Thinking about Income Taxes and Stuff

April 18, 2015

Yesterday, I read Why Americans Don’t Want to Soak the Rich by Neil Irwin for the New York Times. I also saw The Progressive Income Tax: A Tale of Three Brothers from the Prager University a few days ago. And I read Would You Let the I.R.S. Prepare Your Taxes?, written by Farhad Manjoo for the New York Times on April 15. These three pieces—and paying the tax bill on Wednesday—got me thinking about stuff. (Truth be told, Mark Rubin Writes is the product of my “thinking about stuff!”)

Mr. Irwin’s piece analyzes two studies which are designed to test feelings about taxes and the wealthy. His conclusion:

… the question isn’t, Why don’t Americans want to soak the rich more? It may be, Who exactly is being counted as rich and who is perceived to be benefiting from the soaking?

Slightly dense stuff and, frankly, I finished with a sense that the data was lacking.

The Prager University animated video made me angry. Really angry! Now, Prager University is an online production, operated by Dennis Prager, a conservative commentator and talk radio host. I have no issues with online education, and Mr. Prager has a point of view, it’s a free country, and he’s been successful. My anger stems totally and completely from the dishonesty embedded in the video. (Please watch it, but watch it only once. Views are counted and used to promote the popularity of the video.)

The video talks about three brothers, all with equal ability. They’re all the same, with a wife, two kids, and $25 per hour jobs. In one case a brother and his wife are very successful, and great savers and investors. At the other extreme, the wife does not work, the brother does what he does, and the couple does not save. In the middle is the “in the middle” couple.

The brothers decide to pave their street. Successful brother wants everyone to pay one-third. Unsuccessful brother thinks the cost should be shared, in a ratio which matches income tax rates. His argument? That’s how we do it in America.

The video is rigged, totally. Not everyone in America has equal ability. Most people make far less than $25 per hour. (I assume that figure was used because median—half above, half below—household income is roughly $50,000, or about $25 per hour for full-time employment. In fact, though, most low income households have two-earners, and in many cases people are working more than one job.) Not everyone’s needs are the same, either. Some people are healthy and some are not, to name one major factor which affects household spending and wealth.

The video tells us unsuccessful brother wants a free ride from his brothers and, by inference, that lots of Americans want a free ride from the rich. Now, there’s a debate to be had, from time to time, about the progressive income tax. I’ll gladly argue either side, but if we’re going to have that debate, let’s leave the clap-trap and nonsense at home. Mr. Prager is an educated man, and he calls his site a university. A Tale of Three Brothers honors education not at all.

Finally, I included the Manjoo piece because it reflects a core problem in America: vested interests. Mr. Manjoo writes about Joseph Bankman, a Stanford Law School tax professor, who pitches having the Internal Revenue Service prepare tax returns for most Americans. The government gets most of the information on which most Americans rely to complete their returns. Once a return is filed the IRS checks the return against that information. So, suggests Professor Bankman, why not have the government take its information, prepare a return, and bill the taxpayer or send a refund.

One very large vested interest opposes this idea: Intuit, which sells TurboTax. Intuit’s Chief Tax Officer—cool title—says such a plan “necessarily prioritizes revenue generation for government but does not advance taxpayer rights, citizen empowerment or real simplification of the tax code.” Oh, and it would hurt our bottom line.

And on that enlightening note, I’m done with stuff (for now.)

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