Here it is April again and time for my annual artery popping rant against the income tax. First, a review the basics.

An ideal tax system should:

  1. ...raise enough money to run the government.
  2. as simple as possible so you can spend a large part of your life not calculating taxes.
  3. as stable as possible so you can plan your finances and also so the government can plan a budget.
  4. as fair as possible.

This year's tax essay deals with the least important of the big four -- fairness. There are a number of provisions in the income tax that are plainly, stupidly unfair. Here we go, right down the list.

Single people pay one tax rate. Married people pay another, spouses of deceased persons another. "Head of household" yet another. What is the point of that? How is it fair that my income be taxed at a rate different from that of anybody else?

Worse than that, a guy who makes $40,000 buying and selling stocks on the internet pays less in taxes than a guy who makes $40,000 in salary. What's fair about that?

The idea of not paying taxes on income you give to charity is unfair as well. If I give a thousand bucks to the Upside Down Romanian Water Ballet Company then that thousand bucks doesn't get taxed and I don't pay $350 (or whatever) to the IRS. The IRS is going to get that $350 from somewhere and by raising the base rate that cash is going to come from all of you, the people who don't particularly care to subsidize Upside Down Romanian Water Ballet. In effect, I give a thousand to the Water Ballet, and we all chip in to pay the taxes on that thou. Every thousand I donate costs the taxpayers $350. Think of the billions that are donated to "charities" each year and consider that you are pitching in a percentage of the amount of Archer-Daniels-Midland's adspace on public television.

See how that works? Through charitable deductions, I can hypothetically force you to subsidize a percentage of my favorite charities even if that charity is one that you don't like. Not only do I not ask for your opinion or approval, you don't even get notified that it's happening. I come and suck and go like a mosquito in the night. You can suck, too, IF you donate more to charity than the amount of your standard deduction. So people of below average earning power are discouraged from playing this game.

There's nothing fair about exempting taxes on income based on the number of dependents a wage earner has to support. I know everybody with dependents wants exemptions, and it's nice to have the extra money to help take care of your dependents; but taxes on that money have to be made up somewhere, and that's me. I'm subsidizing the maintenance of your big poorly-planned family the same way you are subsidizing my elephant-dung-art charities.

Income put into specially provisioned retirement accounts is exempted from some taxes. In some cases taxes are merely deferred, but those taxes not collected from the income that I put into my Roth IRA has to come from somewhere, and that's you. Of course, if you can you too will put money into your Roth IRA so that you can be in the club of people taking advantage of the law rather the club of people getting stuck with the bill.

It's not hard to find unfairness. Every tax break, exclusion, exemption, deferral, option and schedule exists because some politician gained votes by promising to tilt the tax tables in favor of somebody. Every line on every form and worksheet leads you to pay either more tax or less tax, so every line benefits somebody to the detriment of somebody else. That is the essence of unfairness.

Income spent paying interest on a mortgage can be exempted from income tax. That's the government's way of encouraging people to borrow money to buy homes. Just like the IRA is the government's way of encouraging people to save for retirement. Just like the charitable contribution deduction is the government's way of encouraging people to give to charities. Just like the low tax rate on capital gains encourages people to invest.

So through the maze of income tax rules, the government encourages me to save, encourages me to spend, encourages me to give, encourages me to invest and encourages me to borrow. And if I DON'T do all those things I have to pay the taxes on the income that other people DO put into all those things.


How about this. How about if I decide to go into debt to buy a house based on whether or not it makes the most sense for me and not based on encouragement from the tax code? How about if I donate money to charities and pay the taxes on that money myself? How about I save for retirement because it's a good idea and not because the tax code encourages me to? Is the IRS better motivated than I to look to my personal financial well being? How about we start encouraging the government to stop encouraging us to do this thing or that thing with our money? How about if we use our votes to demand that politicians scrap this madness and we start taking more responsibility for making our own financial decisions?

Finally there's the $3 "presidential campaign contribution" box. They must put that box there just to see how many suckers will check it. You know that all that money is going to be divided among three candidates, the democrat, the republican and the third party crackpot. (He's always a crackpot, isn't he? It's as if the two establishment candidates selected him on purpose in order to make "politics as usual" seem like the best alternative.) Anyway, the three-way split just ensures that two thirds of the money you donate goes to candidates you don't vote for... suck---kerrrr! And then that three bucks has to be made up somewhere, so once again I end up paying for your bad judgement and you for mine. Seriously, please don't check that box.

I can't think of an appropriate concluding paragraph, so I'll just pinch it off and call it a turd. See you next year. Send rebuttals to me at Traveler.


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