Paying Our Way

Complaining about taxes is more American than mom and/or apple pie. People clearly resent having to pay them, work hard at minimizing and/or evading them, and use sayings that yoke their payment to death (“nothing is sure but death and taxes..”)

Dissing taxes is just deeply embedded in the culture. That negativity obscures what would otherwise be obvious; taxes are the “dues” we pay for our membership in society.

I have always wanted to do a cost/benefit analysis, comparing what we get for paying those dues with what we would pay on the open market for the same services. (Garbage collection versus scavenger services, police versus private security, etc. etc.) I lack the data and the expertise to perform that analysis (how do I value paved roads or public parks?), but I look longingly at Scandinavian countries with tax burdens that are not–despite the mythology- much higher than our own combined burden, while relieving citizens from the costs of higher education and health care.

Admittedly, America’s tax system is manifestly unfair–and for the obscenely rich who can afford the very best accountants and lawyers, U.S. taxes are easy to evade.

If taxes are–as I insist–our dues for membership, the assessment of those dues should be equitable–and the system should be transparent enough to persuade taxpayers that everyone is paying a fair share. As economists and pundits never tire of pointing out, the American tax system is both ridiculously complex and wildly tilted in favor of the wealthy.

One of the most vocal of those critics is Robert Reich. Reich was Labor Secretary under President Bill Clinton; he now teaches at Berkeley, and he is among the many economists who have pointed out the folly of those repeated tax cuts for the rich.  Such cuts remain a GOP article of faith, despite the fact that the supposed benefits of such cuts have never materialized.

Last year, Reich penned an essay advocating increased taxes on the rich, and providing 7 ways those taxes might be levied. As he said in his introductory paragraphs

Income and wealth are now more concentrated at the top than at any time over the last 80 years, and our unjust tax system is a big reason why. The tax code is rigged for the rich, enabling a handful of wealthy individuals to exert undue influence over our economy and democracy.

Conservatives fret about budget deficits. Well, then, to pay for what the nation needs—ending poverty, universal health care, infrastructure, reversing climate change, investing in communities, and so much more—the super-wealthy have to pay their fair share.

Reich followed up with “seven necessary ways to tax the rich,” including such items as repealing the Trump tax cuts, imposing a wealth tax on those he designated as the “super wealthy”, raising the top marginal rate, taxing stock transactions (he says a tax of just $1 per $1,000 trade would raise $777 billion over a decade), and closing various loopholes.  (Just closing the carried interest loophole is estimated to raise $14 billion over a decade.)

Biden has already taken one of the seven steps Reich enumerated–giving the IRS sufficient funding to conduct audits and go after the federal income taxes currently being evaded by the rich. He calculates that just going after  the richest 1 percent would generate $1.75 trillion over the decade.

As Elizabeth Warren has long argued, a wealth tax imposed on the super-wealthy should be a no-brainer.

Wealth is even more unequal than income. The richest 0.1% of Americans have almost as much wealth as the bottom 90 percent put together. Just during the pandemic, America’s billionaires added $1.3 trillion to their collective wealth. Elizabeth Warren’s proposed wealth tax would charge 2 percent on wealth over $50 million and 3 percent on wealth over $1 billion. It would only apply to about 75,000 U.S. households, fewer than 0.1% of taxpayers. Under it, Jeff Bezos would owe $5.7 billion out of his $185 billion fortune—less than half what he made in one day last year. The wealth tax would raise $2.75 trillion over a decade, enough to pay for universal childcare and free public college with plenty left over.

I’m not so naive as to think these changes to the tax code would make the rest of us sing happy songs as we paid our taxes, but a system where everyone is obviously paying a fair share would go a long way toward mollifying a lot of us.

I’m also not sufficiently naive to think that these changes have a chance in hell of passing a GOP-majority House.

Eventually–if the culture wars subside, and we elect people actually interested in governing–we might emulate countries with better cost/benefit ratios.

