Sunday, April 26, 2009

Taxnesia: A real crisis

From the folks over at the Center for Small Government:

Warning: Taxnesia is Hazardous to Your Financial Health
by Michael Cloud

In response to the April 15th TEA Parties, USA Today wrote an unsigned editorial that began:

"Quick now: How big a bite do federal income taxes take out of the average person's income? 30%? 40%? Even more?

"Nope. It's 9.1%."

What reaction is USA Today trying to evoke in those who did NOT go to a TEA rally? 'Why are those Tax Protestors getting riled up over a trivial, tiny 9.1% federal income tax? Aren't they just being petty?'

You've probably seen similar propaganda tactics used to raise your sales tax "a meager half a percent." Or to raise property taxes on your home "a mere 61 cents a day."

Big Government tax raisers have mastered techniques of making tax increases look tiny and trivial and cheap.

But each of these tax-minimizing illusions and tricks has a fatal flaw, a huge Achilles Heel: Taxnesia - taxpayers forgetting or ignoring all their other taxes.

You've heard of amnesia. It's a loss of memory. Amnesia can be general or specific. It can be total or partial. It can be permanent or temporary.

Amnesia can be caused by a number of things. Disease, injury, shock - or hypnosis. It can happen by accident. Or deliberately.

Taxnesia is almost always deliberately induced by tax-hikers. Through years of repetition in government-run public schools, colleges, and in newspapers written and edited by advocates of Big Government. By communication tactics, tricks, and techniques much like brainwashing and hypnosis.

When someone considers only one tax increase - in isolation from his total tax burden - he's under the influence of taxnesia.

When a person considers only one tax - separate from all other federal, state, and local taxes - she's in the grip of taxnesia.

When a taxpayer considers only federal taxes - while ignoring and forgetting state and local taxes - he's affected by taxnesia.

When an individual considers only direct taxes - while blanking out and missing indirect taxes and mandatory government fees - she's a victim of taxnesia.

Who uses taxnesia techniques? Lovers of Big Government.

What's the role and function of taxnesia? To lull you into passively accepting Big Government, to doing nothing to oppose tax increases, to stay on the sidelines when tax cuts are on the ballot.

Who benefits from taxnesia? Supporters and profiteers of Big Government. Tax spenders and tax consumers.

Who loses from taxnesia? Private sector businesses and workers. The self-employed. Taxpayers.

Back to the USA Today's 4/17 editorial - Tax rhetoric vs. reality. To give themselves an "out," they wrote:

"In fact, even if you add all the other federal levies people pay in addition to income taxes - such as payroll taxes for Social Security and Medicare and excise taxes for gasoline, alcohol, tobacco and other items - the combined federal tax rate was 20.7% in 2006, the latest year for which figures are available."

What about indirect federal taxes - such as tariffs - that are added to and buried in the retail prices we pay for imported consumer goods?

What about the other mandatory federal "fees" and "charges" that are on our phone bills, cable bills, power bills, and numerous other monthly bills? (Taxes are mandatory government fees. And mandatory government fees are taxes - but are NOT listed as taxes.)

And there are more hidden federal taxes - and fees.

If we add indirect taxes, hidden taxes, and mandatory "fees" imposed on the "average taxpayer" by the federal government to the incomplete "combined federal tax rate of 20.7%" - we will probably arrive at a total federal tax rate of 27%. That's right, a federal tax total THREE TIMES THE PERCENTAGE THAT USA TODAY IS TRYING TO CONVINCE US OF.

Let's say you earn $60,000 a year. That actual combined 27% federal tax rate means the federal government is taxing you $16,200. Every year.

But wait, there's more.

To cure taxnesia, you need to total up your state and local taxes, too. You need to add them to your federal tax burden.

For example, here's a PARTIAL list of taxes in Massachusetts:

* 5.3% State Income Tax
* 5% Sales Tax
* Business and Corporate Taxes
* Death Taxes (Estate Taxes)
* Gasoline Taxes
* Turnpike, Bridge, and Tunnel Tolls
* Motor Vehicle Registration and License Fees
* Beer, Wine, and Liquor Taxes
* Cigarette Taxes
* Cable TV Taxes
* Electricity Taxes
* Internet Taxes
* Long-distance Telephone Taxes
* Water and Sewer Assessments
* Professional Licensure Fees
* Fishing, Hunting, and Gun License Fees
* Hotel Occupancy Taxes
* State Gambling Profits
* User Fees (e.g., court costs, parks, freedom of information, etc.)

But wait, there's more.

Massachusetts state government also rakes in money from other taxpayer-funded sources:

* Tax Bond Proceeds
* Lawsuit Settlements (e.g., from cigarette manufacturers)
* Investment Earnings (on over $30 billion in government financial assets)
* Federal Grants and Subsidies (paid out of your Federal Taxes)

But there's even more. Local taxes.

Your local taxes need to be added to your federal taxes and state taxes.

Remember your property taxes on your home, subsidized housing tax, auto excise taxes, room taxes, rental car taxes, building permits, dog licenses, and more.

Your state and local taxes may have a combined total of an additional 15% to 20% of your income. Say it's 17%. Another $10,200 in state and local taxes and fees. On top of your $16,200 in total federal taxes and fees.

$26,400 in total federal, state, and local taxes on your $60,000 income. 32% to 47% of your earnings taken in taxes!

Those are the real numbers. The real percentages.

