By Leo Morris for the editorial board
Thursday is T-Day, otherwise known as April 15. To take your mind off your own situation, ponder these 10 argument-stopping or argument-starting tidbits, collected from a variety of sources.
1 Congratulations — you’re working for yourself now. April 7 was Indiana’s Tax Freedom Day. That was the point at which you had earned enough to pay off your total tax bill — federal, state and local. That was fours days earlier than National Tax Freedom Day and ranked us 28th in the nation as far as tax burdens go.
2 When it comes to state and local tax burdens, Indiana fares worse in the rankings. At 10.1 percent of income, just above the national average of 10.0 percent, the state is 16th-highest. Our sales tax of 5 percent is right at the national median; the $590 per person collected each year ranks us ninth-highest. Our flat 3.4 percent income tax is second-lowest among the states that collect such a tax. Our 15-cents-per-gallon gas tax is 44th in the nation, while our 55-cents-a-pack cigarette tax ranks 21st. Our combined state and local property taxes of $913 per person ranked 18th in the nation (as of 2000).
3 The state’s business climate, based on studies by the Tax Foundation, ranks 11th in the nation. The better news is how we fare with surrounding states Michigan (18th), Illinois (14th), Kentucky (35th) and Ohio (47th). The rankings are based on the impact on business of five major elements: the percentage of income taken by all taxes, the individual income tax rates, the corporate income tax, the sales tax rate and the complexity of the tax system.
4 Despite what you hear about the beleagured middle class, that group’s tax burden is actually falling. According to U.S. Treasury data, a typical family of four with two incomes is paying a smaller percentage of its income in federal income taxes than at any point since 1951.
5 If you want to argue that the rich pay more than their fair share of taxes, say this: The top 1 percent of earners made 20.8 percent of the income earned in 2000 but paid 37.4 percent of the total federal taxes. If you want to argue for even greater income redistribution, say this: The wealthiest 5 percent of Americans have 59 percent of the wealth but pay only 38.4 percent of the federal taxes. Both are true (note the clever use of the words “income” and “wealth”). The tax code is so complicated that it’s become like the Bible; you can pluck figures from here and there to prove any side of any question.
6 For all the arguments back and forth about President Bush’s tax-and-spending packages (they will stimulate the economy, hurt the middle class and help the wealthy, etc. etc.), the actual numbers don’t amount to a hill of beans. Gross Domestic Product is expected to be about $140 trillion over the next 10 years. Bush’s cuts amount to about one-half of 1 percent of that.
7 If we replaced the income tax with a national sales tax, it would require about a 23 percent tax on the final sale of all goods and services. In return, says the group FairTax, we could get rid of the Internal Revenue Service and all 20,000 (!) pages of its regulations.
8 Citizens for a Sound Economy, on the other hand, likes the idea of a flat tax, for which all Americans, of all income groups, would sit down “with Form 1 from the IRS. Fill in your income, subtract your personal exemptions, tax 17 percent of the balance, write that number down, and you’re done.” A lot of nations, including Russia, have already adopted a flat tax. After Russia replaced its three-tiered system (with a top rate of 30 percent on all income above $5,000) with a flat 13-percent rate in 2001, more revenue was produced.
9 Most startling fact about income taxes: Though government taxes and revenues have increased almost twentyfold in the last 40 years, they have barely budged as a percentage of GDP (because we keep producing more and making a wealthier America). For example, federal tax revenues were 17.5 percent of GDP in 1962 and last year were an almost identical 17.9 percent. Likewise, expenditures have ranged from a low of 17.2 percent (1965) to a high of 23.5 percent (1983).
10 Best two ideas to make Americans make politicians take income tax issues more seriously (from James Antle III): Move the day on which income taxes are due from April 15 to election day, so we can make an immediate connection between what we’re getting and who is billing us for it. End withholding, which lets our money be eased out of paychecks a little at a time, and just send us one bill for our taxes, so we have to pay it all at once and really appreciate the enormity of our burden.