The Cost of Paying Your Taxes
Tax day came and went. Other than the burden of paying 30-50% of your income to all levels of government, what about the burden of complying with the difficult tax laws? Just how difficult is it to comply with tax laws? H&R Block is expected to do just over $1 Billion dollars in sales for this past tax season. That is $1 Billion that individual families and small businesses pay out this year on top of their regular income taxes! The Tax Foundation estimates that in 2005, Americans spent $265 Billion just to pay their taxes! That is $883 for every man woman and child in the US, and $3,532 for a family of four!
Why are Americans paying so much money to, well, pay so much money? Just how difficult is it to comply with tax laws? The tax code is long, complex, and difficult, and the average person has almost no way of knowing what is current and what is not. The current US tax code is 66,000 pages long! Since 2000, 100 brand new forms have been added. Even the 2 page 1040 form that most Americans fill out is no walk in the park. If you want to learn how to fill it out, you need to read a manual that is 143 pages long. If you want to learn more about tax regulation to fill out the 1040 (and not just the instruction manual), you need to read IRS’s Publication 17. That publication is 295 pages long! That is why many Americans hire a tax professional to prepare their taxes.
It would make a lot more sense for the tax code to be a lot simpler. Experience has shown that a simpler tax code is good for the economy. Estonia, once an impoverished former Soviet Block country, instituted a flat tax in 1995. It was 28%. It has since dropped to 22%. They have seen annual double digit growth in their GDP. The amount of foreign investments has quadrupled in that same time. Hong Kong went from being a poor island nation with very few natural resources to one of the wealthiest nations in the world. They have had a flat tax of 15%.
As much as we hate to see government waste our hard earned money, it is time we start focusing on how expensive it is to pay our taxes.
Why are Americans paying so much money to, well, pay so much money? Just how difficult is it to comply with tax laws? The tax code is long, complex, and difficult, and the average person has almost no way of knowing what is current and what is not. The current US tax code is 66,000 pages long! Since 2000, 100 brand new forms have been added. Even the 2 page 1040 form that most Americans fill out is no walk in the park. If you want to learn how to fill it out, you need to read a manual that is 143 pages long. If you want to learn more about tax regulation to fill out the 1040 (and not just the instruction manual), you need to read IRS’s Publication 17. That publication is 295 pages long! That is why many Americans hire a tax professional to prepare their taxes.
It would make a lot more sense for the tax code to be a lot simpler. Experience has shown that a simpler tax code is good for the economy. Estonia, once an impoverished former Soviet Block country, instituted a flat tax in 1995. It was 28%. It has since dropped to 22%. They have seen annual double digit growth in their GDP. The amount of foreign investments has quadrupled in that same time. Hong Kong went from being a poor island nation with very few natural resources to one of the wealthiest nations in the world. They have had a flat tax of 15%.
As much as we hate to see government waste our hard earned money, it is time we start focusing on how expensive it is to pay our taxes.
posted by CincinnatiLibertarian at 8:30 AM
3 Comments:
I am not sure what you mean by a flat tax however, I am in favor of a national sales tax, referred to as the fare tax. A simple national sales tax paid by everyone and anyone who purchases a new product. (for further informaton on this subject visit your local book store, its written by Neal Bortz) If we abolished the highly unconstituational form of income tax, tax witholding and corporate tax our economy and people would have a lot more money in there pockets to invest. I am in complete favor of any and all ways to eliminate the taxation system we have in place.
The flat tax that I speak of refers to there being a flat, across the board income tax. A flat tax of 22% means that every taxpayer and every business pays 22% of their income or profits. No deductions, or very few deductions, and the first bit of money made is not taxable.
To make the entry of reasonable length, I did not talk about a sales tax, but I do think that would be MUCH better than what we have.
MORE BAD TAX LAW - - Ohio imposed a Commercial Activity Tax (CAT)for the "privelege of doing business in Ohio," several years ago. It is touted to be the balance for lowering our individual income tax rates. CAT tax is a miscarriage of justice and will probably never be brought in front of voters. It was passed by edict of legislators who have, for the most part, never worked outside of the justice industry. The whole thing is just smoke and mirrors. No Ohioan will ever save a single cent because of it. Further it allows some businesses to escape from their income tax liability and heaps the burden on the rest of us! They just flip flopped it around so it looks as if they have done something.
