Paying your fair share of income taxes?

 

 
You can argue back and forth all you want about whether or not presidential candidate Mitt Romney is paying his fair share of taxes.  Whether 14%...much less than the percentage less-advantaged citizens, including me, pay of their own income...is fair or not.  Seems to me, though, that most of those who paid more, as a percentage of income, did just what Mr. Romney did.  They probably did not use dedicated accountants and tax lawyers, but they did go to H&R Block or used TurboTax to complete their returns.  And they took advantage of every single deduction and exemption they legally (and sometimes not so legally) could employ, all to lower their obligation.

Didn't you?  Did you not take advantage of every loophole and deduction you could find in order to avoid paying any more than you were required to pay?

On a similar subject, and one that is near to my heart, is just how stupid, bloated and unnecessarily complex our current tax code is in this country.  An interesting article I received recently from my financial advisor--one of his jobs is to help me invest what little money I have in a way in which I can keep all of it that I am legally allowed to--talks specifically to an interesting point: how much our tax laws actually cost us...you and me...and all because of how goofy it is:

In 2011, the Laffer Center published a report detailing the cost of complying - or creatively circumventing - our nation's tax code. The report estimated that U.S. taxpayers pay more than $431 billion annually to comply with and support the administration of the U.S. income tax system. That comes to nearly a third (30%) of the total income taxes collected - money that potentially could be saved by a simpler tax code.

According to the report, taxpayers spend money unnecessarily to comply with today's tax code in various ways. For example, time and money is spent collecting records, organizing files, and learning tax regulations that change every year. Businesses hire teams of accountants, lawyers, and tax professionals to track, measure, and pay their taxes. And perhaps the greatest expenditures are used to hire tax experts to take advantage of our complex tax code for legal tax avoidance and even illegal tax evasion.

According to the Laffer report, the following are specific yearly cost estimates for how much we, as a country, spend in these endeavors:

• $31.5 billion for professional tax preparers such as H&R Block and purchasing tax software
• $12.4 billion in IRS administrative costs
• $377.9 billion is how much it costs individuals to spend 3.16 billion hours complying with the income tax code
• $216.2 billion is how much it costs the U.S. economy to have these hours diverted to this non work/productivity endeavor
• $2.94 billion is how much it costs businesses to comply with the business income tax code,
• $161.7 billion is how much it costs the U.S. economy to have these corporate resources diverted to non-revenue overhead expenses
• $9.3 billion is spent on taxpayer audits each year

For far too long, our tax code has been used for so many other purposes than what taxation is supposed to do--pay for our government and what it is specifically designated to do with the money--that it has become a mishmash so convoluted and dense that nobody understands it.  That includes the branch of government, the Internal Revenue Service, whose job it is to administer it.  Hence those articles every year about people who call the IRS with questions and get the wrong answers.

I'm afraid it has also become so intertwined and interlaced that it will be impossible to bring any kind of sanity back into the mess.

Or am I just being my usual pessimistic self when it comes to bureaucracy and big government?

Don Keith
www.donkeith.com