We can hope…

27 Comments

  1. Indiana has long been known as the “Land of taxes!” Check your paycheck stubs for the number of taxes deducted before you get what is left. We are taxed on utilities, which are monopolies and necessary goods and services for a daily lives. Did anyone else who orders from Amazon realize we were being charged Indiana sales tax before Indiana won their court case against Amazon to receive sales tax on goods from other states? The rate of these taxes do not change when we are seniors and retired, living on limited income or jobless trying to survive; those of us on Social Security pay the same rate as those whose annual income is in the seven-figure level.

    The basis for taxes to pay for infrastructure are a practical use of our tax dollars; with the current exception of continuing tax-free religious properties and school vouchers as an example. Professed millionaires and/or billionaires who pay less, or none, are living above the law and making a joke of democracy. Trump has finally, after approximately 30 years of ignoring IRS, been forced to turn over 6 years of his tax returns – which 6 years? In retaliation he is now ranting outright at rallies to terminate the Constitution; which he has been attempting to accomplish since January 20, 2017. A professed tax-dodger is leading the Republican party.

    “As Elizabeth Warren has long argued, a wealth tax imposed on the super-wealthy should be a no-brainer.”

    A fair tax code is one of those shoulda/coulda/woulda political bugaboos which has reached intolerable levels. Elon Musk’s purchase or Twitter for $44 BILLION as if he bought a “new” used car has become a Republican cudgel on working Americans as it has given such as Marjory Taylor Greene political powers with the coming Republican takeover, NOT transition, of the House of Representatives. We can all file away our hopes of a fair tax code for the immediate future and if we lose the actual majority in the Senate after Tuesday’s Georgia runoff election, we can forget that possibility as a lost cause.

    “We can hope…” Can we?

  2. All of this is 100% correct. Of course, we also have terrible problems with how we SPEND our tax dollars: we currently spend roughly $800 Billion (yes, Billion with a “B”) on the military… more than the next 10 highest military-spending countries combined, and roughly 40% of the entire world spending on military. (https://www.nationalpriorities.org/blog/2022/06/22/us-still-spends-more-military-next-nine-countries-combined/).

    Imagine how we would put our fiscal house in order and positively impact American (and others’) lives with, say, just half the military expenditures each year… to say nothing of avoiding adding to our national debt.

    Alas, it will never happen. So, yeah, go get the fucking tax-evading super wealthy to pay their fare share!

  3. Sheila … you sprung a ranting leak in my nerves.

    What if you pay more taxes in advance than you actually owe? We sometimes file early in time to begin paying estimated tax with first payment in April to be applied toward the current fiscal year.

    Then we reward ourselves to relocate north to our golden pond in southeastern Ontario. This past fall, we had our private mailbox here in Indy hold our mail for September and October.

    Lo and behold, DOR (for folks outside Indiana, that is our state tax revenue office) sent a letter in early September, and another three weeks later. The latter warning of deferral to the Sheriff with a warrant for collection. When we opened our mail and saw the notice, I immediately called DOR. Then called our CPA.

    In review, we discovered that DOR, in their infinite wisdom, credited our estimated tax payment to prior year that created a larger overpayment and refunded to us by direct deposit without explanation.

    Two days later, I receive a warrant from the Marion County Sheriff. Their tax division is located at our county criminal justice center located on Justice Way in the wastelands of southwest Marion County. Now that is a woke moment to place on your bucket list. I am directed on arrival to a reception area to wait for someone from the tax office to meet with me.

    The room is filled with deputies guarding inmates visiting next of kin. About 30 minutes of wanton visitude, a voice coming from someone somewhere announces “who is here about their taxes?”

    Suddenly all eyes in the waiting room leer at me and one tall robust hunk in handcuffs bellows: “that must be you!” So much for customer service confidential discretion.

