I'm just sayin': Taxes are a love/hate relationship - third in a series

Talk about it

Taxes – love or hate them! I assume we all hate them, but who loves them? I am sure there are a few; those in government who view taxes as a means to an end for their political agenda, for instance.

In my last column, I wrote about the U.S. Constitution and the powers it allows for the executive, legislative and judicial branches of our federal government. One of those powers is the “power to lay and collect taxes, duties, imposts, and excises to pay the debts and provide for the common defense and general welfare.” (Article I – Section 8)

That wording has empowered the legislative (Congress) and executive (president) branches of the federal government to interpret it however they desire in order to justify tax law to support special and ideological interests. We either love it or hate it. There is no in between. Even though we may accept it and pay it, taxes result in a love/hate relationship.

Of all the taxes we have to pay, income tax causes the most debate. Income tax is the largest source of revenue for the government; the second largest source being payroll taxes for Social Security and Medicare. So, let’s address the income tax.

The first income tax law provision was instituted in 1862 to pay for the Civil War. Before that, the federal government got its revenue from internal taxes on things like distilled spirits, refined sugar, tobacco and government bonds. The 16th Amendment to the U.S. Constitution made income tax a permanent fixture of the U.S. tax system in 1913. Since then, there have been many tax changes in order to comply with the needs of the times. Today, the U.S. Tax Code is 72,536 pages long. Yes, that’s right. Stop for a moment and contemplate that.

How have we come so far from the original intent of the Constitution, which was to give the federal government the nominal authority to take care of the citizens and pay its bills? Some may say that tax code additions and changes have been made to accommodate the times. After all, the country is more populated and business is much more complicated. The truth is that the tax code and government regulations make business more complicated. (I will address regulations in a future column.)

Think about the monster industry that has grown up around preparation and record keeping for income tax purposes. In the 18th century, who would have been able to tell you what an income tax attorney is?

Currently, our tax code is based on the principle of what is known as a “progressive tax system.” In other words, the more money you make, the higher the percentage of tax owed. This is designed to give taxpayers at the lower end of the income strata the ability to keep more of what they earn and hopefully give them the resources to improve their life. It is also based on the implied idea that those earning higher income should shoulder a heavier burden for the common good. Currently, the lowest income tax rate is 0 percent; the highest rate is 35 percent. The top threshold that pays 35 percent is 1 percent of the taxpayers, and they pay 37 percent of the total taxes taken in by the IRS. The top 50 percent of taxpayers pay 98 percent of the taxes. So, basically, the other 50 percent of taxpayers are paying 2 percent of the total. Now, is that really fair?

Next column will be thoughts about a fairer income tax system. Until then – I’m just sayin’.

“The hardest thing to understand in the world is the income tax.” – Albert Einstein

Tags: opinion, columns