Warp & Woof

  It’s Tax Time Again!

Random Grumbles and Philosophy

William Sundwick

Do you believe that all taxes are theft? Or, do you simply fear you may not be able to correctly determine how much you owe the IRS, because your income taxes have become so complex? Maybe you object to certain elements of the tax code, to bloated defense budgets, or too much entitlement?

Whatever the excuse, many people seem to enjoy grumbling about their taxes. They may feel, in their heart, that all taxation is theft – that they deserve to keep their hard-earned money for themselves. But, when pressed, unless well-lubricated, few admit to those feelings. They know on some level that there is a social contract requiring shared responsibility for maintenance of civilized society.

In the United States, there is a growing divide between those who consider themselves wealthy and those who do not. In fact, growing inequality is an issue worldwide, not just in our country. This can be confirmed with economic statistics. It is not just a matter of self-perception. But, self-perception may be the dominant factor in how much we grumble about paying taxes.

People generally resent paying taxes to support those they consider better off than them, or as Arlie Hochschild writes, “cutting ahead of them in line.” Taxation must be sold as something which benefits ALL taxpayers. Progressive tax schedules are supposed to address the issue. But, the question of where the revenue gets spent is unavoidable. Tax “loopholes” are often understood as primarily benefiting those wealthier than us.  But, how many of us really know where we fit in the modern American wealth distribution pie?

Much of the inequality discussion these days tends to divide the country into two groups – the 99% and the 1% (a meme from the Occupy Wall Street movement of 2011 that seems to have stuck). Of course, everybody we know is likely to be in the 99%. If, instead of that extreme division, we talk about the top 10% or 20%, we begin to see the “middle class.”

But, since even a 20-80 division places the vast majority of Americans at something less than upper middle class affluence, good socialists still have much to complain about. I’m doing my 2017 taxes now, and don’t have much hard information about what my 2018 taxes will look like – post “tax reform.” Initial analysis, however, suggests that most of us in the top 20% will get hit (even if not that top 1%). Should we be bitter?

I say no. While some provisions of the act seem to reward economic rent-seeking (like corporate tax cuts going for stock buy backs), and some are motivated by partisan politics (like state and local taxes no longer being deductible), the basic structure of the tax code is still progressive. The wealthy pay more. But, if you think you are footing the bill for those who are not wealthy to get a “free ride,” you’d be wrong. People who know they are rich usually understand wealth distribution. People who don’t realize they are not rich often object most to taxes, even though they pay little as is. They are driven more by social animus than economic hardship.

This leads us to the wonderful “democracy” we live in, and its small clique of elected officials. Congress and state legislatures are forever trying to appease their supporters – especially their financial supporters. They continuously introduce incentives for certain business activity to benefit their specific “constituents,” via the tax code. There are also the organized pressure groups (they are “constituents” as well) who may demand changes in the tax code to punish certain behavior – these take the form of “sin taxes,” usually regressive sales or excise taxes. Should we resent this feature of democratic government?

Again, I say no. Democracy has a price tag. If there is to be any forward movement in the body politic, somebody must pay for it. The political sphere is, indeed, composed of constituent groups. But, there are alternate ways of organizing power, besides money. Organizations that seek to leverage power can set themselves up as charitable entities, allowing financial supporters to claim a tax deduction – for example, the ACLU Foundation, or Southern Poverty Law Center.

Does all this push and pull in the tax code contribute to making tax time just too darn hard to figure out? Thanks to the wonders of TurboTax, I can say no to this complaint, as well. Intuit keeps refining their product every year. For 2017, it looks to me like even my more complicated tax year is easily handled by the software’s interview format. It feels like a conversation with a friend, or mentor. I can’t believe that years ago I paid a tax accountant to do my taxes! I think many a tax preparer must have been put out of work by the Internet, especially by Intuit, with TurboTax and Quicken.

We’ll see what 2018 brings. I’m resigned to not being able to deduct advance payments for property tax assessment – I made a good try, immediately after the tax bill was signed on Dec. 22. But, so long as my mortgage lender gives me credit for having paid a portion of my 2018 taxes, I guess I won’t complain too much. After all, I have chosen to live in one of those high tax blue states.

Are taxes really that painful, then? The answer seems to lie deep in your orientation to society, and what role you believe governments should play in it. And, perhaps there is a secondary factor for you – have you kept all your tax records for the previous year, in a well-organized fashion? Even TurboTax can’t divine figures from documents that don’t exist.

Thanks to some big capital gains, I need to pay estimated taxes for next year – but, even that process is facilitated by TurboTax. (This is exciting, I’ve never had this situation in the modern Internet era!)

It always feels good when I file my return – another milestone measuring what I’ve accomplished in the past year. It ought to feel even better when I owe money to the IRS at year’s end, rather than getting a refund. But, perhaps that’s a bridge too far.