    I pay what DOR says I owe plus interest and penalties. A week later, another letter from DOR says I still owe taxes. Now I find out it takes 30 days from transactions at the Sheriff’s Office to catch up with DOR. I look at my latest Apple iWatch to confirm this is the year 2022.

    Then I receive a letter from DOR reporting that the check, with reference check #, paid April 2021, was included in our refund and we owe them tax due. Had DOR credited the estimated tax where intended, all this expense of time, a woke experience in waiting room at our new jail house, and labor would not be necessary.

    But hey! “We are the government and we are here to serve you.” Rant over and out. 😅

  4. As long as the uber wealthy tax dodgers, both individual and corporate, can put campaign money in politician’s pockets and promise lucrative careers for them when they leave Congress there can never be any hope for fair taxation. The very few members of Congress that refuse to prostitute themselves out to the wealthy can be counted on one hand.

  5. Norris – your DOR experience was inexcusable. Have you thought of filing a lawsuit against the agency and its leaders? The Indiana legislature might need to increase the DOR budget so they can hire intelligent and well trained employees. Has anyone else on this blog ever called the IN DOR with a tax question? It is instantly obvious that the employees hired to supposedly answer questions have no training or tax knowledge and are most likely paid minimum wage at a phone call center.

  6. Nancy … now think about this … a lawsuit filed on the tax man? No. Through my CPA, we will state our case, provide all documentation, have our record gleaned, and request reimbursement of interest and penalties. Then let it go. There are too many hungry hammers at DOR looking for exposed nails.

  7. Cost/benefit analyses used to be part of my jobs in industry. With regard to the values associated with paying taxes, perhaps the words PRODUCTIVITY and EFFICIENCY are necessary. Universal health care allows for more citizens to be more productive so that their work is more efficient, thus so is whatever business/service in which they work. Same for paved roads, fire departments, etc. Without those things, productivity plummets while cars are in the shop being repaired, or people are living in the street because their homes burned down or their factories were gutted.

    It’s true that our tax burden, as a nation, is pretty low compared to other industrialized nations. This is so for all the reasons of tax avoidance mentioned above. There is no such thing as tax equity in the United States. Never has been. Loopholes in tax codes is a science conducted by the richest among us. Always has been. That’s why the tax code book would sink a small boat if loaded aboard. And harkening back to a much over-discussed issue: The richest also pay for the politicians they want to keep those tax codes vibrant regarding the maintenance of loopholes.

    For all these reasons, they answer the reality that over 60% of our currency resides in foreign banks earning copious interest for the depositors and paying NO taxes for the benefit of the country that made these greedy bastards rich in the first place. SIXTY PERCENT. That comes out to something approaching $40 TRILLION, or the amount the world economies lost when the same greedy bastards de-regulated investment banking in 2005-06 that created the so-called housing bubble that popped in 2007. Well done, Republicans.

    And yet, Republican voters still represent a very large number. Why on Earth would anyone vote for Republicans who are working ever-so-hard at screwing everybody out of their hard-earned money? The working person has no power over the loophole “industry”. That’s just how the corporate/banking sponsored Republican party wants it. Don’t lecture me about how the Democrats are being bribed too. Sure they are. It takes money to be elected in this screwed up system. But look at the voting records of Republicans v. Democrats with regard to the benefits and returns on our tax payments.

    The rich pay a FAR less percentage of their incomes than the working man – as mentioned in Sheila’s essay. Why? Because they pay for it. They pay the lawyers and accountants to make it so. What do they do with the obscene profits they make? They hide it and hoard it to avoid paying taxes. That is what makes our tax value so inefficient and limits our productivity potential.

  8. Two things come to mind. First, the current system ignores one of the phrases in the Declaration of Independence, namely, “To promote the general welfare of the people.” And taxes are the only way to accomplish that. Second, anyone who feels that it is not fair to tax the wealthy at higher rates than average, should consider that Adam Smith, the father of capitalism, believed that a progressive income tax was fair, and he also approved of a higher marginal tax to be imposed on the very wealthy.