First, for small businesses the protocol for complying with the CAT is downright abhorrent! It is especially confusing for foreign businesses (from outside Ohio) who do business in Ohio. It is further complicated by the stipulation of registration (as if being incorporated in Ohio is not enough!)... a company must register to pay and once registered must pay (whether they reach the minimum threshhold or not!) For example, I am a small business owner and after 10 years my gross annual tickets are stable at about $140K/year. I dont register for CAT because I will likely NOT reach the minimum threshhold. Lucky for me, I do this year. So, I register (within 30 days of meeting the threshhold) and pay. The following year, I must UNREGISTER for the tax, because I think that I wont reach $150k for the upcoming year. The alternative to UNregistering is paying... So I must either pay what I may not owe (with no hope of a refund... all submissions are FINAL), or unregister then re-register each year that my gross receipts exceed $150K/year. So I must go through this on again, off again process perpetually until my business no longer exists (or more realistically, until I move away from Ohio like everyone else is!). Large corporations are nearly unaffected by this glitch, because they will likely remain registered continually (and have teams of accountants to accurately project their gross sales and tax liabilities).
More alarming: some industries are exempt from this CAT tax altogether. Most exempt entities you would expect, government agencies, non-profits, utility companies. But among the exempt are some new ones... banks, insurance companies, and certain businesses 'affiliated' with financial and insurance institutions. Thusly, some businesses, namely the ones with all the money, who are NOT exempt from the regular income tax that is being reduced, will be exempt from the balancing CAT tax! - THEY WILL REAP THE BENEFIT FROM THE INCOME TAX REDUCTION AND ARE EXEMPT FROM THE CORRESPONDING CAT TAX INCREASE!) NOT FAIR! CAT tax is a huge burden for small business and is backdoor corporate welfare for "Tax and Steal Taft's" banking and insurance industry cronies. (You remember Taft who 'invested' some 300 million of our BWC money with one of his coin investor buddies only to have it wash out) WHAT SPECIAL VALUE HAS A BANK, INVESTMENT BANKER OR INSURANCE COMPANY THAT THEY SHOULD BE EXEMPT FROM THE TAX THAT ALL OTHER BUSINESSES PAY!!!
Opposed in Franklin County by the Ohio Grocers Association who contended that the CAT tax is actually an excise tax (a tax imposed on the sale of goods, and for the record... IT IS AN EXCISE TAX! Franklin County Court of Common Please even said so) Well, Ohio's constitution prohibits excise tax from being levied on foodstuff. The Common Pleas court in Franklin County is apparently confused. They have agreed that it IS an excise tax, but allowed it as constitutional because it is ALSO a franchise tax... OMG! Could we have a thinner hair split?!? Contrary to the Tax Commission's argument that the amount of the CAT tax cannot be boiled down to the liability of each transaction, logic dictates that 1% of 100 plus 1% of 500 plus 1% or 400 ACTUALLY DOES EQUAL 1% of 1000! (I assure you, the math works the same in reverse, so it CAN be boiled down to EACH transaction) So I ask you, does it make a difference where the calculation occurs if the end result is the same? The Franklin County Common Pleas court apparently thinks so. Their malignant opinion also says that it is different because all businesses pay it... (an outright falsehood!) If we were to allow businesses to deduct their expenses before calculating the CAT... THEN it would not be an excise tax. SO, if it IS an excise, then it IS prohibited to be levied on foodstuff by Ohio's constitution, regardless of whether it additionally qualifies as another different type of tax.
So now, the Grocer IS paying this sales tax while the banker and insurance underwriter are relieved of their income tax burden!
What has happened here is that some legislators who have no idea or experience working in the private sector have dictated a tax policy that is not only contrary to our constitution, but is ALSO a form of corporate welfare... IT IS JUST SICK! DOUBLE SICK! I have massive objections to this type of deceitful practice.
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