Pondering: Tax Day

Unless you are in Nebraska, the 15th of April isn't Tax Day this year.  All of the other states that have income tax and the federal government are on 17 April 2012 or later.  The political season is already going crazy with Republicans accusing the Democrats of being the party of Tax and Spend and Democrats accusing the Republicans of being the party of Spend and Don't Pay For.  Let's take a little step back and talk about taxes.

I like paying my taxes.

Sure, I want to save my money and spend it on things that I want.  But I also want to pay taxes.  I don't want to pay more than my fair share, but I do want to pay my fair share of taxes.  This isn't an altruistic point.  Taxes are spent, in part, on things with tangible benefits for me and for all of society.

It is cheaper to pay taxes and have the government maintain the roads than to buy new axles when neighbors forget to maintain the parts of the road that are in front of their houses.

This example is a little controversial, not in terms of the concept but in terms of implementation.  When we talk about road maintenance, there are questions of whether government should directly hire road crews and equipment or hire private contractors.  There are questions of the quality of the work and verification of that quality.  There are questions of potential fraud.  None of these questions change the need for road maintenance or the need for taxes to pay for that.

But some of my tax dollars pay for things I don't like.

Yes.  I was quite upset when we started a second war, the first being the response to being attacked on 11 September 2001 by going after the Taliban and Usama Bin Laden in Afghanistan, sending troops and resources to Iraq.  Of course, that was not the fault of taxes, but the fault of the electorate in choosing the wrong Commander in Chief.

We can, and should, have a strong debate on what is important for the government to fund and what should be left entirely in the private sector.  Important questions.  We can also find waste and fraud that should be rooted out and eliminated from government spending (both parties tend to include a huge amount of waste and fraud that they claim that they, and not the other party's candidate, can eliminate as part of balancing the budget).

So, what should tax dollars cover?  In making such decisions, politicians and those who elect them should think about the concept of the Commons.  Transportation infrastructure is part of our modern Commons and should be created and maintained by society via tax dollars.  There are debates as to whether airports and train stations should be included in that transportation infrastructure ... I believe that the answer should be in the affirmative to both.

Air, land, and water need to be clean and safe.  Even private property needs to be maintained in a fashion such that our health and well being are not jeopardized by waste and pollution.  The idea that corporations should be free to desecrate our environment in the spirit of free enterprise is ridiculous.  So, tax dollars need to go to enforcement agencies like the Environmental Protection Agency and the Nuclear Regulatory Commission to protect us.

We also need protection in other venues.  This is why agencies like the Consumer Product Safety Commission are needed.  Individual citizens should not have to fight for reasonable safety from big corporations on their own.  The list of agencies goes on and tax dollars are necessary.

To be clear, I do believe that we need our taxes to pay for our military to protect our shores and our interests around the world.  We can debate which interests should be protected and at what cost.  Being a member of organizations like NATO helps keep us safe.  This means that we sometimes enter into conflicts as a result of our treaties.  We do need to negotiate our treaties very carefully.


Wouldn't a Flat Tax be fairer?

No.  While a flat tax sounds good, a flat tax has a tremendously larger impact on the poorest people compared with the wealthiest.  While I do not favor taxation with the purpose of income redistribution, the poor should not be expected to pay a proportionate amount to the wealthy.  A progressive income tax is far more fair.  If you will pardon the pun, to the flat tax I say, "nein, nein, nein."  (I don't speak German, but I do understand that much).

How about Sales Tax instead of Income Tax?

No.  A sales tax is paid by all, despite their means or lack thereof.  An income tax is paid by those who can afford to pay.  Particularly, when sales tax is applied to necessities, like food, it is a bad idea.

We can debate various taxation schemes.  A progressive income tax may not be the best system, but it is better than most of those floated as alternatives.  I do think that our list of possible deductions should be critically and regularly reconsidered.  Simplifying the tax code while keeping appropriate incentives (not those that were appropriate twenty years ago but no longer) is a good idea.  Congress tends to have trouble letting any deduction go, so an independent panel should be convened every five years or so to make recommendations as to which deductions can be removed.

You won't find detailed answers from me as I am neither an Accountant nor an Attorney, just a taxpayer with a few, perhaps controversial, ideas and a strong belief in the United States of America.

Happy Tax Day!