    Who is willing to say that Thomas Jefferson and Adam Smith were Socialists?

  9. When Diana and I were both still working in IT, we had risen to the top of the respective pay ranges for salaried professionals in Indiana. When I did my taxes, Quicken would report that we were in the top 10% of salary ranges. In that same report it would give stats on the average deductions in various categories taken by people in that range, and was always dumbfounded at the huge numbers being reported. Being in the bottom of top 10% must have been very different that being in the top of that range. Once we started our own Airbnb business, suddenly a whole new world of legal tax deductions opened up and like every good American that can afford an CPA to do our taxes, we take advantage of them.

    Joann is exactly right, in that for the “average” person, everything is taxed. I suspect that Indiana is more regressive that most states, so that the lower your income, the larger the percentage goes to taxes. The thing that irritates me in Indiana, because our tax system is so regressive, inflation boosts tax collections very quickly leading to huge surpluses. Rather than use the money to actually do things that would be good for the state, they “refund” it to the tax payers. I don’t know if this a bribe, but I do know the direct effect is to fuel inflation as people have more money to spend.

    My one right wing face book friend was horrified that the IRS got more funding. I told him he is being duped by the rich guys. If you cut funding to the bone, than the only thing the IRS can do is run an automated computer programs to catch “mistakes” made by the people who are unlucky enough to have all of their income recorded and reported on a 1099, people exactly like him.

    Norris, as for your story, It took us 6 months to straighten out a obvious mistake made by IDOR. The first 5 months was spent dealing with automatically generated letters. Once a real person got involved it was resolved quickly, but I am still not sure I ever got a letter telling me so. That’s the level of service you get when “small government, lower taxes” people are in charge and forget you get what you pay for.

  10. It has been a long time since I have complained about my tax burden. That said, I understand that the history of this country is littered with rebellions caused by people who didn’t like their tax “burden” from the Tea Party through the Whiskey Rebellion and up to the Bundy bs. Those rebellions were never led by people who were really hurt by the taxation, but by those who felt entitled to be treated like they were special. Tax the wealth, but be prepared for the whining.

    Thirteen Circuits/Thirteen Justices

  11. Average net worth of Americans in 2022 – $121,000 or so. Average net worth of Congress in 2012 (latest figures available) $1,008,767. Game over.

    Also, IRS has been funded before and collection wasn’t much better…dem rich folks dodge real well.

  12. For years now Republicans have masterly framed the tax issue in terms of the need for “tax relief.” I first heard the “taxes as dues for membership” framing from George Lakoff in his book/talks on Moral Politics. Here’s a relatively recent interview with Professor Lakoff on reframing issues in politics which serves as an intro to anyone unfamiliar with his work.
    https://youtu.be/yBglQugobBI

  13. Every country today has a mixed economy of socialism and capitalism. Both are required, but neither is sufficient. The socialism part provides and maintains the collective infrastructure that almost everyone uses every day as the means of production for all of the goods and services that we must add to the infrastructure to complete our individual needs for comfort and to cushion our rise above merely surviving. Of course, our labor and/or wealth to invest from savings or debt, and the earth’s limited natural resources, including energy constantly renewed by the sun, work together to create all of the means of production for both aspects of our economic lives and it is all temporary, eventually becoming waste to deal with. The simplicity of that big picture is easily obscured by 1) our day-to-day perspective deep in the bowels of it all and 2) the use of currency to account for all of the inputs and outputs and 3) the means that we choose to use to distribute the real wealth of comfort that we produce and consume.

    The taxes and bills that we pay are accounting transactions that allow us to trade in our labor and/or wealth or debt for all of the goods and services that we consume. The only thing that is manageable given our standard of living is precisely where we draw the line between taxes and bills. One consideration is that lowering taxes at the expense of raising our individual bills that support our individual standards of living has the tendency to redistribute wealth up and moving in the other direction tends to redistribute wealth down. That’s the real political issue.

