Tuesday, April 17, 2007

Thoughts on Tax Day


1. Why is the IRS called a "service?" Couldn't it have been named a department like Labor, a bureau like the BLS or FBI, a commission like the FTC, an administration like FDA, an agency like EPA, etc.

2. From a previous post: Under the scoring rules of bowling, you get rewarded, not penalized, for being successful. If you get a spare, the scoring system rewards you by adding the pins from the next ball into the current frame, and if you get a strike you get rewarded by adding your next 2 balls into the current frame.

Under our progressive income tax system with 6 tax rates increasing from 10% to 35%, you get penalized, not rewarded, for being successful, productive and entrepreneurial, because the more you earn, the higher the tax rate you pay. The top marginal income tax rate has been as high as 91% in the 1950s and 1960s, and 70% in the 1970s.

If we scored bowling the way we tax income, we would subtract, not add pins for a spare or strike, i.e. penalize successful bowling.

If we taxed income the way we score bowling, we would reward success by reducing the tax burden for the most productive workers, not increasing it.

3. From an editorial by David Strom, president of the Taxpayers League of Minnesota, "The further a person climbs up the economic ladder, the harder the tax code hits them. By taxing higher incomes, the government discourages the most productive members of society from doing what they do best: producing.

Progressive income taxes serve to put a higher and higher burden on those people climbing the economic ladder, and serve to entrench the wealthy at the top. Because as lower- and middle- class workers climb that ladder, bigger barriers are placed in their way. The rich stay rich, while the rest of us work ourselves to the bone to get ahead."


4. A good collection of tax quotes and observations here from American.com.

5. Q: What's the difference between tax avoidance and tax evasion?
A: About 5 years in a federal prison.


3 Comments:

At 4/17/2007 8:39 AM, Anonymous Walt G. said...

This is an especially appropriate topic for today!

I guess the taxation system fairness depends on how one looks at the purpose of government and answers the following question. Is it government’s job to redistribute wealth? If not, there’s really nothing to discuss because the answer is simply a flat-rate income tax. If it is, those at the top will pay more than those at the bottom because they can more easily provide for themselves; that’s where the money is at. Just as you cannot expect to catch fish where there are no fish, you can’t expect to collect money where there is no money.

Using the bowling analogy for discussion. In a competitive match, two bowlers compete and the best bowler brings home the money. Fair enough. Right? Let’s change the scenario to a bowling game of life with the winner being able to eat and the loser not being able to eat. Now, let’s add a realistic twist to the analogy and envision a bowler with two arms and a bowler with no arms. I’m sure most would agree that the two-armed bowler has an advantage in the game of life, so should we expect equal contributions from both? I don’t think so.

I agree that sometimes people make decisions in life that either advantage or disadvantage their financial position, but others are just “born with no arms” and it’s impossible to separate the two. Consequently, I believe in a graduated income tax. The focus, I believe, should be on the prudent use of tax dollars. Saving tax dollars will decrease the amount of money necessary thereby reducing the amount of taxes collected from everyone. Those at the top have the most to gain from reduced spending because they pay the most in taxes.

I’ve read where those in Congress say they have never known a congressman get defeated for spending money. Conversely, they do get defeated for not spending enough money—in their own district. Maybe that needs to change.

 
At 4/18/2007 11:00 AM, Anonymous Bob Wright said...

While it's nice that others think they know best how to spend my money via socialist redistribution schemes implemented through the tax code, I prefer to make that decision myself.

Life is great when you get to spend other peoples' money to pay for things you want to do.

 
At 4/19/2007 1:19 PM, Anonymous Walt G. said...

I agree there are two schools of thought on this one. I take it you are a flat-rate proponent. So, what's 15% of $0. How about 15% of $100 and 15% OF $1,000,000. The rich will always pay more because that's where the money is at and people demand services like roads, police, fire protection. . . . I don't have a solution, but I’m pretty sure fairness is a highly subjective term.

 

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