Federal tax day was Tuesday. Good time to talk about taxes and I like the idea of a flat tax.
I read an article the other day that reported that Californians are fed up with taxes. Without knowing much about the details, I assumed that they are upset with the high personal income, property, sales and what other taxes are levied upon them. Reading a little further though and it looked like they were upset with federal taxes, too. Then, reading a little further I found out that they were tired of the taxes, but not the spending. They just thought someone else, people richer than they, should pay the tab.
No surprise there, really. Most of us feel that way. We’ve paid enough. Someone else should pay for it. Problem is in the details. Who should pay and how much? Right now anyone who is employed pays 7.65 percent of their salary into Social Security and Medicare funds. The employer matches that. If you’re self-employed you pay both sides or 15.3 percent of your income. Then you pay your local and state income taxes which could be another 3 to 5 or even 9 percent (not Florida, Texas, Tennessee or Nevada). On top of that are property taxes and sales taxes, soon to go to 8 percent of purchases in Pinellas County (not 8 cents as reported in the Tampa Bay Times).
For many, federal income taxes take more than food, clothing, or rent combined. That’s pretty significant. Others, however, pay no federal income taxes or get a refund (reportedly 47 percent are in that category). Kind of a big gap between zero and maybe 20 percent if you don’t count SS and Medicare taxes as taxes as I do because both are kind of forced retirement that benefit each person in the end. This gap is what is called progressive: Placing more taxes on those who can afford it. Making it more progressive and supposedly more fair would be to tax the higher incomes at higher rates than now.
Some point out that taxes used to be 72 percent in the happy-days 1950s as compared to 39-42 percent today. That overlooks deduction and exemptions and distorts the discussion because few point out that those high rates are only on the last bracket of income. Also, very few paid those rates for a multitude of reasons. As they say, it’s all very complicated. So what to do about it?
Well, for one, there doesn’t seem to be much sentiment for cutting spending. And, we’re dealing here with federal taxes only. The feds spend the most and have created a $17 trillion deficit. If we’re going to spend the same we have to raise revenues enough to pay for everything plus the debt. Part of the way to do that is to get more people paying taxes whether through getting more people to work, eliminating frauds and cheats, or just broadening the base to tax more people.
Personally, I start with the premise that government is not entitled to a citizen’s earnings. It does not belong to them. It, government, has to negotiate to provide services we’re willing to pay for. After that, it’s my personal belief that everyone should pay something even if it is $5. If you aren’t paying in, you’re not a part of the system. That makes a difference psychologically at the very least.
One way to do that is a flat tax (it is not progressive other than the person who earns more pays more). Again, surveys say that people like the idea of a flat tax, but then complain that the rich guy doesn’t pay enough. Perhaps one way to do it is to eliminate all deductions, but create a base at which the tax starts but also establish a minimum tax. That’s progressive. Mainly, it gets away from the matter of providing a million exemptions that end up in an incompressible tax code of 75,000 pages that few can accurately figure out.
No one seems to be happy with what we have now and a flat tax would be simpler and easier to collect.