  14. I have to agree with Vernon and Lester this morning, The tax burden will always be on the backs of the average middle class citizen!

    We can go after the rich, absolutely! But the corporations are dodging at a even higher rate. Corporations in the United States are setting on about 5.4 trillion dollars of liquidity. Half of that is actually in accounts that can be drawn down by a check or some other transaction very easily.

    This massive piggy bank is controlled by the heads of these corporations or as Todd would say the oligarchs. Why are the corporations setting on this almost incalculable amount of cash? This gigantic piggy bank is really unmonitored. Withdrawals are made cuz! Cuz why? Cuz that mega yacht has my name all over it! Or that business vacation to Monaco, or, transferring shiploads full of money to Cypress or Malta. It could go on and on!

    You donate money to politicians, they can now do with it what they please. And, with the right paperwork they don’t even have to pay taxes on it.

    When you think about the Boston tea party, people rose up against paying unfair taxes or taxation without representation. Now, they can stick their hands so far in your pockets legally, you can’t even play pocket pool, lol!

    The criminality involved in all of this, and I would say the moral turpitude, putting the burden on those who can least tolerate it, should not be accepted as customary. We have a duty to pay taxes, but not an unbalanced and unequal burdensome edict by the government.

    The government if they so desired, could actually seize some of that money, and, tell corporations and the extremely wealthy, that the laws of this country will not protect them, that there will be a waiver given to other governments so they can proceed with action against them. So in other words, if they want the protection of the American government, they have to pay their fair share.

    During the housing crisis, and the great recession, the average taxpayer bailed out the banks and other large entities that dealt with financial transactions. There should be a fiduciary relationship between government and its citizens, not, unplausible or unreasonable cock and bull!

    It’s sad that these untouchable entities want to bleed what little treasure they can get out of your wallets and pockets, as they hold on to their treasures. The wealthy, the corporations, the churches, if they were all taxed equally, the burden, as Jesus Christ said, “His burden is kindly and His yoke is light.”

    Isn’t that what we all want? If it’s a burden it should be a kindly burden, it should be light and not unbearable.

    The government could correct this at any time, but they have not! So, why? Because they are all in it together.

  15. The two most obvious of the seven listed by Reich which could be undone easily via repeal are: the Trump-Ryan tax atrocity of a lame duck Congress in December, 2017, which gave 1.9 trillion largely to the rich (including Trump and Ryan) and being unpaid for went straight to deficit for the rest of us to pay; and, of course, the carried interest atrocity which redefines what is clearly ordinary income as capital gains for the benefit of hedge and equity fund managers. We hear talk of their repeal from candidates before elections but silence afterwards. Ever wonder why?

    I was once a Deputy Attorney General in charge of Territorial application of the Internal Revenue Code. I ran a case through a grand jury in Guam, obtained an indictment, and brought the defendant to trial. The defendant had attempted to bribe a revenue agent and gave him a check as payoff! I had the revenue agent on the stand who testified to the attempted bribe, introduced the check into evidence, and the jury found the defendant not guilty! I asked defendant’s counsel afterwards how that could be, and he said: “They found him not guilty because that’s what they do themselves and don’t want to be inconsistent.” Being careful on the voir dire didn’t help.

    One of the secrets of the so-called 1,000 years of the Pax Romano was that after the Romans subduded another country militarily they would gather the leaders of the subdued and enslaved state and say: “Look, there are two things we demand, i.e., tribute and peace. We don’t care about your religion or local politics so long as we have tribute and peace, and if we don’t have those we will kill you.”

    So who’s for arming IRS agents?

  16. @ Gerald … “who’s for arming the IRS agents? “

    At DOR, apparently we need not arm the state agents, anyway. The DOR automated letter mill defers to the Sheriff if the system is not updated in time for those who comply. The internal system at DOR operates at warp speed to deploy hammers looking for marginal nail pops. But the mascot for the inter agency communications team at the Sheriff’s tax office is that lovable barn bandini eating sloth.

