Taxation Nation

This entry is the first of a series exploring improvements to the federal tax system.

Nearly every activity of our day is taxed. Waking up to the alarm clock, turning on the light, and taking a shower all include utility taxes. Driving to work? Gasoline taxes are outrageous in some states. Settling into your desk chair at the office costs both you and your employer. On the way home from work, that stop at the grocery store probably costs you sales tax. Call your spouse to say you are running a bit late and add cell phone taxes to your day. Walk in the front door of your house and put your change in the piggy bank, because you are probably paying property tax. Renting? Your landlord is passing the cost of taxes along to you. And whether you watch CNN, Fox News, MSNBC, ESPN, or Lifetime, you are paying taxes on your cable or satellite service. Even the money sitting in your savings account is being taxed.

There are so many taxes and so many tax laws that Americans have no idea how or how much they pay in taxes every day, and this is exactly how government wants it. In March of 2006, according the United States Government Printing Office (another drain on your income), the tax code totaled 16,845 pages. It is so long, and so exhaustive, that no one can truly grasp all of intricacies. Back in 1976, when the code was substantially shorter, President Jimmy Carter said, "Our income-tax system is a disgrace to the human race."

The Tax Foundation estimated the cost of compliance with the federal income tax system to be $265 billion in 2005. What this means is that, on top of the approximately $1.2 trillion in income tax businesses and individuals coughed-up, another 22% was spent on making sure we paid the proper amount. To put it another way, if the system garnered 30% of income in taxes, it cost another 22 cents on every dollar to pay them. That would mean that 52 cents of every buck earned in 2005 went towards the tax system.

And that is just for federal income taxes. Stack state, local, excise--all the other taxes on top--and Americans are paying the majority of their income in taxes and compliance costs.

President John F. Kennedy wanted to lower tax rates in order to increase tax revenues. Citing actual studies (a simple procedure our government usually fails to follow), JFK determined that lowering tax rates would bring about more growth, resulting in higher revenues within just a few years. Almost fifty years later, we still have not learned this lesson.

What it comes down to is this: Americans are paying over 40% of their income in taxes. This is ten percent higher than the rates in 1960. Republican or Democrat, both parties have increased the size of government since World War II. Stack another 20-plus percent on for compliance costs, and we are working from January until July just to pay for our tax burden.

But businesses pay a huge chunk of our taxes, right? Wrong. For businesses, taxes are just another expense. In order for businesses to survive, these expenses are passed along to employees, consumers, and shareholders. Taxing businesses is just another way for the government to tax you.

Fortunately, the solutions to this issue are uncomplicated and well-researched. All we need to do is simplify the tax code and cut tax rates. Unfortunately, we have to find politicians who are willing to embrace the common sense reasoning of taxes.