The rush of “Tax Season” is over! My family and friends will finally see me again. You can put your tax papers away again and congratulate yourself.
It’s a big event each year for all of us. As a tax practitioner, I actually enjoy it. Not because I’m some kind of sado-masochistic freak who likes to see people in agony. I just like seeing all those people I work with and seeing the reality of how the economy and tax policies look “on the ground” in the lives of real people. And I like participating in a system that, at least in concept, applies fairly to all of us.
I’m most familiar with federal and state income taxes, which are what this “season” is all about. Having read the Code, Regulations, Ruling and Court Cases, I have come to trust that the overall operation of these laws aims at fairness.
I like, for example, that if a small business owner has a bad year and shows a significant loss, she can expect that the tax rules will allow her to offset income with that loss, whether in this year, a prior year or a future year. We can also count on paying tax on our income only once and claiming deductions for allowable expenses paid, but not more than once. There is a balance that is built into the system that I have come to feel is an effort to assure fair treatment for all citizens.
I also see that, over the years, lawmakers have tried to make the income tax system progressive, providing lower rates of tax on the lower levels of our income and increasing the rates as income increases. I see the fairness in that. Of course, George W. Bush has worked hard to shift tax responsibility away from the super-rich and toward low- and middle-income people, as well as future generations (via the record-breaking deficit). Right now, our tax system is regressive, not progressive, but that will change when the administration and control of Congress change.
I do balk at the Social Security tax being applied to the very first dollars a taxpayer makes. Most of my clients are small business owners or low-to-middle income employees. It’s hard to tell a client, who has worked really hard all year to make their business profitable, that they owe more than $1,400 to IRS for Social Security taxes on their inadequate profit of $10,000. The Earned Income Tax Credit does help with this in some cases, but I would still like to see an exemption at the living wage level and an expansion of this FICA/Self-Employment tax at the upper level of earnings.
Overall, I am comfortable with the concept of us individual citizens paying into a “cooperative” system that is intended to provide services on a larger, more complex and comprehensive level than we in our families and neighborhoods can handle. I just can’t see how each of us could manage to provide the policing, fire protection, highways, schooling, national security, health research, environmental protection, etc. that we are chipping in for with our taxes.
There will be a constant call for change, improvement, reform, reduction, and increase, and that is as it should be. We should assure the laws remain fair and effective, resulting in the highest good for the most citizens. We should not, however, heed calls to repeal major taxes or to demand more “sacrifice” from those who can least afford it. Rather, we should always be asking what investments we need to make in our communities, and how we fairly divide up responsibility for paying for those investments.
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