So complex is it that even in my very simple situation, without the help of a tax calculation program I would have to pay someone to accurately file our annual taxes. That in and of itself amounts to "just another tax".
There is a guiding principle behind the imposition of tax. It simply accepts that if we wish to live in a civilised society, then some things are better paid for jointly, and that we should pay according to our ability to pay and not necessarily by our desire to consume.
One good example would be Public Schools. You may not have any children using the schools, or likely to do so in future. Why should you pay? Because our society needs an educated populace. Without them we will cease to function. You might not have kids yourself, but you drive on roads, or have goods transported to you or the stores you patronise. Without engineers, scientists and planners none of this will be possible, and they need educating.
What I am saying here is that any given individual does not have to directly need a public service to benefit from the fact that the service is there, and it needs to be paid for.
We are all in this together, and we all need to pay for it. It can only be a fair system if we pay according to our ability to pay. If you like, it is the second half of the Marxist philosophy ... "from each according to their means". I put it this way simply because I am not advocating an idealistic egalitarian society, simply suggesting that if we need services, then it is only a just system if we share the burden equitably.
Taxation in the United States is in a mess. There is little doubt about this, both sides of the political spectrum agree. The code has developed over generations, each new tax, or exemption being seen at the time as solving a specific need. The result is that the code as a whole addresses very few needs, and the application bears most heavily on those least able to pay. Some might, with justification, suggest that it actually penalises those in the middle classes rather than the very poor. This would be arguable if we were only considering Federal Income Tax. I say "arguable" because it is actually one of the few parts of the tax code that is progressive, and the poor pay all the regressive taxes too, bearing a disproportionate level of burden.
I would go further than this and suggest that Income Tax is the only progressive tax, because it asks citizens to pay for society in direct proportion to the rewards they receive. I would suggest that when we rewrite the tax code, we start by abolishing every other tax, and the vast majority of fees that are demanded by basic service providors.
Let's examine a few of them to demonstrate the point:
Most countries have a form of sales tax. It makes no sense. They are complex to manage and they vary widely. These variations between localities distort markets in an entirely artificial manner from the business end, and have to be paid by the poor even though those folk are considered too poor to pay income tax. The net result is that the poor pay a backdoor tax on most of their income, and the wealthy pay substantially less, as more of their income is diverted to non-tax services, or savings.
We then have to try to develop a whole panoply of exempted items, to attempt to redress this balance. It's an exercise in futility. It also leaves local cities vulnerable to even minor economic fluctuations, or entirely dependent on the goodwill of Walmart. If Walmart leaves town, your town is pretty well stuffed, so Walmart drives down the costs to itself and gains an advantage that a citizen simply cannot hope to match. This is no way to run a country. I use Walmart simply as an example.
Problematic. It is unfair to many residents as it does not take into account the ability to pay. Worse, if you cannot pay you might lose your home. It might seem attractive to make those with large homes pay large bills, but there are better, and fairer ways to do this. Property tax sucks, it is one of the worst offenders.
The theory here seems to be that those who use the roads the most, pay the most. It is an attractive idea. The more you consume, the more you pay, who could possibly have a problem with that?
Well I do. Most road use is not discretionary. We need to go to work, we need to shop, and visiting the mother-in-law is not something I get a choice about. There are few, if any, affordable or reliable forms of public transport in most areas. Car use is mandatory in much of the country. While a hike in the price of gas might be seen as an irritant to they well paid, it is a major budget item to those less well off. Gas taxes, and the vagaries of gas prices generally hit the low paid, and rural communities very hard. People don't simply choose to drive a long way, many of them have to drive a long distances .... for those people, roads, and gas are much like utilities.
Most fines are a tax. They are levied by municipalities and they account for a significant part of the income of many. There can be no real attempt to apply justice in this scenario. The fines are not being levied as either a punishment or a deterrent, and even if they have elements of both, they can't be divorced from the strong taint of "revenue-raising". Equally, most fines are not punishing, or deterring everyone equally. My $150 fine for speeding in a School Zone may have been very well deserved, but that $150 punished me far more harshly than the guy driving the brand new Range Rover who received the same penalty. If we are going to do this, then some sort of sliding-scale is necessary or yet again we have to accept that the poor are hammered and the rich miss an expensive lunch.
Just four examples, the principles of which you can apply to virtually every other tax or fee currently imposed, with the same conclusion.
Payroll Taxes? Sure, them too. They have the benefit of being progressive, but only if you earn a salary lower than the cap. The minute you exceed that level of income you are paying proportionately less ... and you are better placed to pay so the tax suddenly regresses for the better paid.
And while we are on the subject of taxes, let us not forget medical insurance, deductibles and co-pays. They are a tax too so please add them to all of your other taxes when working out the overall burden. As health provision in this country is piecemeal, and for-profit, the amount you pay is vastly higher than in any comparable country. This might not seem so bad if the outcomes were so much better, but they are not. Mrs Twigg has a pretty good health plan yet we still struggle with the co-pays, and if you cannot afford to access the healthcare you are paying for then all of your premiums are simply someone else's profit.
One might think that during the fifties, sixties and seventies that the relatively high taxes were an impediment to growth and development in the US. One might think that, yet one would be wrong. That period was the time of highest prosperity. Corporations grew, employment was close to full, and the entire middle class was born. Equally, the current low tax rates are not, apparently, giving impetus to recovery. Productivity is at an all-time high as are corporate profits and share prices. Yet the economy is stagnant and all that means is that the lower paid are bearing all of the pain.
The rich will not suffer if we make them pay more income tax, close their loopholes and tax their profits. They will still be rich. Paying more tax does not equal having less. It means you still have much more, just a slightly smaller much more than you think you are entitled to. If that causes you to quit your job then I feel confident that the position will not remain unfilled for long.
Simplify the system. With a few minor allowances, the only indication of ability to pay, is the amount you receive ... so tax that. There would need to be some adjustments made by some folk. Those people are among the more privileged, and best placed to make those changes. The poor, the middle class? Well they would simply get to keep more of what they earn, or have to pay less for what they need.
Either way, America wins.