April 17, 2017 1 Comment
Writing about taxes on tax day seems so intellectually lazy. Complaining about our complex, confusing, largely unequal, and definitely incomprehensible tax system simply doubles down on the cliche. After all, American’s don’t agree on much, but I think it’s pretty universal that the systems by which we collect money at the local, state, and federal level have become so bloated and outrageous that the only people satisfied are politicians sucking at the public teat and tax accountants who try to guide the rest of us lost souls through the process. Apologies to tax accountants for tethering you to politicians.
Yet, here I sit the morning after our college-age son had to pay 10% of his pretty meager “income” to Uncle Sam after filing his taxes last night. Both our boys worked hard and earned generous academic scholarships. Instead of forking over tuition dollars, I’ve been able to buy a big screen t.v. (Who says reading to your kids doesn’t pay off!) Last night, though, as my younger son completed his taxes, we found out that scholarship money above and beyond tuition, fees, and required books counts as taxable income.
Really? Somehow, some hair-brained numbskull in our nation’s capital decided that we really need to go after all that extra money full-time college students are pulling down in their spare time between classes. Can’t let those crazy kids live too high on the hog, after all. Better declare those pennies on your eyes, as George Harrison says.
I’m not trying to express some sort of Unabomber outrage. I’ll willingly admit that I do think people need to pay their fair share in taxes. For my money, our taxes give us access to goods and services that make America great, and we need to share those costs. At the risk of oversimplification, it’s much less expense if we share the cost of military protection among the all 300 million of us than if we all form our own isolated feudal compounds and hire our own protection. Public schools, public roads, consumer protections, and thousands of other “goods” work much better when centralized and when costs are shared. Having healthy debates about what those shared costs should be is worthwhile (and, in theory, something we do every election cycle when we vote for candidates based on their debates about the issues–ha, ha, ha!).
As such, I don’t mind taxes on goods and services, property taxes, or other taxes associated with my choice to consume various goods and services. I think it’s worth reminding everyone that rich and poor, citizen and alien, old and young all pay taxes into the system simply by living and consuming in America. Likewise, I have no issues with federal taxes on income, capital gains, inheritance income, and I fully support requiring that all workers pay into the federal system, even if that amount is as small as 1% of earned income. There’s nothing wrong with ensuring everyone has a little skin in the game. I’ll even admit that I’m a fan of a progressive flat tax system with limited deductions to avoid letting the government pick winners and losers based on who hires the best lobbyists.
Full-time students should have access to that limited set of deductions. My son pays taxes when he buys his books, pays for food, and pays rent. He, like any full-time student moving toward graduation, has limited earning possibilities, though, if he’s going to take enough classes each semester to graduate in four years. Those students who work, like my older son who covered his living expenses as a student, pay taxes every paycheck, but they (usually) get a refund at the end of the year because they don’t earn much.
For students who earn scholarship money above and beyond the cost of tuition, though, the tax bill hits even if the amount above and beyond is the same as their colleagues who work. My son last night paid 10% of his scholarship to Uncle Sam. I’m sure if there’s a CPA reading this blog you can tell me there was IRS Form 666 or something we could have filed, but my son shouldn’t have to do do. Likewise, my older son, once he marks full-time student on his W-2 should be exempt from having money withdrawn. He shouldn’t have to wait for a refund. Let’s put money in the pockets of those citizens who need it the most, especially those who are working to improve their futures (and future earnings).
Like so many other things, we can’t trumpet the value of an education and then actively work to make earning that degree difficult. Students who earn scholarships are being paid to do well in school. That money isn’t income; it’s a long-term investment. After, Uncle Sam’s going to get his eventually, anyway.