Thursday, April 19, 2012

My View

Random ruminations from your resident curmudgeon...

Now that the tax filing deadline has passed, it is instructive to look back and see what has just happened to those of us that pay taxes. Here is what you should know and keep in mind the next time that you hear about the profligate spending that occurs at the federal level and the desire for more of our income in higher taxes. According to statistics compiled from the Internal Revenue Service for 2010 which is the last year for the data, Americans that made over $50,000 paid the majority of federal taxes. Those wage earners had an effective tax rate of 14% and carried 93% of the tax burden. By contrast, those that made less than $50,000 had an effective tax rate of 3.5% and paid 7% of all taxes. 143 million tax returns were filed in 2010. 58 million, or 41%, were from filers that did not pay taxes. That means that the tax burden in this country fell on 85 million families or individual wage earners. Additionally, according to the IRS, those filers that did not pay any taxes received $105 billion in refundable tax credits. So not only did 58 million filers NOT pay taxes, but they got credits totaling $105 billion that is a transfer of payments from tax payers. I expect the 2011 data when released will show similar results. Keep this in mind the next time that politicians talk about raising your taxes. And this is the crux of the problem: a shrinking percentage of families and individuals are supporting a growing number of non-paying households. Eventually, the percentage of non-paying households will eclipse the number of paying households if the trend continues. Now you see why cutting government spending has become an intractable problem for those in Washington.

I finally hit my stride. I backed over it in the driveway.

As painful as tax day has become for more Americans, it has the potential to get much more painful January 1. That day is being euphemistically called "Taxmegeddon", and it has been dubbed that because if Congress fails to act, a myriad of automatic tax increases will go into effect on that day. The current tax cuts that were originally enacted in 2002 will expire, and if they do, taxpaying Americans will face an automatic $494 billion tax hike. According to the Heritage Foundation, most Americans will face an average tax increase of $3,800, and 70% of the tax hikes will fall on low and middle income families. Payroll taxes will automatically increase, and workers will have a bigger bite taken out of their paycheck. That is just the start. There are five tax hikes that will be solely related to Obamacare, if it is not repealed. There is a surtax on investment income; estate taxes will increase significantly; and income tax rates will increase across all income levels. Think this will help the economy grow and entice businesses to hire new employees? Neither do I. This election in November has lasting consequences for each of us, and we as taxpayers have to elect and hold accountable our leaders to constrain the growth of government and begin to meaningfully cut government spending.

Cheat on your taxes and you will end up in one of two places- jail or working in Washington.

About those leaders and bureaucrats in Washington: they are certainly quick to want to collect your tax payments and you face serious consequences if you fail to pay what you owe. How about those in Washington? A report by the IRS showed that in 2010, 98,000 federal employees owed over $1 billion in back taxes. Let that sink in for a moment. Here is more. Members of the U.S. Senate alone owe over $2 million in back taxes. Now let me ask you this: do you think the IRS would be as lenient and forgiving toward you or me as they are to those in Washington? I agree with you- they would not. And this is part of the problem. Our leaders and those charged with enforcing the rules and collecting the taxes that are owed view themselves as better than or above you and me. It is an attitude of privilege and exemption. We should pay, and we will be asked for more in the coming months and years while those "in charge" do not abide by the same set of rules. Washington has created a caste system of rulers and administrators that not only think they know what is best for us but have exempted themselves from the law. And that has to change by our action, involvement, and our votes. Right now.

I flirted with disaster last night. Now it won't stop texting me.

And that, my friends, is my view.

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