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« Ahead Of Schedule? | Main | Equal Opportunity Politicizing »

Tax Thoughts for the Year

Every year, I do an annual column on taxes. It is a little later this year than last year and all I can say in my defense is that I filed an extension and that Austin is in the hurricane affected areas (at least according to the IRS).

I have a surefire way for taxes to be reduced. Republicans claim to be for low taxes. Democrats should be. Do Democrats really want Republicans to spend more than $2 trillion every year that they are in power on their own things?

Here's the three point plan:

1. Express tax owed as a percent of the dollar you get to keep as opposed to the last dollar of "gross" income. I put gross in quotes because for most people everything beyond net goes straight to the Government in the form of payroll deductions. In my book, if you don't get it, it's not income.

In the top tax bracket (ignoring various phaseouts), if you take home $0.65, you pay $0.35 in income taxes for the privilege. That's a 54% tax rate if you look at it like sales tax. If you add in medicare, it's a 57% tax rate. You and your employer pay $36.45 for you to take home $63.55.

Government expenditure can be reported as 25% of private GDP instead of 20% of the economy.

Living in a city where more than 50% of property taxes leave the jurisdiction, I can say from experience that people get real mad when more than 50% of anything is going away (or more than 100% of what stays in the district). Framing it that way will reduce taxes.

2. Report employer "contributions" toward social security and medicare as a percent of net take home pay and lump it together as a sum. Paying 16.6% of take home pay seems more like a crisis than 6.2% and 1.45% of "your share". I put "contributions" and "your share" in quotes because an employer considers the entire cost of an employee. If that money was not paid as taxes, that could be paid as salary and the employer would still be hiring.

3. Have all people file quarterly tax returns and write a check for their taxes. Dick Thaler has done research showing that the more often people consider their st0ck market portfolio, the more unhappy they become even if the daily fluctuations even out and people make a bundle. They turn out to be extra sensitive to small losses and become more unhappy frequently they consider them.

This can be turned to advantage for tax cutters if people are forced to consider the burden of taxes more than once a year. If instead of direct payroll deductions, taxes were put in a notional federal checking account and taxpayers had to write a big check every quarter instead of be pleasantly surprised by a small refund, we would see a lot of unhappy people.


Posted by Sam Dinkin at June 01, 2006 08:52 AM
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Here's the way to reduce taxes- http://www.amazon.com/exec/obidos/ASIN/0060875410/bookstorenow57-20/102-3445908-9839330

Posted by Jay-dubya at June 1, 2006 10:17 AM

Let me repeat my suggestion that the polititions get a percentage of savings in their districts. If they were getting 10% of the difference in spending/taxes recieved, they would find ways to reduce spending in their districts. When federal spending dropped below income, taxes could more easily follow. (you don't want the long version)

Posted by john hare at June 1, 2006 10:21 AM

Sam,

These are great ideas -- they go a long way to make the act of taxing more transparent.

Unfortunately, those interests that benefit from taxation would be against these proposals and generally in favor of ideas like withholding which mask the act of taxation.

Posted by Fred K at June 1, 2006 01:49 PM

The best way I have heard is at fairtax.org

Posted by Mike Puckett at June 1, 2006 05:07 PM

I have a very simple way to reduce taxes. Either move election day to April 15, or move the income tax due date to the "first Tuesday after the first Monday in November". It's no coincidence that Tax Day is almost exactly 6 months away from election day; that way we sheep have mostly forgotten the shearing of April by the time we see the candidates in November.

Posted by Ken Mitchell at June 3, 2006 10:12 PM

Last year, Tax Freedom Day for the UK was June 2nd. You Americans are lucky in this respect!

Posted by Ian Campbell at June 5, 2006 02:39 AM


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