Declare Those Pennies on Your Eyes

IRSWriting 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.

 

 

 

 

 

Advertisements

Turning Off and Tuning Out

I’ll admit that I’m a political junkie and a news addict. I read multiple papers each day, listen to NPR, check out CNN, and Fox News. Andrew Sullivan and the Huffington Post are must reads throughout the day. Slate, the Economist Magazine, Mother Jones, and the National Review make my weekly reading list. Heck, I even check out Bill O’Reilly on occasion just to hear what the crackpots are thinking.

But I am growing weary of the idiocy that passes for political thought in America today. Nancy Pelosi has decided President George Bush is to blame for the IRS scandal while she defends President Obama because he can’t know everything that happens in every government department. One assumes, Speaker Pelosi, that if the current President doesn’t know what’s going on, perhaps the ex-president is equally in the dark?

Rep. Stephen Fincher voted against food stamps (because the bible told him to) while accepting millions in farm subsidies for his family farm. Don’t you wonder if politicians ever listen what they actually say? Food stamps just make individuals dependent on the government, Rep. Fincher argues, farm subsidies help those farms that are struggling when times get tough.

Huh?

I’m no economist, and I didn’t stay at a Holiday Inn Express last night, but I’m fairly certain one of the basic tenets of the free market is, in fact, not propping up businesses with tax dollars. The free market only works, Mr. Fincher, if some businesses fail.

Yet, I still listen, read, and watch the news, enjoying that sense of ironic detachment as we watch politicians perform linguistic gymnastics justifying hypocritical and contradictory ideas.

Until this week.

As I listened to Senator Rand Paul defend Apple computers for paying what they “legally” owe, regardless of the nefarious methods by which they avoid paying their fair share, I realized I had enough. At some point, the absurdity of hearings celebrating Apple’s ability to avoid paying taxes while holding hearings across the street about the IRS investigating conservative political organizations to be sure they pay the correct taxes was just too much.

And I turned off NPR earlier this week when Sen. Levin of Michigan refused to recognize that perhaps, just maybe, Congress might need to accept a little, tee-tiny amount of blame for passing ridiculously complex tax laws and using Capitol Hill hearings as opportunities to politicize and demonize everything from apple juice to disaster aid. Is it any wonder that various agencies and workers investigate groups their powerful political supporters characterize as nazis and terror groups?

What really pushed me over the edge, though, was listening to President Obama tell us, yet again, that he plans to close Gitmo and ask Congress to re-define the use of drones in the war on terror. Great goals all, and I have a great deal of sympathy for the President’s inability to convince Congress Gitmo is largely a concentration camp whose mere existence is offensive to American ideals of truth, justice, and fairness, but I find his stance on drones disingenuous. If you don’t like the way we use drones, Mr. President, stop using them that way. Just because an act is legal doesn’t mean you actually have to perform that action.

We shouldn’t have to pass a law showing us the moral path.

But, as I was falling over that ledge, the Republicans started throwing rocks from above. Evidently, the mere act of giving Congress the task of defining legal drone use and the simple hint that we might re-define the war on terror equates to letting the terrorists win. Remember, though the President is a Kenyan born Muslim who is trying to enact Sharia law in place of the Constitution. Ironically, of course, too many of those politicians ready and willing to kill in the name of American freedom deferred when their names where called back when it mattered.

Because, in American politics today, hate has replaced honest disagreement. Personal attack has replaced ideological differences.

And I’m fairly certain personal ambition has replaced willing public service.

This weekend the politicians can go on tv and explain how they can vote against disaster aid for the east coast while demanding it for the mid-west. The sons and daughters of immigrants, both legal and illegal, can argue about protecting our borders and deporting human beings. Married men and women can stand with their spouses while telling the rest of us who we can, and can’t, marry.

And they can all attack the IRS and our uneven, hypocritical, unethical, and incomprehensible system of taxation while never admitting they have seen the enemy and it is them.

But this weekend, as we honor those men and women who serve our country protecting my right to be apathetic and my elected representatives’ right to say stupid things, I’m turning off and turning out.

I’m pretty sure when I tune back in Tuesday, I won’t have missed much.

2+2=5, Or the Federal Budget

The latest Pew Poll shows that, surprise, most Americans don’t have a clue how the federal budget works. That’s okay, though, because I’m also pretty sure our elected officials don’t understand the budget either.

In our defense, budgets are complex things once you turn 18 and get all grown up. For my kids, handling money is relatively easy. Money comes in and money goes out. In large part, these are fixed things. My son gets a budget allotment from us and he works at Outback a set number of hours each week. He can estimate his income within a few dollars. His expenses depend on his personal choices. There are no long term deficits (housing), mid-term deficits (cars), and short term contracts (phones) to worry about. Recurring costs are minimal, mostly because we don’t charge our kids rent or utility costs (although we did once start charging my older son a dollar every time his shower lasted longer than 12 minutes).

