Tax Day
"Tax Day," typically the 15th of April every year since 1955, is the day where that most odorous of civic duties compels citizens, residents, and even those Americans living far abroad to offer "their fair share" of taxation to the municipal, state, and federal governments.
For those who pay, I salute you. The annual redistribution of income, wealth, and labor should be recognized as the blight it has become on the growth of this nation; economically, socially and morally by the establishment of a National Holiday.
The flag should be flown at half staff on Tax Day to recognize the continuing sacrifice millions of taxpayers make to their government(s) annually. Sadly, this sacrifice is largely wasted by that very government. Fraud, waste, and abuse have been well-documented at every level of government and continue largely unabated daily. By some estimates, nearly 80 cents of every dollar is wasted.
The Founding Fathers were geniuses...they knew government would ultimately grow to become both uncontrollable...and unaccountable. The U.S. Constitution was specially written NOT to have income taxes. Indeed, an argument can be made America was born of resistance to taxation. Yet there is no creature more oft-maligned than your everyday taxpayer.
The everyday taxpayer goes to the back of the line, every time. Some 250 years ago this country began with NO income taxes at any level and seemed to do just fine, but government itself was hungry for the wealth and power the people had accumulated and so the cycle began again...this time cloaked under "fairness."
In 1913 everything started unraveling with the passage of the 16th Amendment which was an answer to the lowering of tariffs. Prior to this legislation, America ran on tariffs. Goods were taxed and consumers ultimately paid these taxes based on their consumption of said goods. Nobody was forced to buy certain goods or services, like say healthcare.
The 16th Amendment, however, changed everything; now a person would be taxed on BOTH their consumption of goods (tariffs did not go away completely) AND how much INCOME they derived on an annual basis.
"Progressive" Democrats at the time sold this to their constituents as perhaps the first instance of "tax the rich." It would not be the last, and it ultimately failed as every other attempt has, but not before the 16th Amendment shackled millions of Americans to a new form of economic slavery.
Initially pitched as "only 1% of people will be affected," the new income tax spread like wildfire from the Federal level, to the State level, ultimately to the municipal level. This obscene cash gusher was the beginning of the end for low-friction growth. Insidious like a cancer, and just as malignant, the income tax spread both horizontally and vertically across every part of the body of society.
In 1913 the original plan was to apply a 1% federal tax on all incomes over $3K (or $4K married.) A graduated scale rose to a maximum marginal tax of 7% on incomes overs $500K. There were no State taxes at this point. And taxes were paid annually. Consider what this has become over the next 100+ years.
First, vertical layers of taxation were added: local/municipal taxes, State taxes, and Federal taxes. Next taxation expanded horizontally like a locust plague...licenses, sales tax, usage tax, gas tax, water tax, etc. ad infinitum. Of course the brackets themselves expanded to capture nearly everyone. Remember, $3,000 in income in 1913 is equivalent to $300,000 today. So imagine everyone today making $300,000 (or $400,000 married) having ZERO income tax at either the Federal or State level!
Finally, the SPEED of taxation increased to zero. Zero? Correct! What once was paid annually in arrears, is now paid instantly at the point of sale. Who says the government is not efficient? They have compressed time to zero! That is just how far we have "progressed."
And the rates themselves? 1% is long gone. The lowest rate is now 10%. That's right, 10X the original lowest RATE! The moment someone starts to make a little bit more money their silent partner is also making a LOT more. The Federal Tax rate now peaks at 37% for those making over $626,000 (married.) Then add in State taxes, with California topping out at 13%. Add in local/muni taxes, sales taxes, gas taxes, etc. and high earners can easily drop 60% of their income to taxation.
What does all of this taxation support? Sadly, larger and larger government that wastes more and more of your money. The problem is that the taxpayer does not have a champion. Congress is tasked with SPENDING our money so it is pointless to approach them. The Executive Branch is the beneficiary of the spending and the Judicial Branch enforces the spending via "interpretation" (read Obamacare.)
What can the average taxpayer do? Nothing. What can the savvy taxpayer do? Become an expert on the tax code to maximize your situation. There is a reason why the rich hire teams of CPAs. You may not need a team, but becoming knowledgeable on the tax code, geography, and strategy can help immensely.
For most, the "shakedown" will continue for a lifetime, and beyond if you do really well. Careful planning and execution can help sharpen the blade so the various immortal government entities cut off only what they are legally entitled to and not an ounce more. Sadly, after 250 years we have become a nation of taxation without representation. Happy Tax Day.
