Tax Day, 2008

Today is TurboTax’s day of reckoning. Will they burst their servers’ seams like last year or will they weather the storm? We shall see.

That is my introduction the day’s topic of discussion: Taxes. As an American who proudly states that I live in one of the best countries in the world1, I really don’t have a problem with my tax load. According to my handy dandy calculations, our married-filing-jointly tax rate is surprisingly low. That is because we are doing some of the things that the tax code encourages us to do: be homeowners, donate to charity, etc. As soon as we have kids, or start contributing to IRA’s, or losing money on our farm, we’ll do even better!

Unfortunately, it’s an election season, and moreover it’s looking like there will be a changing of the guard from Spend More than our Income Republicans to Spend More than our Income, but Raise Taxes a Bit to Make The Deficit Less Democrats. It doesn’t seem that fiscal responsibility is a big ticket item this election cycle despite it is arguably the most important long-term agenda item. Part of that is the difficulty in presenting an effective plan to the public that won’t immediately result in a pitchforks and torches party. I’m a realist enough to admit that people don’t want to make the sacrifices necessary to adopt healthy fiscal policies. That doesn’t change the fact that we’re rapidly chasing the rabbit down the hole and soon we’ll be in crazy land where someone can say “it’s only a 200 billion dollar deficit” and everyone nods like that’s a good thing.

The process might be painful, but I see some low hanging fruit.2

  • 1) Get the hell out of Iraq. Whether you agree or disagree about the policies that got us there/keep us there, you have to agree that the war is costing a ton of money. That is money that shouldn’t be spent at all. The argument that it’s money that should be spent at home is a false dichotomy. This is money we’re borrowing and paying interest on.
  • 1a) Re-think the size of our armed forces. Armies and Navies are expensive. Do we really need to have one the size we do now? Military expenditures are the second highest item after social services. This is ultimately a policy decision, whether we want to maintain a force that can kick-ass any three places in the world. Personally, I think we have the premier fighting forces in the world, however the American philosophy of armed conflict is OVERWHELMING FIREPOWER until we win, then leave. We need to remember that last part: leave. I won’t stake too hard a position on this item, but it remains a huge portion of our national budget.
  • 2) Implement the FairTax provisions. BAM! You just freed up overhead expenditures that are being used by the IRS to monitor, interpret and enforce the tax code. Those expenditures, not no longer going into a sinkhole can be applied elsewhere in the federal budget.
  • 3) Do an across-the-board 10% budget cut. Or, show no budget increases for the next three years. That will equate to a 10% cut when inflation is accounted for.
  • 4) Remove the ability for Congress to include earmark riders in federal legislation. Okay, this one isn’t a low-hanging fruit, but it’s necessary to display some fiscal restraint.
  • 4a) Give the President the line-item veto ability when it comes to budget authorizations. That way, congress critters can tell their constituents that it wasn’t their fault that the pork subsidies weren’t increased. It was el Presidente!

The problem, of course, resides with the politicians. Despite campaign rhetoric, republicans have never been any more interested in small government than democrats. Even President Reagan only chose to exercise fiscal cutbacks in the arena of health and welfare. Ask the USSR about how much Reagan cut the military. The truth is that the demand for restraint is only going to work if the people get behind and push and I’m too much of a cynic to see that happening.

I invite anyone who’s answer to these proposals is “it’s just not that simple” to explain to me why it can’t be that simple.

Update: After I finished writing this, I saw a news item about McCain’s Tax Day speech. He’s proposing that congress “help spread relief across the American economy” by declaring a Federal gas & diesel tax holiday between Memorial Day and Labor Day. The Federal fuel taxes are 18.4 cents per gallon of gas and 24.4 cents per gallon of diesel. By my calculations, that will save me and Jenn about $59 this summer. I think I’ll let the Feds keep it, especially because that $59 directly funds my job. I can see where a gas tax relief would help people who are more dependent on vehicles, such as truckers, but this is just pissing in the wind. Three months of no fuel taxes will mean three months of no receipts into the Federal Transportation Infrastructure Fund, which will spell worse funding issues later, meaning the need to raise taxes. How does this help?

