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.

Tax Freedom Day over time

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.

Easter Sunday was special this year. While the most special part was commemorating the resurrection of Jesus Christ two thousand years ago, something extra happened on April 11th that you probably didn’t notice. Easter Sunday was Tax Freedom Day for 2004.

So what is Tax Freedom Day (TFD)? “Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year.” [1] This means that after working 65 days to pay your federal Income Tax and another 36 to pay your state Income Tax, you are now finally working for yourself. This makes 101 days of the year that an average American needs to work to pay for taxes. That’s an average of 27.6% of the year’s work.

The graph above from TaxFoundation.org shows the TFD for the last four decades, and you can see that TFD has come early this year. In fact, it has been 37 years since TFD has come on or before April 11th. You would have to go back to 1967 when TFD arrived on April 10th. You can see that TFD came as late as May 2nd, in 2000. After the seven year run-up, I am glad to see that we are on a downward trend. Of course, this can change as fast as a Democrat can say “tax hike.”

Currently, America spends 101 days to pay off the Federal and state taxes. This is more than housing and food costs at 97 days together. So, on average, Americans spend almost 30% of their money as taxes to the government. Here is something that was said by the prophet Samuel about 3,000 years ago when the people of Israel demanded that a king be placed over them:

And he will take your fields, and your vineyards, and your oliveyards, even the best of them, and give them to his servants. And he will take the tenth of your seed, and of your vineyards, and give to his officers, and to his servants. And he will take your menservants, and your maidservants, and your goodliest young men, and your asses, and put them to his work. He will take the tenth of your sheep: and ye shall be his servants. And ye shall cry out in that day because of your king which ye shall have chosen you…”
1 Samuel 8:14-18

Is there any difference today with our government and what Samuel told the people of Israel their kings would do to them? Well, there is one difference: they were only taxed 10%. Currently, the highest Federal income tax rate is in the 30s. But this rate has gone as high as 90%! How would you like it if you only got a dime for every dollar you made? If slavery is working 100% for someone else, then wealthy Americans during the days before President Kennedy dropped the upper tax rate were 90% slaves! How much of a difference is there between 90% and 100%? Not much at all, but there are people today who yearn for these tax rates of old. I listened to Robert Reich, Secretary of Labor under President Clinton, on the Sean Hannity show excited about the idea of raising the tax rates on the rich. According to him, the rich just were not paying their fair share.

But what is their “fair share?” Below is a table printed by TaxFoundation.org from data compiled from the 2001 tax recipts.

Summary of Federal Individual Income Tax Data, 2001

Number of Returns
(000)

AGI
($000,000)

Income Taxes Paid
($000,000)

Group’s Share of Total AGI

Group’s Share of Income Taxes

Income Split Point

Average Tax Rate

All Taxpayers 128,817 6,241,036 887,682 100.0% 100.0% 14.2%
Top 1% 1,288 1,094,296 300,898 17.5% 33.9% above $292,913 27.5%
Top 5% 6,441 1,996,492 472,823 32.0% 53.3% above $127,904 23.7%
Top 10% 12,882 2,690,589 576,163 43.1% 64.9% above $92,754 21.4%
Top 25% 32,204 4,071,034 736,053 65.2% 82.9% above $56,085 18.1%
Top 50% 64,409 5,379,286 852,642 86.2% 96.1% above $28,528 15.9%
Bottom 50% 64,409 861,750 35,040 13.8% 3.9% below $28,528 4.1%

Source: IRS (formatted by taxfoundation.org)

In this table, you can see that the top 1% of wage earners in the U.S. paid for 33.9% of all income taxes. To put that in perspective, that’s like sitting down to dinner with 100 people and asking one guy to pick up a third of the whole dinner bill. Now, how can that be fair in any sense of the word? “But Captain, it is only right that the rich guy pick up the tab for the poorest ones!” Ah. This is very much what Robert Reich was proposing, and can be summed up in this classic statement: “From each according to his ability, to each according to his need.” Try mentioning that idea the next time you are in a crowd, and watch the people nod their heads in agreement with it. Then tell them that this statement was written by Karl Marx, and it is a major component of the Communist Manifesto. Do you find it interesting that liberal leftists like Robert Reich espouse this idea?

Here are the numbers I find most distressing: the bottom 50% of wage earners pay only 3.9% of the Federal income tax, while the top 50% pay the rest at 96.1%. When a liberal tells you that President Bush wants to give a tax break to the rich, remind him that the rich are paying the damn taxes in the first place!