Land of the free, home of the taxed
There is a day of celebration at this season that is not on any calendar. It falls between mid-March and mid-April but varies from home to home.
It happens when the income tax is done.
Suddenly the awful, haunting thing can go out the door. Into the mail with it! (Or more likely now, into cyberspace.) The kitchen table can be cleared of tax forms, bank statements, receipts and calculators. And 13 to 16 hours of uncompensated labor, $120 to $270 of out-of-pocket costs, by official averages, are over.
Historians may puzzle someday how the freest country on Earth could do this to its people.
It forces them to tell, and to share, every dollar they've earned by working, saving, and investing. And if they don't tell, somebody else tells — informers. Banks, brokers and employers are obligated to let the government know what they paid you. It is a vast machinery of compulsion and invasion of privacy.
And it only brings in 3 cents of every 10 cents the federal government collects.
It says so on Page 104 of “1040 Instructions.” Form 1040 (or 1040EZ) is what we send the Internal Revenue Service with our confession of making money. In due course the IRS will let us know if it believes us by taking our check or sending a refund. Then go your way, peaceful citizen, for another year.
Probably nobody has ever read “1040 Instructions” all the way. It runs past 200 pages and refers, chillingly, to even more forms if you bring up complications.
Yet it's not all dull reading. We're reminded the government now runs so deep in the red every year, it has to borrow more — way more — than the personal income tax brings in. Borrowing money (and “printing” it) took care of 37 percent of Uncle Sam's bills in fiscal 2011 vs. just 30 percent from all the people's 1040s. Corporate income taxes kicked in another 5 percent.
Now look at the outgo side, what the government spends,
“Law enforcement and general government,” all basic, legitimate things we expect from Washington, spends only 2 percent of the budget.
A “Development” category lumps together all infrstructure, road, bridges and dams, plus scientific research, space, student and farm programs. The total: 8 perccent of the budget, still pretty affordable.
“Defense” is big at 24 percent. But it includes veterans' benefits and foreign affairs.
Even interest on the $16 trillion national debt seems small at 6 percent. But keep in mind, the Federal Reserve has hammered interest rates to near zero, punishing savings accounts in the bargain. Eventually that will change.
The really overweight federal spending is in “social programs” at 23 percent of the budget and “Social Security, Medicare and retirement” at 37 percent. Put them together, at 60 percent, and you have the unsustainable cost of the modern Welfare State: a creation of the last three-quarters century.
Interestingly, this tax season is noteworthy for very little talk about income tax alternatives.
Remember the Flat Tax idea of a few election cycles ago? You could file it on a postcard, proponents said. Or the FairTax, a national retail sales tax of 20 percent or so, which theoretically might replace the income tax altogether? In 2012 we seem resigned to the monster we have. But how good to get it out of the house.