1 that title is debatable, and I don’t necessarily disagree with those people who state that we are not the best country presently
2 while reading this, please keep in mind that my salary is directly affected by government spending. I’m a traffic engineer working for states and counties, so it’s not like I’m divorced from this topic

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4 Responses to Tax Day, 2008

  1. James Cronen says:

    Along the lines of your armed forces argument, agreed. Additionally, I’d add, the armed forces need to stop preparing for a cold-war style war and start researching how to fight insurgencies and decentralized enemies as we’ve found formidable the past few years.

    A federal gasoline/diesel tax holiday will only temporarily disguise the fact that oil prices continue to go up due to declining production, economic policies abroad and at home, and worldwide strife. As a nation, if we really feel that we can “do without” the tax revenue from fuel, it would be better to take the money collected during this three month interval and apply it to regional light rail systems, carpool efforts, and other sustainable transit.

  2. Jeff says:

    Ahh, the fair tax. I’ve seen some pretty detailed analysis of the ramifications and it scares me. A couple of quotes from their website that scare me.

    “Consider, for example, your typical billionaire, of which America now has more than 400. These fortunate few are invested primarily in equities on which they pay taxes at a 15 percent rate, whether their income comes in the form of capital gains or dividends.”

    So, we’re expecting the billionaire to spend all that money that they would have saved otherwise so that they do pay taxes on it? Somehow I doubt it. Let’s assume that the billionaire makes 10% on their billion dollars, so that would be $100 million, taxed at 15% that would be $15 million. To get the same benefit that billionaire would have to spend $65 million. Is that billionaire really going to spend the additional money? Bill Gates flies coach and is fairly frugal (well, except the $55 million house, but wait, that’s not even the mythical $65 million) somehow I doubt it’s going to be made up. Now let’s take the other example, let’s say I’ve got $10k in the bank making 10% interest (it’s a math game), giving $1000 interest, 15% is $150, requiring $652.17 to make back the equivalent. Which do you think is the more likely case here?

    Retaining the present tax system makes economic progress needlessly slow and frustrates attempts at upward mobility through hard work and savings, thus harming low-income taxpayers the most.

    How about providing a few examples of this rather than just making a blanket statement oh writers of Fair Tax.org? I am reluctant to deregulate our economy any more without very careful consideration. Look at what ill considered deregulation brought about in the mortgage industry…

    As for the McCain gas tax thing, does anyone really think that gas prices would mysteriously creep up to cover at least part of this difference? They tried this trick with the New York gas tax and it was barely a blip on the radar. I’d take the opposite tact, add a buck to the gas tax and pour that money into the Universities and car companies to fund alternative energy research. It will be painful, but we will all benefit from it.

  3. zerj says:

    “According to my handy dandy calculations, our married-filing-jointly tax rate is surprisingly low. That is because we are doing some of the things that the tax code encourages us to do: be homeowners, donate to charity, etc. As soon as we have kids, or start contributing to IRA’s, or losing money on our farm, we’ll do even better!”

    I do this calulation every year and my non-married filing separately w/ 2 kids is still about $5K better for us. If I really worked the system I think it would be closer to 8K*.

    *The Feds allow a fixed 5K per family deduction for childcare. As 2 singles with 1 kid each we thoretically could get 10K here

  4. Kim Bosco says:

    Cronen says: “Along the lines of your armed forces argument, agreed. Additionally, I’d add, the armed forces need to stop preparing for a cold-war style war and start researching how to fight insurgencies and decentralized enemies as we’ve found formidable the past few years.”

    I can guarantee you that we’ve already started researching that whole counter-insurgency thing. The army hasn’t been training for a cold war type fight since before I got out in 2000. My husband has been doing nothing BUT the whole counterinsurgency thing for years now.

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