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Tax Rumination

Let me offer a few simple, cranky, thoughts on taxes today.

(1) I like to believe I am not the dumbest person on the planet. I also happen to be a professional economist. And I have absolutely NO IDEA going into the year how much in tax obligations I owe to the government at all levels. If I get within 10% I would be incredibly impressed with myself. I find that to be “problematic.”

(2) In terms of tax incidence, it is well understood that at all levels, but even just at the federal level, the rich pay much larger shares of their incomes as taxes than the non-rich, despite the rhetoric. The table below, from the CBO, shows it for the federal level. But what I’d like to see, but cannot find from a cursory search, is a distribution of tax payments by household. For example, if you paid $10,000 in taxes last year, what percentile of the tax paying distribution does that put you in?

Average Federal Tax Rates, by Income Group, 2010

(3) Just for those of you who know me and my extravagant and unseemly lifestyle, my estimate is that Rachel and I, whose combined income puts us nowhere near the 1% (not that it should matter), paid a total of about SIXTY THREE THOUSAND dollars in taxes last year. Are we doing our share? And let’s ask simply, does that make us more or less likely to give to charities in a given year? Given that I am told that government is supposed to provide for my health and retirement security, does this make me more or less likely to save for my own health and retirement? Does this make us more or less likely to spend time in the community in a given year? Does this make us more or less likely to be sympathetic to all of the “hard work” our elected officials do? We can ask many more questions. But I’d like to do this exercise one day (were in not impossible due to Friedman’s stupid recommendation that we have tax withholding). I want to take $63,000 worth of cash. And I want to go to a research lab investigating basic disease pathways. And I want to go to a single mother in the inner city who is struggling to find work and feed her kids. And I want to go to a piece of state or national forest that is threatened by some development or other encroachment. And I’d like to ask, “are you better off with me handing some of this to you or by me sending it all to Albany and DC first and having their experts take care of you?” Note that this is not committing the “voluntarism fantasy” (more on that in a future post) but rather me committing the $63,000 to the causes that we support. Is there ANYONE, regardless of political affiliation, who would say,”yah, you know, I don’t think we want that money from you, better to funnel it through the political sausage grinders in DC and Albany, that way we can make sure it is spent properly!”

No reason to go on. I’ll just leave with my annual takeaway point. I think my family is upper middle class at best, and we pay $63,000 every year in taxes. My bet is half of this is totally wasted and funneled to politically favored interests. My bet is that half the remaining funds are used to supply services that we take advantage of (this is not to say they couldn’t otherwise be provided” and the remaining quarter maybe goes to do things we otherwise couldn’t do on our own. But the larger point I will beat on until I am in the grave … at all levels of government we spend DIRECTLY over $6 trillion. That government spending is equivalent to the second or third largest country on Earth if we relate that to GDP. And people are still screaming that we can’t get basic infrastructure provided. We can’t get adequate schooling provided. We can’t get enough funds for basic scientific research. Our military is squeezed. Our state budgets are squeezed.

Well, as they say, (insert mean words here). That’s pathetic. There is simply no case to be made that we are undertaxed, that we underspend, or can’t get done what needs to get done. Every time I hear that, (remember yesterday’s post) this is a gigantic admission that the entire apparatus is incompetent and failing, and yet that is proudly pronounced by supporters of big government each and every time this sort of an issue comes up. There is no reason for me to be charitable to that view. If there is a case to raise taxes more, or spending more, it’s NOT on the grounds that we’re not doing enough now. Not … at … all. That case can only be supported by arguing, however crazy I think it is, that we should do more, that families like mine should “contribute more”, that retirees “deserve” more, that all of our “obligations” to all of the millions of people with hands in the cookie jar must be met in full. Give me a break.

Finally, just to kick us in the nuts a little harder than normal, after I paid $90 to Turbotax to do my taxes (a racket if there ever was one), I was greeted with a sales tax on the software on top of it. Thugs. If you don’t want to make the same mistake as I did, I suggest you get your taxes done right here at E.A. Buck Accounting & Tax Services.

Update: the first article I read today is this one from Vox …

Yes, they are calling the lack of movement on infrastructure a “tragedy.” Quiz time everyone: how much of the federal gas tax dollars have actually been funneled to toy transit projects and away from roads? Question #2 is this really a “tragedy?” Question #3 so 6 years into the crisis we’re still in a depression? Can I just ask someone to tell me when it’s over? Finally … well … I think Vox is doomed. This particular author used to write far more nuanced pieces than this. Tragedy? … $6 trillion. Repeat it …$6 trillion and one of government’s most fundamental jobs is being deemed a tragedy. Emperor? Clothes?

10 Responses to “Tax Rumination”

  1. Gabriel Wittenberg says:

    It really is despicable. And I agree that the worst part is that the cries for more money/more data are never ending. Give a mouse a cookie…you know how it goes. I would like to hear more of what you have to say, more from a sociological standpoint, concerning the ‘crowding out’ of personal responsibility, and even morality (don’t worry about the poor, the state will do it for you!). Not only do I believe voluntary giving is WAY more virtuous, but it also has intangible benefits for the strength of a civil society. As you point out, who thinks throwing money into the sausage grinder is a good thing (If they actually made sausages, I would be more willing to pay taxes. The sausage analogy implies you don’t want to see it get made, but you’ll like the final product; I like neither)? It’s hard to quantify the value of giving in a ‘less efficient way’, so not paying a specialized bureaucrat to do something a 4 year old could do, but I certainly believe institutions like the church, book clubs, etc. do more then state sponsored charity programs could ever accomplish.

  2. Speedmaster says:

    If you were to read the City Newspaper (I do that when my blood pressure gets low), you would have the impression that the so called rich pay little if any taxes. I think they actually believe that.

  3. Greg Werbin says:

    I’m going to spend Thursday on the tax-percentile project and report back.

    • wintercow20 says:

      Does it make sense what I am asking? I actually think looking at only federal income taxes makes the chart above more skewed than it really is – my belief (guess?) is that the tax system overall is less progressive than the federal income tax data alone indicate. That I think HAS to be true given the structure of payroll, sales, property, etc. taxes.

      I think you can go to IRS data and compose the table I ask about for federal income taxes, but a more comprehensive picture would be nice to see. What’s interesting is this: aside from my snarky frustration at my high tax burden and the large government expenditures I am claiming, I am quite amazed at how much revenue (actually, spending is the right concept now) we can generate.

      Illustration: There are about 100 million households in America. My belief was that my own household’s payments of $60,000 (rounding) would be far above what the “average” household pays. Which means I am surprised we can actually generate the $6 trillion or so we spend each year. In other words, at $6 trillion in government spending, then the average spending burden, annually, per household is about $60,000. So does this mean I am getting a good deal?

  4. Harry says:

    One advantage you have with paying all those taxes is that you have less money left over to invest for your retirement or your kids’ education.

    As far as estimating your tax liability goes, Form W-4 provides comes with simple instructions for taxpayers with zero investment income.

  5. Harry says:

    I missed “rumination” from WC. This appeals to the sympathies of people who read The Holstein-Friesan World, and it is appreciated.

  6. […] here. And here. For starters. And by the way, go check out the premise to begin with. Try here. And here. And […]

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