick, what is your federal income tax liability on an average year? Most people don't even think in those terms. Taxes are withheld from their paycheck (overwithheld, actually) so they never even see that money, and then they get a small check back from the government at then end and feel grateful for it.
I know that drastic tax code simplification is going to be a big uphill battle. There are too many powerful people with a vested interest in the status quo. But unless the public demands it, there is zero chance of its ever happening. And unfortunately, people just don't seem that upset about it. As long as they don't have to fill out the forms themselves and they get a decent check from the Treasury at the end, they're pretty much content. Too bad.
Comments
Most people's FEDERAL tax burden is a lot less than they think it is.
If someone thinks he's in "the 25% bracket", he thinks that he is taxed on 25% of his entire gross income. By the time you take into account deductions, and where the 25% rate actually kicks in, most people in this bracket are at 17-20%.
The feeling that Americans have of being overtaxed is coming largely from state and local taxes, which have gone up astronomically as the Federal government has sent ever less back to the states, especially states like NJ, which only gets 57 cents back for every dollar we send to Washington.
Posted by: Jill | February 14, 2006 03:04 PM
Thank you! I was beginning to wonder if I was the only person in the nation who gets really ticked every year by the fact that I have to either pay someone to handle my taxes or (as I do) buy Turbotax or some other software to figure it all out. If you think it's bad now, just wait until retirement when you start withdrawing from your IRAs.
Posted by: Owl Creek Observer | February 14, 2006 03:05 PM
As Jill has sometimes observed: "A pig just flew past my window!"
I actually agree with her and aespecially about the local tax burden. As a New Yorker, I am always dumfounded when I receive a Federal refund but somehow owe New York State.
Last year, I inherited a nice bit of money, exactly the same as my sister who lives in Virginia. The tax differntial, despite having roughly the same AGI was over $11,000: NY over VA!
Posted by: mal | February 14, 2006 05:51 PM
If I have to pay taxes (and I realize that I do if I want to continue providing my good-for-nothing elected officials supplied with pork to poor into the public trough) I much prefer to pay them to my local taxing authority rather than some distant "national" pork barrel.
As far as I know, Mayor Mike has never used my NYC taxes to send armed forces to foreign countries.
Posted by: withoutfeathers | February 15, 2006 10:08 AM
A person's tax burden is their FULL tax burden - their federal, state, local, property taxes, sales taxes, telecom taxes and gasoline taxes.
Added up, the FULL tax burden for MOST working Americans, since the income tax is geared ONLY at working people, as "the rich" don't generate their wealth via income, is well OVER 6o% and can top 70%, depending upon income and where you live!
The "Fair Tax" (a NRST, replacing the income tax and making ANY income/productivity tax illegal) would be a great place to start, but it faces a huge uphill struggle.
Liberals simply don't grok basic economics and many special interests, including the accounting industry, real estate and private charities, etc all have a vested interest in maintaining the current system and they also have a very loud and effective voice.
Posted by: JMK | February 15, 2006 01:51 PM