Wednesday, April 14, 2010

The Income Tax Man Cometh

Tax day is here tomorrow. Get your forms ready if you haven't already. If you gave the government a short term loan and are expecting the balance of that loan, you probably already filed. If you owe money, you're probably getting ready to send your form in. If you're looking to dodge an audit, you should probably go ahead and file an extension. The IRS-agent-to-filer ratio is much lower on extension day than it is now since they hire temp workers to handle the additional load in April.

But that's not really the point of this post. Gallup recently did a survey asking if your personal income tax was too high, too low, or about right. About half of Americans are happy with what they paid on income tax. Personally, I'm happy with what I paid in federal income tax. It was about $4,000. For what I get, that seems like a fair deal to me. State income tax bothers me though. What did I owe the state this year? About $4,000. Excuse me? I pay sales tax, property tax, and all other manner of state taxes and they still hit me up with a bill as large as what I owe the federal government?

Back to subject, I wonder how many people polled actually know what they paid in income taxes? I know several people who think they don't pay income taxes because they get a refund every year even though they clearly make enough to have to pay something. I also know at least one person who gets "refunded" more than she pays in thanks to tax credits.

There are a lot of arguments about our current income tax code. It's too complicated. The IRS is too powerful. We shouldn't be reporting on each other. The top tax bracket is too high. The top tax bracket is too low. Too many people don't pay. A tax credit is just a thinly veiled wealth redistribution (but any progressive income tax is wealth redistribution).

I understand those arguments. But you know what I really want out of our tax system? Transparency. The best example of transparency in taxes I can think of is property taxes. When I pay my property taxes, there's a breakdown right on the bill of every penny I owe and where that money is going. And nobody thinks they get a property tax refund even if they have escrow and escrow collected too much the first year (which is fairly common for the first year living in a newly built home). Why can't we get that from income tax? I think it would open a lot of eyes. Maybe that's the issue.

If we actually got an itemized receipt (even if it were grouped into broad categories), I think both sides would be worried. There are a lot of pet projects on both sides of the fence that our federal government blows money on. And sometimes it's a little surprising to see how big a chunk of your bill goes where (defense for example). $4,000 sounds fair, but where exactly is that $4,000 going? I think if they're going to take our money, the least they can do is let us each know.

1 comment:

Cousin Pat from Georgia said...

I filed online, so the IRS "accepted" my return. I should be getting a few dollars back (and when I mean a few, I ain't kidding - I'm apparently very close to the fulcrum between "refund" and "owe").

I would love to see my itemized reciept, and that would defintely open some eyes. It should start with "How much income you qualified" followed by "How much tax you paid." Then show the percentage of your income that was taxed, and where you stand locally, statewide and nationally for that percentage.

Then break down where yo' money went.

I was quite pleased earlier in the year to recieve a very different style credit card bill, so I know an itemized IRS receipt is possible.

It may require hiring some more IRS workers though....