A column I wrote in June dealt with who really foots the tax bill in this country. Apparently, it struck a chord with a number of you. Here are what some of you had to say.
Thanks for taking the time to share your views,
My wife and I just got a bill from the IRS due to a correction in income reported by a previous employer (they had to increase the taxable value of a performance-based trip I won). Our total tax due was $133 on an extra $500 of income! $75 of that was AMT!
Dear Scott —
I hear your frustration about the Alternative Minimum Tax (AMT). But it's much more important that your elected representatives hear your frustration!
Everyone who talks about taxes fails to mention the other taxes that have more impact on the majority of wage earners than the 'income tax'. These are the Social Security and Medicare taxes, which add up to 15.3 percent for most people. It doesn't matter that the employer pays half. Most employers would give that half to the worker if they didn't have to send it off to the government. That half is a factor in deciding an employee's salary and the company must consider it along with state taxes such as unemployment, worker's compensation, etc. to determine what the true cost of an employee will be.
I think taxes would change if everyone had to write a check every year/quarter/month for all federal tax levies. It would probably get most incumbents tossed out during the next election.
Dear David —
I like the idea! I think it would be healthy for people to be more aware of what it costs to be a citizen of this country and to weigh what we receive in return — the highways, Medicare, air traffic controllers when we fly, someone who delivers our mail to our doorsteps (which still only costs 37 cents for a first-class letter), protection against unsafe workplaces, someone to apprehend and prosecute criminals, federal money spent on local schools and universities, customs officers and others who guard our borders, our military, and so forth. It's easy to lose track of all of the things the federal government provides. And, yes, there probably isn't anything that could not be improved in some way.
But that's not the point: the act of sitting down and writing out a check — as many people do when it comes to paying local school and property taxes — would make you really think about how your hard-earned dollars are being spent by our elected officials. And that would probably make all of us take a greater interest in how our government is being run. Maybe we'd even get more than half of the electorate to turn out for elections.
I'm all for citizens becoming more informed and involved.
But there's no chance your suggestion would ever see the light of day. That's because the elected officials who would have to pass such legislation are the ones who risk getting booted out of office.
Is there a way to organize to lobby for repeal of AMT? Just seems the middle class is getting screwed one way or another. What do you suggest at a state and federal level to make this an issue?
Dear John —
When the Taxpayer Advocate lists the AMT as the biggest issue that needs to be addressed, you can bet it's got the attention of those in Washington. Some are genuinely trying to address the issue. However, because the AMT now generates so much money, the reality is that many in Congress can't figure out how to wean themselves away from it. Or don't want to.
But your elected officials need to know that this issue is a priority for their constituents. Write, fax, email, your House and Senate representatives and demand they stop taking a "band-aid approach" to the AMT and fix the problem once and for all. I'm sure if you just ask around, you'll find neighbors and co-workers who are just as angry as you are. When your Congressperson or U.S. Senator holds a rally to ask for your support, take the time to attend. Ask him/her to tell you what — specifically — he/she would do about the AMT if elected. Nothing gets the
attention of a politician like a grassroots movement of angry constituents. And remember to keep the pressure on once that individual is in office!
WARNING: PLEASE DO NOT follow the advice from "Jim," below. I include this letter only to illustrate how you can get in trouble by thinking <logically> about the tax code.
If parents are affected by AMT and their children have investment income, the best thing that the parents can do tax wise is to not claim their children and then let their children claim themselves for the personal exemption. Since the children are not effected by AMT and the parents get no exemption anyway, the IRS loses.
Dear Jim —
I don't know where you got your tax advice, but this is DEFINITELY NOT the correct approach, according to Sonya King, an assistant editor of "Tax Facts," a comprehensive and respected tax handbook.
However, I see what you're trying to accomplish with this strategy. Under the Alternative Minimum Tax (AMT), you lose many of the deductions that would be allowed when you calculate your taxes the regular way. This includes the deduction for dependants, such as children.
You're probably thinking that the way around this is to have a child file his own tax return as a single filer and claim the "personal exemption" for himself, thereby circumventing the loss of the deduction on the parents' return.
Nice try. Won't work.
King says Section 151-D-2 of the Internal Revenue Code specifically bars such a move. "No personal exemption is allowed on the return of an individual who is eligible to be claimed as a dependant on another taxpayer's return."
This applies even if the other taxpayer chooses not to claim that individual as a "dependant."
It's dangerous to jump to conclusions without fully researching or understanding the Tax Code. Please, folks, get professional help. Mistakes are costly.
I generally enjoy your articles because you look beneath the surface. But in your article on June 4, you said two things that look like a serious contradiction:
"My point is, it [progressive taxation] IS working..."
"...it's safe to pick on The Rich because: 1) they're easy to resent; and 2) they're not going to defend themselves."
The second quote describes a culture of envy, in which successful people are to be resented for their success. And, of course, the successful people are supposed to feel an unearned guilt, and hang their heads in shame rather than proudly stand up tall.
I don't think cannibalism "works." Look at the socialist experiments all over Europe, which are declining in wealth, standard of living, and life expectancy. One example that comes to mind was in France last summer. Many people died because the temperature rose a few degrees above average. They're too poor to have air conditioning.
The rationalization for taxes is that it pays for things we all use like roads, police, and schools. Do rich people consume these services in proportions of their tax burdens? If not, what reason on earth is there for people to be forced to pay for things they don't use? And what reason on earth is there to give people things they don't pay for?
Au contraire, I don't think this "works" at all.
I think you protest too much. But I respect your right to express your opinion. Which, by the way, is protected by our national constitution. And upheld by our national Supreme Court. And enforced by our national law enforcement agencies.
First of all, I never said our system of taxation was working perfectly. The confusing and expensive Alternative Minimum Tax is a glaring example of something that needs to be changed.
