While doing research for my book I calculated something disturbing. I had never added all of my taxes together and figured out how much it all totals. I was shocked to realize that 34% of my income goes to taxes. That means that I work until May 4th every year just to pay taxes, and I don't live in a state or town with especially high taxes. I can't imagine what I would pay if I lived in New York City for example.
This disturbing calculation inspired me to do a little more research, some of which made it into my book. For example, federal income tax was not in the original US Constitution. In fact, twice the supreme court found income tax to be unconstitutional and stuck it down. It wasn't until 1913 that the 16th amendment passed allowing for income tax. Not surprisingly the first income tax began immediately in 1913. The first income tax was 1% for anyone earning more than $70,000 in today's money. Wait right there for a moment. So in 1913 I wouldn't have paid any income tax at all? Yes, that is right!
Next I thought about something that I didn't put in my book. The overwhelming size of the tax code. The current federal tax code is 73, 954 pages long - 4,000,000 words! The US Constitution, the document establishing everything about our government is only 4,000 words. Why on earth does the tax code need to be 100 times the length of the founding document? The only answer that I can come up with is that it is intentionally confusing. What is wrong with if you make X then you pay Y, period? Tax credits, tax incentives, tax deductions, tax havens, tax shelters, all make it so much easier to be manipulated. It has become one huge, and very lucrative scam designed to keep We the People in the dark.
Who really benefits from a bloated and confusing tax code? Most people immediately answer the rich benefit. That is true. The rich can hire tax lawyers that seek out all of the intentionally created loopholes. Some will even argue that the rich have lobbied and paid the politicians to create those loopholes. I would like to point out another group that benefits. A political advantage created in the enormous tax code is the poor. The politicians have attempted to buy the poor vote with tax credits. Tax credits for low-income people make it possible for someone to get tax "refund" that are larger than all the taxes that person paid. I have known several people that get back thousands of dollars in tax "refunds" even though they only worked low-paying and/or part-time jobs. That isn't a tax refund anymore. That is welfare. No one; rich, poor, or middle class should get a tax refund of more than they paid, ever.
Who does not benefit from the ridiculously long tax code is the hard working middle class. The middle class don't have enough money to take advantage of loopholes the rich bribed into the tax code. The middle class make too much money to be bought by politicians with tax credits. The middle class pay the majority of the taxes and get none of the benefits in the corrupt 4,000,000,000 word tax code.
One argument that I made in an earlier blog post has to do with why. About 30% of the budget of most state and local governments comes from federal grants. That is a total reversal in the flow of money when compared to before federal income tax. Early in our republic, the states paid the federal government for services provided. Why is the IRS collecting our tax money and then giving it back to state and local governments? It would be far more efficient if the state and local governments just collected that money themselves. The only reason I can think of is power. Money is power and our federal government is power hungry. So many of our politicians want to raise our taxes and tighten their grip on more power. 45% of our federal budget comes from income tax. I would be willing to bet that if our federal government operated within the the restrictions of the the US Constitution that they could easily do without that 45%.