Our household budget gets a bit more complex. We have fixed costs (house, car, phone, insurance) and anticipated costs (utilities, food, gas, cable). These are usually about the same each month. Fortunately, we also have a fixed income. We know within a few pennies how much money we will make every month. Obviously, that means when we buy the house, car, etc, we know how much we have to spend. We also, though, have variable costs: medical, family emergency, total inability to cook night, increased alcohol consumption (based on too many inability to cook nights), and vacations (to try to stem the previous costs). Still, all in all, we know each month how much money will come through the door and about how much will go out. We also know, though, that the income can go up and down (based on taxes, job-related issues) and the costs can go up or down (pay off the car, insurance rates). The complexity is that we do, in some way, have to plan for those contingencies, knowing we have to make some purchases based on potential future expenses.

Naturally, that means I should understand the federal budget. Except that I don’t. A federal budget has variables that seem almost infinite: it is my budget on steroids. The amount of money coming in can depend on natural disaster, terrorist attacks, consumer confidences, unemployment rates, world markets. The cost has just as many variables. Economics, I tell my son, is like creative writing with numbers. The experts are all just guessing (educated guesses for sure) but they can only anticipate. And they study this everyday.

That leaves the rest of us guessing (often not educated). Let’s start with the obvious reasons we are so confused:

1. I can’t count to a trillion (or a billion, and I have my doubts about the number of zeros in a million). The number one reason most Americans are stupid about the budget is that the numbers we discuss are incomprehensibly large. The well meaning among us can talk all day long about decreasing spending and creating efficiencies,  arguing that cutting aid to Africa and reducing the federal work force will save millions of dollars. The problem, of courses, is that aid to Africa and the size of the federal work force isn’t driving the deficit. And, hard as it is to believe, saving a million dollars (or even 10 million) is a bit like arguing that saving $10 a month will let you buy that condo in Maui. Because we don’t quite get the numbers, we keep imagining we can reduce the deficit by cutting the low hanging fruit. We can’t. There isn’t enough fruit there and we consistently under appreciate the importance of that money. Cutting aid to Africa will save us money, until the disease and disharmony requires a larger response. Cutting federal workers will save the government money, but the service they provide doesn’t end. Outsourcing simply transfers the cost. (Think of it this way–if your city outsources garbage collection, that simply means you won’t pay your city to collect the garbage. You will still pay for garbage collection, but you will pay a for-profit company. They might be more efficient by paying workers less money with fewer benefits. That short term savings becomes a long term cost in medical care, retirement, etc.)

2. Americans aren’t really ready to make the difficult choices to cut programs that will reduce the deficit. We have the greatest military in the world and we damn well should based on the money we spend. The reality is that the military-industrial complex has done exactly what President Eisenhower warned–it grows and consumes. I love freedom, and I know that freedom isn’t free, but I also know that our military expenditures have taken on a life of their own. Simply put–we must reduce our military footprint, reduce our reliance on increasingly expensive technology, and stop being the world’s police. If we aren’t willing to do so, then we have to accept an increasingly expensive military. In other words, we need to decide that we can have a less expensive version of freedom. And by all means, let’s stop subsidizing wealth for Lockheed Martin’s executives.

3. Our social programs must change. Social security is important and vital to the well-being of an aging work force. We must continue to support the social safety net for those workers whose lifetime profession didn’t include 401(k) programs, pensions, and other job related retirement accounts. American cannot be a country that abandons laborers whose jobs depend on physical abilities that fade over time, pushing them to either lower paying jobs or retirement. Doing so requires that we stop trying to treat all retirements equally. The social security age should be raised for certain professions and certain income levels. They guy down the street who runs a backhoe and digs ditches probably has a more difficult time doing his job at 62 than the college professor living in my house. More importantly, he doesn’t have an employer matching his retirement fund dollar for dollar. Index for income. We all benefit from putting money into Social Security because no one really wants a bunch of old, poverty-stricken homeless people running around. Or moving in with us.

4. Medical costs are out of control. Read Steven Brill’s Bitter Pill: Why Medical Bills are Killing Us. Let’s stop fighting about who pays and worry about why we are paying so much.

5. More revenue is not evil. Federal taxes are at their lowest levels in years but federal tax law is more confusing than a physics dissertation to an art major. We can increase revenue and stabilize revenue pretty easily if we could, and I know this is a radical concept, consider the greater good and not simply our own self-interest. Let’s start with two basic concepts: everyone pays something and we eliminate loopholes. We do this via either a national sales tax. Want to pay less in taxes, buy less stuff. The idea that the rich would reduce spending misunderstand the rich. Bill Gates doesn’t live in a mansion because he has to. He lives there because it speaks to his wealth. A consumption tax would, in fact, allow us to budget based on 10 year spending averages. If we don’t like the consumption tax, then create a progressive flat tax: 0-20,000 pays 10%; 20,000-30,000 pays 15%, 30,000-40,000 pays 16% . . . You get the idea with a top rate at 25% for those making over $5 million. No caps. No loopholes. And no whining. If you are making $10,000, put some skin in the game. If you are making $10 million, you will not stop producing or stop pushing yourself to make money to avoid taxes. You live in the greatest country on the planet and you make $10 million because you live here. If you don’t like it, leave. Go try to be rich in Venezuela.