Think about this for a moment: Isn't it a bit ironic that you are complaining about our tax system via the Internet, an information/communications systems that was developed at federally-subsidized universities.
Moreover, I'm assuming you think that creeps who prey on minors over the Internet ought to be stopped, prosecuted, and jailed. Me too. I'd just like to point out many of the folks who do that work — the FBI, the prosecutors, the prison guards, etc.— are federal employees.
I'm far from being a scholar of American history, but I seem to remember learning that one of the reasons we have a federal system of government, as opposed to having separate states, each selfishly jockeying for their own interests, is that our nation's founders recognized that some things, such as defense, are better handled by an entity that is unified and looking out (albeit imperfectly) for the good of the whole.
Think of the progress we've made against diseases such as breast cancer and AIDS. Much of the money that funds medical research comes from the federal government. If it were left solely up to private industry, only "popular" diseases — the ones drug companies and medical providers could make the most money from — would get the attention. People who suffer from less common ailments, like Crohn's disease, would just be out of luck.
By your thinking, the people who suffer from a particular disease — and stand to benefit from the discovery of a cure — should foot the entire bill for the research!
Consider the fact that residents of all 50 states can transact business in a single currency: the dollar. Imagine if every state printed its own currency and you had to use that in order to buy or sell anything in that state. Minnesota's currency could not be used in neighboring Wisconsin. Merchants in Utah would refuse to take money issued by Colorado.
On top of that, what if you had to stop and pay a tariff — in each state's respective currency — every time you moved your goods across a state line?
This is essentially the way things have worked in Europe until very recently. It not only made conducting business much more expensive, the added costs were, of course, passed along to consumers. It's taken the European nations 200 years to figure out that our system of an overarching federal bank, a unified monetary policy, and a single currency make trade more efficient and reduce costs.
Imagine what it would be like to drive from Virginia to California if each state had to pay for its share of the highway. What if New Mexico, a sparsely-populated state, decided it could only afford one lane in each direction? And if Alabama wanted to maintain a rural atmosphere, so it stuck to dirt roads? And if the section that ran through Texas bobbed and weaved instead of heading off in an essentially straight line?
Because the federal government paid for the interstate highway system, we have uniform standards on everything from lane widths to signage to speed limits. Our federal highways are free. (Okay, mostly. I'm still trying to figure out how the heck New Jersey gets away with toll booths on I-95...)
If a section of interstate that runs through, say, Pennsylvania, is damaged, we all share the cost of repairing it, instead of leaving the entire burden for the folks in the Keystone State.
And the reason we should share the cost is that we all benefit, whether we ever drive that stretch of road or not. That vehicle in your driveway probably wasn't made down the street. It had to travel hundreds of miles from the factory to the dealership where you bought it.
The lettuce you're having for dinner was probably trucked in from California. There's a good chance the computer you're reading this on was shipped from another state. The shirt you're wearing might have been made overseas, but to get from the dock to the store where you bought it required a truck. And our federal highway system.
When used to describe the federal income tax, the adjective "progressive" refers to the fact that the tax rate that is imposed goes up (gets progressively higher) as one's income goes up. I'm not saying I think that "35%" is the proper tax rate someone ought to pay once their income hits a certain level. But one of things this country attempts to do is protect the weak from the strong, to lend a hand to those who are unable to take care of themselves.
And, yes, one of the ways this is accomplished is to take some of the wealth from those who have the most and redistribute it to those who have less, either by delivering services, or training, or medical care, or cash. Many of the recipients are children, or senior citizens, or disabled.
I don't call that "cannibalism," I call it compassion.
Now, we can spend the rest of our lives arguing about what is the "correct" form of assistance and what level is the "right" amount. But every civilized society, to one degree or another, makes some provision to care for its weaker members. I personally think it's the moral thing to do. (You can find many examples of this in the animal kingdom: just watch how a herd of elephants surrounds its young when danger is present.)
Even if you don't have children, I maintain you should still pay school taxes. In fact, it's in your best interest to do so. Because an educated society and a skilled labor force are better for society as a whole. So while you might not benefit directly, you indirectly enjoy the results, which include a higher standard of living.
As for your "French connection"... The vast majority of people who died in last year's exceptional heat in France were senior citizens in nursing homes. They didn't have air conditioners because the country doesn't generally get this kind of heat wave. It was unprecedented.
Take a visit to Maine in the summer. Guess what? Most homes there don't have air conditioners, either. And it's not because the citizens of Maine can't afford one. It's because they rarely have a need for one, so why spend the money? If anything, last year's deaths in France argue in favor of national regulations and inspections to ensure that vulnerable citizens are protected against such an occurrence in the future.
I don't think there's a contradiction at all with regard to what I wrote in my previous column. Both statements are true: "The Rich" are not currently organized and are unlikely to ever have a lobbying group. Our imperfect tax system does work. Could it be better? Undoubtedly. What are you personally doing about it besides complaining?
In other words, if you're so upset, do something. Exercise your federally guaranteed rights to organize, speak out, and vote!
If you have a question for Gail Buckner and the Your $ Matters column, send them to firstname.lastname@example.org , along with your name and phone number.
Gail Buckner and Foxnews.com regret that all letters cannot be addressed and that some might be combined in order to more completely address a topic.
To access Gail's past columns, simply use our new "Search" function: type in "Buckner" and you'll be able to get all Your $ Matters columns since April 2001.
The views expressed in this article are those of Ms. Buckner or the individual commentator, and do not necessarily reflect the views of Putnam Investments Inc. or any of its affiliates. You should consult your own financial adviser for advice regarding your particular financial circumstances. This article is for information only and is not an offer of the sale of any mutual fund or other investment.