That's what we see when we shake off, speak out, and fight against taxnesia. When we honestly count and weigh the true tax burden on you - and the rest of America's taxpayers.

We must cure taxnesia in ourselves, our community, our state, and all across the United States of America.

We must roll back taxes, borrowing, and spending at all levels of government.

How to Clear Up Murky, Muddy
Government "Transparency" Web Sites
by Carla Howell

The U.S. Government and several states - Alaska, Kansas, Louisiana, Maryland, Missouri, Nebraska, Oklahoma, South Carolina, Texas, and Washington state - have put up "transparency" web sites that claim to shed light on government spending.

Before you celebrate, beware! Far from transparent, these web sites are superficial. Perhaps any attempt at "transparency" is better than nothing - and should be encouraged. But don't expect them to be of much use - and don't believe for a second that government finance has seen the light of day.

As of this writing, only one of the "transparency" web sites - Missouri's - discloses expenditures at the level of the individual transactions. All of them omit whole areas of government spending. Most of them focus on government contracts, leaving out government employee expenditures, other operating expenses and a host of government programs - the costs of which remain undisclosed and unreported to you, the taxpayer.

What's worse, it is safe to assume (but difficult to verify, for obvious reasons) that none of these "transparency" web sites disclose the massive "off budget" spending that goes on today at all levels of government in the United States. Perhaps as much as one third of total government spending is hidden in special "off budget" accounts, which politicians have decreed are not necessary to disclose to the public.

We know that in Massachusetts, for example, about $30 billion out of $70 billion in total state and local spending is "off-budget."

Can you say, "The fox is watching the hen house?"

Real government financial transparency demands that politicians disclose all government spending. No existing government "transparency" web site comes close.

While politicians refuse to fully expose government finance, they do a superb job of nailing you down to report yours.

There is no justification for this double standard. If anything, those who forcibly extract tax dollars should be the first to reveal their finances - not the taxpayer! We need to level the playing field!

When the IRS audits you, they demand a fully transparent view of your personal and business finances:

They'll look at every dollar that goes into and out of your financial accounts to establish how much you took in, where it came from, and how you spent every dollar that you claim qualifies for a deduction or exclusion.

They demand receipts, or proof of purchase.

Those receipts must show that each deduction or exclusion is "allowable."

The IRS can bust into your house and swipe your computer or subpoena your bank, the phone company, your Internet provider, and other vendors with whom you do business to verify your claims.

If you don't disclose your finances, or if you are found to have filed a fraudulent report, the IRS will hit you up for the what they say is due, plus steep interest and penalties, plus possible fines and imprisonment.

If you own a business and your bookkeeper files a late or fraudulent report, you are considered responsible and could be on the hook for penalties as well.

Isn't it high time politicians play by the same rules?

True government financial transparency would require the following:

Government budgets are always posted on time, completely and accurately. No "off budget" spending.

From summary budgets, you can "drill down" and get any level of detail you want about any transactions - similar to schedules and supporting data you must produce in an IRS audit.

If there are multiple versions of a government budget, they are reconciled with each other (there are now four versions of the Massachusetts state budget - which politicians refuse to reconcile).

Documented proof of every transaction is on file and accessible to citizens with the full cooperation of government officials. No stonewalling.

Each expenditure of every budget is linked to enabling legislation and approved budgets. Ideally, each expenditure would additionally link to a list of the politicians who voted in favor of the spending and a description of its alleged purpose.

Government officials - all the way up the chain to the politicians who run the show - are held civilly and criminally liable for fraud, for failing to file complete and accurate reports on time, or for stonewalling or obstructing a citizen audit.

Enacting all of these measures holds both taxpayers and the politicians who spend tax dollars to the same reporting standards.

Next time a politician suggests that more transparency is too difficult or costly to achieve, or that it is not necessary because government finances are already reported, or some other excuse, then say, "Fine. Let's make a deal."

Here's the deal you offer them: No Double Standard! Politicians must play by the same rules as taxpayers.

Tell them that if reporting government finances is too inconvenient for them, it should be optional for taxpayers as well. We should therefore make the payment of the income tax an honor system.

Taxpayers would simply send in whatever amount of money they believe is "due" according to their own best judgment of what is legal - just as politicians do. At their option, they could declare large portions of their income "off budget" and not count it as taxable, similar to the way politicians spend tax dollars "off budget."

Like politicians, taxpayers would bear no liability for penalties of any kind. All tax enforcement measures would be immediately repealed. Anyone incarcerated for a tax violation would be freed from prison with their records wiped clean.

This approach offers several key benefits. We could pink slip a few hundred thousand bureaucrats, including every IRS auditor. No longer needed. You could throw out those boxes of otherwise useless tax records and receipts - and free up space in your office, basement, or attic. You could save yourself hundreds, if not thousands, of dollars you now spend every year on tax accountants.

Sound like a good deal to you?

If politicians find this option unacceptable, then they can quit making excuses and start reporting their finances - on time, accurately, and completely. We need true transparency web sites for every government in the United States.

The hypocrisy and the double standards must end. Full government financial transparency - now!

1 comment:

Anonymous said...

I think that USA Today used the wrong statistic to measure the amount of income taxes people pay. A more appropriate measure would be the median percent of income paid as income tax. The median would be 0%. Using this statistic we can conclude that anyone who thinks they actually pays income taxes is delusional.