Posted by: bkivey | 15 April 2010

“Let Me Tell You How It Will Be . . .”

I’m proud to be paying taxes in the United States. The only thing is – I could be just as proud for half the money.

Arthur Godfrey

Another Tax Day is upon us, the day when many Americans, to paraphrase Oliver Wendell Holmes, Jr., assess whether the civilization they are buying is worth the price they are paying. For the 53% of Americans that actually pay income tax, the answer is increasingly: not so much. What many productive people see is government at every level not only holding a gun to their head with one hand and sticking the other in their back pocket, but becoming more intrusive and aggressive in the action. Most people understand that a level of taxation is reasonable and necessary, but it’s harder to understand why more and more money is needed for every pet political program under the sun. A politician might promise, but it’s you that’s got to deliver, and you don’t get a say. Sure, you might be able to throw them out of office next election, but the damage has been done.

I live in Oregon, and the median annual income in 2008 was $35,956. That’s not a tremendous amount of money. If you made around that amount you would have the privilege of paying 25%, one dollar in four, to the Federal government. In Oregon the maximum state income tax bracket of 9% kicks in at $7,150, so your income tax liability is 34%. One dollar in every three that you earn is going to government, and we’re just getting started. Some counties charge a local income tax, and I have lived in one city, San Francisco, that charged a city income tax.

So after the Feds and the State and possibly the County and the City have taken their cut, the rest is yours, right? Well, no. Because you are going to be subject to one or more of the following taxes as you go about your business:

Building Permit Tax

CDL License Tax

Cigarette Tax

Corporate Income Tax

Dog License Tax

Federal Unemployment Tax (FU TA)

Fishing License Tax

Food License Tax

Fuel Permit Tax

Gasoline Tax

Hunting License Tax

Inheritance Tax

Inventory Tax

Intangible Tax

IRS Interest Charges (tax on top of tax)

IRS Penalties (tax on top of tax)

Liquor Tax

Luxury Tax

Marriage License Tax

Medicare Tax

Property Tax

Real Estate Tax

Service charge taxes

Social Security Tax

Social Security Tax

Road Usage Tax (Truckers)

Sales Taxes

Recreational Vehicle Tax

School Tax

State Unemployment Tax (SUTA)

Telephone Federal Excise Tax

Telephone Federal Universal Service Fee Tax

Telephone Federal, State and Local Surcharge Tax

Telephone Minimum Usage Surcharge Tax

Telephone Recurring and Non-recurring Charges Tax

Telephone State and Local Tax

Telephone Usage Charge Tax

Utility Tax

Vehicle License Registration Tax

Vehicle Sales Tax

Watercraft Registration Tax

Well Permit Tax

Workers Compensation Tax

 

I’m not a tax expert, but I would bet that our hypothetical person making the per-capita income is going to spend close to 50% of their gross income in taxes. In states that have an income tax and a sales tax I would think that they would spend more than half of their income in taxes. That’s ridiculous. And the health care reform law will bring additional taxes to a paycheck near you, as well as forcing you to buy health care insurance, which in itself is a tax. There have been members of Congress who have floated the idea of a new consumption tax, the VAT, as a way to pay for the greatly expanded Federal government that compassionate people everywhere are so fond of. For a look at how that has worked in Europe, you can check out this article in The Wall Street Journal.

What we have is an unholy trinity of a near-plurality of people who don’t pay income tax and have no stake in the system, government at the State and Federal level that is so obviously hellbent on governing against the will of the people, and a vocal and intolerant minority that believe that their compassion for ‘the poor’ should trump the laws of economics. Is it really any wonder that the bare majority of Americans that pay income taxes should feel a wee bit put upon?

I would propose that a good start to restoring some rationality to the system is not to levy additional taxes on ‘the rich’ and the middle class, but to levy taxes on those the left is fond of calling ‘the poor’. Yes, the 47% who do not currently pay income taxes. I am not advocating the same level of taxation that I used in the earlier illustration, but does not everybody in this country enjoy the benefits provided by those who pay taxes? Why should a society expect a lesser degree of committment to the common welfare from those of lesser means? In an equitable society, it is vitaly important that all members have some skin in the game. Lack of participation, lack of investment and committment; these are the true inequalities, and the more they are encouraged out of a misguided notion of compassion, the weaker the society.

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