Friday, March 12, 2010

Thinking of taxes, tea, and coffee

(From the March 11, 2010 issue of the Grand Haven Tribune)

I’m thinking ahead one month and back 217 years. One month from now it will be almost April 15, the deadline day for paying taxes. Meanwhile, roughly 217 years ago, in 1793, a group of disgruntled Americans tossed a bunch of tea into Boston Harbor because of their anger about taxes.

My how history seems to repeat itself. One of the more popular current political stories of the past year has been the “Tea Party,” a group of Americans who are motivated by their anger at the increase in taxes and the size of government. They even had their own convention last month in Tennessee.

Those early Americans were upset about the British East India Company being allowed to import tea to the colonies without paying taxes. The decision to allow this further angered Americans already protesting about “taxation without representation.” So they made their point.

Taxation without representation seems to be an issue today as well. It’s shocking to look at the difference between the gross and net amounts on a pay stub and realize how much is being sent to Lansing and Detroit—and how little seems to come back. Meanwhile, news reports reveal how much of the current activity in Washington D.C. happens behind closed doors. Unions, associations, and corporations with lobbyists have special access to meet with people in the White House and Congress, many of whom had “issues” paying all THEIR taxes, if you recall. When the U.S. Treasury Secretary and a Congressman who heads a tax committee didn’t pay their personal taxes, maybe the Tea Party is on to something.

Now, such organized revolution is not my cup of tea you might say. But as I have grown frustrated with taxes lately, such desperate action does have a certain appeal. For years our politicians have been talking about cutting taxes, simplifying the tax code and making the tax code more fair. But every year it seems that we pay more taxes and it gets harder to do so. When I say harder, I don’t just mean the difficulty in parting with my hard-earned money. It’s the process of actually figuring out what I owe the government.

Lots of folks bring their records and forms to an accountant and let them handle it. But that costs money, and you still need to keep records during the year. Some of you, if you’re like me, try to prepare your tax forms yourself. If you qualify to use the “E-Z” form, it is in fact, easy. But if your income becomes a little greater or more complicated you need to use the long form with various and assorted schedules and additional forms and worksheets. I did mine recently and when I printed out the final paperwork it was more than 30 pages.

Even with tax preparation software the task doesn’t get a lot simpler. TurboTax and other such programs ask you a series of questions to ensure you don’t forget anything. But there are so many questions! And every year there are new tax laws, meaning you have to buy the tax software every year. Why does filing taxes have to be so taxing? If you’re required to do something, the least the government could do is make it easier to comply. I mean, by comparison, the government allows you to get married by answering one simple question, once, and you’re all set. You don’t have to answer a set of difficult questions year after year. (At least not to the government.)

In the past several years the government has pushed “e-filing” your taxes. They promote it as being free and easy. It is neither. It’s not easy because you have to go through the process I already described before you “simply” click and electronically file your taxes. It’s not cheap because you have to go through an accountant or buy tax preparation software in order to file electronically.

Even having completed the process, and even if you get a return, there is no sense of relief. The government takes a sizable chunk of your money. If you track your personal finances using Quicken or some other software, run a pie chart report on your expenses. You’ll probably find that taxes are the single greatest expense category you have, even more than your mortgage or groceries.

And that’s just income. We also pay property tax, and sales tax. There are various “sin” taxes on tobacco and alcohol. There are even estate or “death” taxes.

The irony is that poor people originally pushed for an income tax. They realized that tariffs, the government’s main revenue source, were forcing them to pay more for products. And so an income tax was introduced but was assessed mostly to the wealthy class. According to tax historian John Witte in a PBS documentary, all that changed during World War II. In 1939, at the beginning of the war, only 15 percent of Americans paid any kind of income tax. By the end of the war, 80 percent did. The change was part of a rationale that the US needed the money for the war effort. So patriotism prevailed and more of the masses started paying taxes as well.

Today, with payroll deduction and automatic deposit, most people take taxes for granted. And the increase in taxes—in spite of campaign promises—just keeps growing along with the size and role of government. We’ve moved a long way from what our founding fathers envisioned and described in the Constitution as a federal government with “limited and enumerated powers.”

Maybe what we need is not a Tea Party, but a Coffee Party to wake people up to that fact.