Monday, March 22, 2010

Income Tax

I'm trying to avoid a topical political statement today, despite the recent news. Rest assured, the Greatest Show On Earth will be ongoing in DC, and everyone (on both sides of the aisle and beyond) will be piling out of their little clown cars, and lo a vast amount of stupidity such as can be seen in few other places in the world shall be committed before and for the amusement, bemusment and vast distraction and befuddlement of the American viewing public. And We The People shall be sent the bill for it. Which reminds me...

I did income taxes this past weekend. I wait until the last minute because I never get a refund. There's really no point in sending them monies that are mine until the very last second. However, I do do my taxes before hand so there are no surprises.

This year there was a surprise! I came across some through the letters and notes that my grandfather had compiled. What do you know? Stashed in there was a income tax form 1040 Grandpa filled out for the year 1920. Are you ready for this?

The form and instruction sheet was FOUR FUCKING PAGES LONG!

Let me get back to that, but first...

In 1920, Grandpa earned $1,023.32 (that is $11,692.32 in 2010 dollars). He got a $1,000 personal exemption, which means his taxable income was $23.32. At a tax rate of 4%, he owed a whopping 93 cents to the government.

Now, keep in mind, he's a young man, barely 19, living at home, paying no rent.


The actual form, for the return was a mere one page in length. It contains 18 line items. Two pages for instructions. One page for Schedule A. The two pages of instructions are a miracle in brevity and clarity. I daresay a six-year-old could read them (not suprising as we would consider the average citizen of 1920 barely literate and feeble-minded today).

Hang on, it gets better. Fast forward to another 1040 Grandpa filled out, this one from the year 1942. (For those of you who are not history buffs, the year 1942 counts as one of the darkest periods in our nation's history - outside the Civil War. I'm sorry, but if you think the past two years were tough... you really need to get a grip). The 1040 form is now four pages long. The instruction book is separate. There is one page for tax calculation, containing 33 line items. The other three pages are devoted to Schedules A - J, at basically about a paragraph's size each, and perhaps at most 6 line items per schedule.

In 1942, Grandpa earned $10,158.96 (that's $141,536.50 in 2010 dollars, way to go Gramps! or maybe not, he is listed as a Division Chief in a large corporation, so the equivalent VP position today would include a seven figure income with stock options and a really swell health and pension package).

His taxable income, after 5 line items of deductions, including personal exemptions, is $6,198.59 ($86,359.96 in 2010 dollars). The normal tax, at 6% comes to $371.92. There is also a surtax of $1,234.29, bringing his total tax to $1,606.21 ($22,378.03 in 2010 dollars). A quick comparison using the 2010 tax tables shows Grandpa would have paid $16,446.00 as head of household.

Oh, but with all of the current tax preferences, all the credits, exemptions, exclusions, accelerations, carryovers, and other provisions that are listed in an instruction book the size of a fucking fashion magazine, Grandpa would have paid considerably less. If his accountant was good at hiding things, he'd pay nothing at all!

So, what the fuck? Why are things so goddamn convoluted and complicated, and why are some of us taxpayers - *cough*rich assholes*cough* - paying SO LITTLE in taxes?

Well, obviously the tax code has all this shit because Congress, or the executive branch, or somebody who lobbied for it, wants to promote certain types of behavior. They wish to influence the American public to do things, such as own homes, have families, invest in savings, provide employer health care, promote corporate investment in R&D and other well-meaning stuff.

(And guess what about this well-meaning shit? It Ain't Working).

There were, are, obviously, lots of breaks for special interest groups that we should take out, subsidies for rich people, or at least anyone who had enough money and influence to hire an imaginative lawyer and effective lobbyist - which is, yeah, I'd say they're probably rich.

So, we lose, how much? The IRS estimates all the fancy tax breaks amount to about a trillion dollars in lost revenue. That's a million million dollars. That's one million stacks of bills with one million dollars in each stack.

Is that fair? I don't think so. What would I call that?

I'd call that rich people fucking We The People up the ass with a chain mail gauntlet that's embellished with barbed-wire knuckles.

Health care reform? Fuck! I'd say it's time for a little tax reform!

Bastards should pay!


  1. I understand that we can thank Reaganomics for the decline of the middle class and the rise of the upper class...

  2. The Republicans certainly carry the larger share of blame, but we cannot ignore the role of private enterprise, which moved a huge numberof jobs overseas.

    Actually, the two tax reform acts by Congress while Reagan was in office did simplify the tax codes. They also cut rates to the top tiers, and have been used to support the Big Lie that tax cuts create more revenues. Was is conveniently not mentioned is that both acts eliminated loopholes to the rich. Revenues did increase when the rich started paying taxes, but only because of a combination of lower rates and elimination of loopholes(making the cost of avoidance of paying tax greater than the actual act of payment of tax). Both rates and complexity have been creeping up since then, leading to our current situation the government receives more revenue from payroll taxes than from income taxes. It appears that the upper tiers pay the lion's share of income tax (top 2% contributes 69% of income tax), but the current tax codes are such that the lower and middle classes are subsidizing the rich. This is unacceptable.

  3. Any idea what percent of the income the top 2% have?

  4. Judy, a quick google search says the top 2% accure 15-20% of income (depending upon the website). For annual income, I'd say that's about right. How wealthy they are as a percent, difficult to say as they are kind of touchy about who knows, but if Pareto's Law holds, bet on about owening 80% of the country's assets.