  17. they,the billionaires, mainly here in America, have gained their wealth,at the nations costs. they inturn go to congress,buyout one party,and part of another,while PACing and so called philantropy their way to be citizens of good cause,and social media icons. they, the billionares have used America and its people like a front door mat,wiping their dirty feet on us as they gleefully trash America and the and the world. wall streets boogaloo has made it a fact, the working class is expected to kiss their ass, or get nothing. seems like someone forgot,the profit is because we earn it for them. act 2
    if the threat of a rail strike is being hampered by a law and Bidens/demos push for no strike. go figure how fast that strike would end if it does happen.a perfect storm to make the strike and show how the rail thugs (owners and reps)dont care if you have a merry christmas..all for profit. hey buffet,KMA

  18. Lester,

    Consider these facts. The average age of Senators in 2021 was 63.9 years, of Representatives 58.7. The average net worth of Americans 55 – 64 is $1,175,900. It seems our elected representatives have some catching up to do. Now what game is actually over?

  19. I ditto Sharon. Pete … well said. Your reasoned insight into a global complex economy simply stated to be informed and understood. Dan, thank you for sharing your experience getting things right with IDOR. Managing expectations sustains sanity. Thank you. 😊

  20. I wonder what the average net worth of Congresspeople is in 2022. Probably more than it was a decade ago. But your point is still interesting Peggy. Kind of undercuts the argument that all politicians are corrupt.

  21. I saw a figure that answers Sharon’s question. The article said that the median income of members of Congress is about a million dollars. Clearly, that is not their government salary, but many of them have other sources.

  22. Pascal – just for the sake of it – Of course Jefferson and Adam Smith were Pinko, radical socialists. Anyone who doesn’t subscribe to the “party line” of today’s GOP is so by definition. Look any any campaign ad. 8)>

    Sheila – you forgot one of the GOP’s great selling points. Buried on pages 239-423 of the Federal Budget is “Waste and Fraud”, and we can simple rip out those pages and cut everyone’s taxes. To use an example, Christine Todd Whitman came into the governor’s office in New Jersey with a promise to balance the budget AND cut taxes. She did. It was easy. State contribution to employee retirement fund — $0.

    One general reaction to some of the comments – not all women (Greene, Palin) are champions for women’s issues and not all rich people are “in it for themselves”. FDR was considered a “Traitor to his class”, and I wouldn’t accuse him of “sticking it to the poor”. He was rich, no question.

    There have been many rich Senators and Representatives that favored helping the working people. Sadly, there are fewer of them in power now. Also remember, if I wanted to run for the Senate, I don’t have the money to self-fund, nor the rich friends to hit up for contributions. If I am an affluent whatever, I probably have other affluent friends who live in my upscale neighborhood or are members of the same upscale clubs. Our political funding structure favors candidates with more money, small contributions aside.

    Back to the main topic – Reich’s ideas would be great, if we could only pass them.

  23. The military industrial complex is supported by huge corporations run by the super rich.

    How often have we heard of significant cost over runs or technology failures on the newest and best weapon being reported to Congress? Did anyone say “We [the Congress] are not paying?” or “That is on the corporation to make right at its own expense?” Of course not.

    Those huge corporations employ large numbers of people that might be unemployed if the corporations were held accountable. From there the domino issues of re-employment, displacement of employees (and their families) and vulnerable military personnel would fall heavily on both coasts of this nation. It would adversely effect a broad swath of tax paying Americans with good paying jobs and benefits.

    Without the ships or weapons, could the military continue to recruit the best candidates? What would those would-be recruits do if not in the military?

    If the war industry is the most important part of our economy, second to (maybe) the entertainment industry (not always the artists), what does that say about our collective values and the future of this nation? What does it say that we are not taxing the persons, human and corporate, that disproportionately benefit from those industries?

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