Tax Day Reading

It’s the obligatory Tax Day thread — but while I’m going to post some items related to paying taxes, I also want to note that today is Jackie Robinson Day, which is a happier thing to consider than Tax Day. I hope that all of you are done with that task. Delaware and Wilmington taxes are due by the 30th, so there is some breathing room.

How do we feel about paying taxes? There’s a slight majority who think that their federal taxes are too high, but I’m intrigued by the downward trend of that number over the past few decades.

NYT columnist proposes that if corporations are people, then maybe they should be taxed like people.

The fiscal problem we face is not, then, a lack of revenue sources. We can finance any amount of transfer payments and “entitlements” by taxing corporations’ profits in the same way we tax personal income, using a progressive formula. If necessary, give them a mortgage deduction — they already get something like it in the form of accelerated depreciation allowances on their purchases of capital equipment — but make them pay higher taxes on their income. Do that, and the federal deficit goes away.

The now-familiar objection to a tax increase on corporate profits is that it will discourage private investment and thus dampen job creation. The retort is just as obvious: since when have tax cuts on corporate profits led to increased investment, faster job creation and higher per capita consumption out of rising real wages? It didn’t happen after the Reagan Revolution, it didn’t happen during the Clinton boom of the 1990s, and it sure didn’t happen under George W. Bush.

There’s an idea out there called “return-free filing”. It would have the IRS send you a pre-completed tax form for taxpayers who routinely file the simple forms, you would review, make your adjustments and send it in to the IRS. You can accept the return as prepared, you can make changes to it or you can just do your own return for filing. ProPublica and NPR have been reporting on how Intuit has spent more than $11M in trying to kill this idea. For filers with simple returns this is easy and costs are reduced all the way around for this kind of return. And if you hate the government’s return for you, you can always do it yourself. But it would clearly lift the burden on filers with simple returns. Intuit, of course, wants people to spend more money on their software, so they have been opposing this idea. Intuit has also been working on making sure that the IRS does not offer its own electronic filing service.

An interesting discussion for the case of getting rid of tax deductions.

The charitable-giving deduction also favors the causes of the stingy rich over the generous poor. Households with incomes between $20,000 and 40,000 give 5 percent of their income to charity, but most get no tax deduction (and very few indeed will get their name on a building or invitations to a black-tie dinner as a result). Households with incomes of $75,000 and above are far more likely to get a tax break. Yet they give away only about 2 percent to 3 percent of their income. The rich also give differently. According to the Congressional Budget Office, households on less than $100,000 a year give 10 percent of their funds to charities designed to provide basic needs and 1 percent to the arts. Households with incomes of more than $1 million give 4 percent to basic-needs charities and 10 percent to the arts.

This idea of eliminating the charitable giving tax break, the mortgage interest tax break and the local taxes tax break have been around for awhile, but they are getting more and more traction each year with the pundit class. The problem with eliminating these tax breaks is that you remove key supports to the real middle class. It doesn’t make much sense to me to further destabilize the middle class, because these tax breaks don’t incentivize the wanted behavior for people who have lots more disposable income.

A great report by the U.S. PIRG — noting “that the average taxpayer would have the burden of an additional $1,026 in taxes to make up for the lost revenues due to the use of offshore tax havens by corporations and wealthy individuals. The report also found that the average small business would have to pay $3,067 to cover the cost of offshore tax dodging by large corporations.”

And while you might not be paying the additional thousand dollars now, you can expect to if businesses and wealthy people can continue to avoid paying their taxes.

Hope your taxes were easy this year!