It’s either that or let’s make that 1 trillion dollar coin. Heck, let’s make two.

Paying the Taxman, I think

screamI am relatively convinced that tax law and IRS forms are designed and written by college freshman shortly after toking up. To think otherwise would assume that sober men and women with fully functioning frontal lobes could conceive of these forms. That’s more frightening than Hannibal Lecter, Jeffrey Dahmer, or the zombie apocalypse. Feel free to kill me, boil me up in a stew, and feed me to the neighbors–just don’t make me try to figure out if I need to complete form 1089, schedule D, appendix RULOSTYET.

No one really likes to pay taxes and, other than Warren Buffett, I don’t see my neighbors rallying for fewer exemptions. But, I think, when we dig deeply enough, we can see that the basis of the tax code has good intentions. Like washing the dirt, grime, and soiled sins of humanity off the early explorers of the new world, we can see a clear sense that the original intent was noble. We wanted to create a system that allowed us to share the costs associated with our core national values.

I’ll also admit that I have myself sucked at the teat of big government. I’m a product of public schools, have allowed the government to partially subsidize my college education, happily contribute part of my salary to help fund social security, and willingly pay to keep our soldiers armed and ready. I am also proud to contribute my fair share to pay for roads so my friend who owns a business can deliver goods, to pay pennies on the dollar so my colleagues at public institutions can teach and research, and to send in my little bit to fund the arts and Big Bird. I don’t even, for the most part, mind paying the salaries of our political leaders. (Well, most of them. I don’t what the heck the voters in some districts are thinking by electing some of those numbskulls.) I’m even willing to fund a savings account to help states deal with natural disasters and pay so scientists can ensure my food arrives safely to my table. I sure as heck can’t afford my own personal taste tester.

I’m not even horribly bothered by those people who take advantage of the system or wasteful government spending. We are a nation of 300 million people. Inefficiencies are part and parcel of the deal. For every welfare cheat or $300 toilet seat, we saved someone’s life, fed a hungry child, and protected someone half-way across the world today. Some people cheat and some people get more than they deserve. Hell, I’ve only got 4 people in my house and we have the same problem.

These are the shared costs of being an American. I’ve got your back and, I hope, you’ve got mine. The good outweighs the bad.

But our IRS forms and our tax systems seems designed to make me bitter and angry about paying my taxes. The complexity of the system contributes to our large national malaise about shared costs and shared benefits. Federal taxes are, for the most part, lower than they have been in five decades. More people than ever are benefiting from our educational subsidies, social security, and medicare. We have the best military in the world. And we just had yet another peaceful government election to decide who will pass laws. (If you need a refresher on how amazing our election cycle is, go visit Syria, Egypt, or Venezuela.) Despite what your crazy right wing friend writes on Facebook, things aren’t that bad. We have 11 million people who risked life and limb to get here so they could join us.  We are, and I’m not afraid to say it, an exceptional country.

But if we are so darn good, why can’t we figure out a tax system that isn’t so darn difficult? At what point do we create a system so unwieldy it becomes a mockery of itself? (Yeah, yeah–I’m fairly certain we are there already. Every time I do my taxes, I feel like I’m in a Saturday Night Live skit. I keep waiting for Will Ferrell to walk in the room.)

More importantly, why have we created forms designed to collect my share of government expenses (which I’m willing to pay) that alternately find ways for me to avoid paying my fair share? It’s a bit like giving students a math test but offering them a chance to fill out alternate forms explaining why they should be exempt from answering certain questions.

Our tax system has evolved into a mess of contradictory desires. Fundamentally, though, the system has become so burdensome the amount we pay seems disproportionate to the benefit we receive, but most importantly, the way we pay creates perceived inequities and a sense of unfairness. Why, we might ask, does the rich guy get to itemize for his house (because he pays so much) but all us in the middle don’t? Why, we might wonder, does the person on the bottom pay nothing? We become, and the form fuels this idea, more and more focused on what others are paying or not paying that we lose sight of what we gain.

But when the form has 15 exemptions, deductions, and various goofy exceptions designed to give you a break on one side while taking it back on the other, what else are supposed to think?

I guess the best thing to do is grab the calculator, light up, and start filling in the boxes. Hopefully, I can claim I’m smoking for medicinal reasons. There’s a deduction for that, right?

Things I Read

And Things I Learned

Washington Monthly

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

Joanne Jacobs

Thinking and Linking by Joanne Jacobs

Inside Higher Ed

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

NYT > Politics

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

Balloon Juice

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

Scott Adams' Blog

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)

The Full Feed from HuffingtonPost.com

Do I contradict myself? / Very well then I contradict myself, / (I am large, I contain multitudes.)