Today is April 15th, 2005. Here in the United States, it is Income Tax Day. Ugh.
Well, that’s not over a thousand words, so I’ll blather on a bit more about taxes. Did you that people used to write out the full check to pay for their taxes on this day? Withholding of taxes by one’s company or business didn’t start up until 1943, during World War II. At that point the federal government was desperate to get its hands on the tax money as soon as it could. And even if you ended up getting all of your money back, the government was still able to generate interest off the loan of your money. Nice racket, no?
Do you know that the bottom 50% of wage earners pay less than 5% of all the federal income taxes? Did you know that the top 5% of the wage earners pay over 50% of the federal income taxes? Whenever there is any talk of a reduction of tax rates, it will affect the top 50% of the nation’s wage earners because they are the people paying the vast majority of the taxes in the first place. This is why the Marxists in the Democratic Party love to vilify any tax cuts as being “just for the rich.” Since the top half of the wage earners in the U.S. pay over 96% of all the income taxes brought in, any reduction in taxes will affect the rich by definition.
Neither of these two issues should be news to you if you read my comments from last year. Also mentioned last year was Tax Freedom Day, as described by TaxFoundation.org. Tax Freedom Day was described last year as “the day when Americans finally have earned enough money to pay off their total tax bill for the year.” This year Tax Freedom Day will come on April 17th, up from last year, but still lower than the high point of May 3rd in 2000. Since President Bush’s tax cuts came into effect, Tax Freedom Day has come earlier. Looking at the following image outlining the historic trends of Tax Freedom Day, you can see the last four years are lower than anything since President Reagan’s first term.
There must have been some adjustments of the data with this year’s graph more than the leap year change mentioned, because there are several years that have shifted more than a single day from last year’s graph.
Figuring out taxes is a rite of passage for most American adults. And swearing at the complicated tax forms is commonly a part of this activity. The Drudge Report linked to a news article by Mary Dalrymple saying that Americans will spend 6.6 billion hours this year figuring out their taxes, 1.6 billion of those hours on the common 1040 form. That calculates to over five hours of tax swearing for every American man, woman, and child on just the 1040 forms alone. I don’t know about you, but I find it distressing to imagine the children I know spending five hours this year swearing at a pile of papers.
Time to put this article on pause while I run to pick up dinner — Indian food. Mmm… lamb korma.
Still here? Good. Now that I have some yummy food inside me, I think I can tell you that our bane this year has been state taxes. Filling out the 1040 was easy, but we spent our 5 hours swearing at Utah’s TC-40. We moved from Utah last year, so I knew I’d have to fill out two state income tax forms. Figuring out our new state’s taxes was pretty easy. Enter how much you made this year in the state, subtract the standard deductions, and calculate the tax from the result. The bottom line was a rebate of some of my money, and that was to be expected.
Since I knew how much I had made in Utah, I figured I’d be getting most, if not all, of the state taxes back. We were unpleasantly surprised to find out that we owed over $100 more to Utah. Cue the tax swearing. How the [bleeping bleep bleep] did we manage to owe more to Utah when we made less money there? Time to go through the agony of doing the taxes again, this time manually filling out the Utah forms rather than using TaxCut. Add this, swear, subtract that, swear, carry the 2, swear, look at the bottom line — more swear thoughts! It was exactly the same amount that TaxCut said we owed! Grrr!
OK, time to figure out why this was different. Let’s see — take the amount we earned in Utah, subtract the standard deductions — no wait! We didn’t start with the amount of money earned in Utah. It called for the whole amount we earned last year in both states, then subtracted the standard deduction. That is what Utah considers our state taxable income. Here’s the kicker: this method showed that our Utah taxable income was over $4,000 more than the amount we actually made in Utah. Double-you tee eff?
So TaxCut wasn’t on the fritz; it simply recognized the screwy way that the Utah legislature had written the tax code. With our faith in software rekindled and our poor expectations of government confirmed, we wrote out a check to the bloodsuckers in the capitol building.
I hope they get a paper cut.