Thursday, April 16, 2009

I kind of like paying taxes...

This week, like a hundred million other Americans, I paid my taxes. Though I’m still in school, 2008 was my most profitable year to date, and this relatively substantial income was reflected in the amount of taxes I owed.

My mother, who happens to work in an accounting office, encouraged me to think of anything I could write off as a “business expense,” which can be proportionally deducted from my tax return.

I worked part of the year as an independent contractor, and was paid on a 1099. This allowed me to write off all my mileage driving to and from work, which made a surprisingly significant difference to the bottom line. I also worked as a waiter for several months, so I wrote off the uniform I bought and alcohol-education course I had to take for that job.

Such tactics are commonplace in the world of accounting; indeed, clients expect their accountants to not only fill out their tax returns, but to exploit as many loopholes and clever accounting techniques as possible to minimize their check to the government.

As a rational actor in a capitalist economy, I should fully support this tactic. A smaller check to Uncle Sam means more money in my pocket. Yet as a naïve and idealistic young man, I wonder about the legitimacy and justness of so easily knocking down what I owe.

Yes, my claims are real, and they would certainly hold up in an audit. But if it is so easy to find a way out of one’s tax obligations, how will our economy ever emerge from the staggering debt that it currently faces? If anyone who can afford an accountant can shake off 30-50% of his original amount, as I was able to, how can our government continue to function?

Tax rates today are already far lower than they were in the pre-Reaganian days. From 1936 to 1980, those in the highest tax bracket had a top marginal tax rate of at least 70% (meaning they owed 70% of their income above a given number), compared to less than 40% today.

It’s not that I strive to live like an ascetic monk, and give up all my material earnings and possessions. But I struggle to comprehend how a country can continue to provide for its neediest citizens, as well as prepare for the future, when the amount it collects in taxes is determined by millions of shrewd, self-interested actors, and therefore utterly insufficient.

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