Taxed Out

Tax time, we all hate it except for those getting a refund. If you are a middle class guy or gal and on a salary you will have no choice but to pay the prescribed amount based on your earnings. When we look at the tax code we can’t help but notice it contains 73,954 pages and none of them are there for the benefit of the middle class person. In 1913 there was 400 pages. In 1945 it jumped to 8,200 pages, in 1974 19,500 pages and just kept increasing until it hit the number it contains today. If history is any indicator it will just continue to grow, but why? I think the answer can be summed up this way, the law has been made super complicated for a couple of different reasons. The first reason is to allow for many different tax shelters so the rich can get away with paying less of a percentage of their earnings than we the middle class do. Another reason may be the fact most people in congress are lawyers and the complex tax laws provide plenty of legal work to that profession.

When President Obama was sworn into office the tax code was 67,506 pages long. In his first two years when the democrats controlled both houses the tax code grew to 71,684. The code was growing at a rate of 3% a year. The growth slowed down to 1% when the government was composed of a democratic President and a republican house with the democrats having a slight lead in the Senate. It seems to be a good thing for the tax code when there is a division in the government preventing each side from helping their favorites with it. One tax expert said most of us don’t realize how much our tax rate really is because of all the different taxes we pay. Just in income tax alone some of us are asked to pay Federal Income Tax, State Income Tax, City Income Tax, and Social Security tax. We are also asked in some cases to pay sales tax, property tax, inheritance tax and taxes on money we might win over a certain amount. While all these taxes may not apply to everyone, the tax expert reckons the average person pays about half of their income in taxes when everything is added up.

So here we are dutifully paying all our taxes on our middle class income salaries, all the while hearing about companies and fat cats either paying a very low rate or even nothing at all. I heard about a company which not only didn’t pay taxes for the year, but somehow got money back. One tax shelter which is available to everyone is investing in real estate. There are many different deductions you can claim and hopefully, if you made a good investment your property will increase in value. Many large corporations have moved their headquarters to foreign countries to avoid paying some or all of the taxes in the United States. The government is so worried about this, new laws are being worked on to make it harder for companies to accomplish this. A few companies which have their headquarters in foreign countries, because they moved from the US are Seagate Technology the data storage company, Pricewaterhouse Coopers Consulting and Tyco Electronics now TE Connectivity. I don’t know what Pricewaterhouse is worth, but I do know the other two companies are worth billions so the US is losing a lot in taxes.

Senator Dick Durbin had something to say about this the other day, but I doubt if his words will have much effect. Monsanto is thinking about buying a competitor in Switzerland. The senator said, "I strongly urge you and the board of directors to maintain Monsanto Company's headquarters and its tax address in the United States." One thing I have to wonder about is how can most other western countries have so much better tax laws for companies? It sort of reminds me about how we have failed with our Medicare. It cost us twice as much as the Europeans for health care and it is not rated as good as many of the European countries. Why does the United States require so much money in taxes from its citizens and companies? I am tired of hearing it is the fault of Medicare and social programs when the European countries have them and they work there. Anyway there is no doubt we have allowed our tax laws to get completely out of hand. We can’t just keep adding new laws every year to appease those with big lobbies. What many people don’t realize is the fact laws are written many times by the lobbyists and basically “approved” by those senators or representatives submitting them.

No one wants to face the truth, the tax code is killing us. One senator once said if we had a flat tax where everyone in the country and every company paid 15% on their salaries or profits we would have plenty of money and the deficit would disappear. This would also depend on our elected officials not finding new ways to increase the amount of spending. One of the problems is we spend too much money and there is no accounting for where some of it is going. The spending is shielded in black accounts. Those are accounts where there is no oversight and which are supposed to be used for secret projects. There is also another problem, a few years ago a law was signed which allowed certain spy agencies to raid other agencies’ budgets without permission. Then there are the projects which are either useless to most of us and are designed to help only a few or even one, like the bridge to nowhere a famous bridge project. The bridge to nowhere was really the Gravina Access Project. It would have cost $223 million at the time and would have led to a very sparsely populated island in Alaska. The island only had a population of 50 people. It makes one wonder how this could have even been considered in the first place.

Tax reform is long overdue. Lawyers would go nuts at the idea of a flat tax, because there would no longer be a need for tax lawyers. This might be one of the reasons it would never pass. Another reason is if you are a rich guy paying very little or nothing, or a corporation doing the same, a flat tax would be a tax increase for you and those people would never want that and they would begin lobbying heavily against it. Something has to be done or we might be looking at a tax code with over 100,000 pages in the next 20 years and who knows how big it could get in the next 50 or so years. If we can’t go to a flat tax will we ever have the ability to be able to simplify the tax code with so many interests at stake?