As a “tax guy” I follow the Taxgirl blog at Forbes of Kelly Phillips. Because her posts are practical, not philosophical, they can profitably be read by Americans of any political persuasion.
A recent post of Kelly’s was titled “10 Things You Absolutely Need To Know About Taxes.” Reading them got me thinking that there are 10 other things you absolutely need to know about taxes that are far more important.
Here are the opening sentences to each of the 10 things Kelly explained:
- You may not have to file a federal income tax return.
- Even if you don’t need to file a federal income tax return, you may still want to take advantage of tax breaks and credits. The Making of the King... Best Price: $12.97 Buy New $3.60 (as of 06:05 EDT - Details)
- You don’t have to itemize to take advantage of certain deductions like the student loan interest deduction.
- If you’re self-employed, you likely need to make estimated payments.
- You should file a return even if you can’t pay your tax bill.
- Due dates matter.
- An extension of time to file is not the same as an extension of time to pay.
- Once the year-end passes, you still have one more opportunity to reduce your tax bill.
- If you fail to file and pay, the government can take some pretty drastic measures – even seizing your passport.
- A good tax preparer doesn’t have to break the bank.
There is no doubt that Kelly’s explanation of these things may help people as they get ready to file their taxes for last year during the upcoming tax season. But the 10 other things you absolutely need to know about taxes are things you need to know every day of the year.
1. Taxation is government theft. On this point, I cannot improve upon the late, great Murray Rothbard:
All other persons and groups in society (except for acknowledged and sporadic criminals such as thieves and bank robbers) obtain their income voluntarily: either by selling goods and services to the consuming public, or by voluntary gift (e.g., membership in a club or association, bequest, or inheritance). Only the State obtains its revenue by coercion, by threatening dire penalties should the income not be forthcoming. That coercion is known as “taxation,” although in less regularized epochs it was often known as “tribute.” Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.
To say that taxation is not government theft is to say that the government is entitled to a portion of every American’s income. War, Empire, and the M... Best Price: $16.00 Buy New $9.95 (as of 06:05 EDT - Details)
2. Progressive taxation is Marxist. At the end of section two of Marx’s Communist Manifesto, in addition to calling for the abolition of private property and the centralization of the means of production in the hands of the state, he petitioned for “a heavy progressive or graduated income tax.” The U.S. income tax has been progressive from the very beginning. The current tax rates of 10, 15, 25, 28, 33, 35, & 39.6 percent are highly progressive. The tax code is also progressive because of the personal exemption and itemized deduction reductions and the phrase out of certain tax deductions and credits that punish high-income taxpayers. The U.S. tax code is Marxist, even if the Marxism is disguised as the idea that “the rich” should pay some arbitrary “fair share.”
3. Americans are taxed to death. It is not just the federal income tax that plagues Americans. The Social Security and Medicare payroll taxes affect even the poorest of Americans. There are also federal taxes on gasoline, airline tickets, alcoholic beverages, tobacco products, and firearms. Most states have sales taxes. And then there are the state taxes on income, gasoline, alcohol, and tobacco. Americans also pay local sales taxes and property taxes, plus special taxes on hotel rooms and rental cars. Americans are not just taxed to death, they are also taxed after their death thanks to the estate tax.
4. The FairTax is not fair. A consumption tax is not “better” than an income tax. There is nothing fair about the government taking a 20, 25, or 30 percent cut of every commercial transaction. In fact, there is nothing fair about taxes in general. As Rothbard succinctly explained: “There can be no such thing as ‘fairness in taxation.’ Taxation is nothing but organized theft, and the concept of a ‘fair tax’ is therefore every bit as absurd as that of ‘fair theft.’” Saying that there is a fair amount of taxation is like saying that there is a fair amount of stealing, robbery, burglary, mugging, shoplifting, embezzlement, or larceny.
5. The flat tax is not flat. Because all current flat tax proposals have exceptions to the income that is taxed and still have some exemptions, credits, and deductions, all taxpayers don’t pay the same percentage of tax on their income. They are not genuine flat taxes like the Medicare tax of 2.9 percent (split between employer and employee) on every dollar earned regardless of one’s marital status, age, number of dependents, medical bills, home mortgage interest paid, or donations to charity. All current flat tax proposals are at least as progressive or more progressive than the current system. They still shift taxes from the “poor” to the “rich.”
6. Regular tax credits are always good. As are tax deductions, breaks, loopholes, shelters, exclusions, and exemptions. Tax credits serve to reduce the amount of tax owed on one’s income. The rest of these things serve to reduce one’s income subject to tax. Tax credits and deductions are not subsidies that have to be “paid for.” Tax credits and deductions allow Americans to keep more of their money in their pockets and out of the hands of Uncle Sam.
7. Refundable tax credits are a form of welfare. A regular tax credit may reduce the amount of tax owed down to zero. However, if there is no taxable income to begin with—due to tax deductions, exemptions, or otherwise—then no credit can be taken. Not so with refundable tax credits. They allow some Americans to receive a tax refund of money that they never paid in. This makes refundable tax credits no different from other welfare programs like food stamps, WIC, section 8 housing vouchers, Medicaid, TANF, and SSI.
8. Revenue-neutral reform of the income tax is a waste of time. It is nothing more than the proverbial rearranging of the deck chairs on the Titanic. Revenue-neutral tax reform is based on the idea that the government has a claim to a certain percentage of every American’s income. It implies that the tax code contains too many credits and deductions. It implies that government revenue should not be decreased. The only legitimate tax reform is that which follows the Rockwell rule: Does it reduce or eliminate an existing tax?
9. Republicans want to take your money just as much as Democrats do. Their tax-reform plans are always revenue neutral. They want to eliminate tax credits and deductions in the name of “simplicity.” They support income-transfer schemes like the refundable Earned Income Tax Credit. They could have made the so-called Bush tax cuts permanent before Obama got into office. They opposed renewing Obama’s cut in the employee share of the Social Security payroll tax. Their tax-cutting icon Ronald Reagan was also a tax-raiser. They support a progressive tax system in the name of “fairness.” They believe the government is entitled to a portion of every American’s income.
10. Americans should view paying their taxes like they view an armed robber telling them to hand over their money. The government doesn’t “need” the tax money to perform its constitutional functions. Taxes are not the price we pay for civilization. Taxes are the price we pay for the welfare/warfare/national security state. Americans should pay their taxes, not out of any patriotic duty or because of the Sixteenth Amendment, but so their property doesn’t get seized by the IRS, the IRS doesn’t garnish their wages, they don’t go to jail, and they don’t get killed by an IRS agent for resisting arrest.
These are the 10 other things you absolutely need to know about taxes. And they never change from year to year.