Guest Commentary
Ann Markusen
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It's not happened lately. But not long ago, it seemed that every retail merchant handed me a bill and said with a scowl, "and of course, there's the bite the government takes." I always respond that I am glad to pay taxes. They go to pay teachers' salaries (not high enough in my view), keep our roads in great shape, provide public safety, and help support parks and recreation, arts and culture.
It's income tax season, and it's not a pleasant experience for anyone. Actually, an income tax, most economists conclude, is the fairest and most efficient form of support for public services. It reflects both ability to pay (the equity principle) and distribution of services: higher-income people are more apt to go to publicly-supported colleges, travel to national parks, and so on.
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First introduced in 1862 to pay for the Civil War, the progressive federal income tax as we know it was adopted permanently in 1913 with the 16th Amendment to the Constitution. Because federal government provides services to both businesses and households, the tax is levied on both corporations and individuals.
Why is an income tax superior to a property or sales tax? For one, property taxes do not correspond to ability to pay. Retired people, for instance, often have a difficult time paying these taxes because they are on fixed incomes. Many are forced to sell homes they have built and loved living in for years. Sales taxes are outright regressive. Lower income families pay higher shares of their incomes in sales taxes because they spend more of what they make.
Why do we complain more about income and property taxes than sales taxes? Well, both are paid as lump sums once or twice a year, or quarterly (for income taxes) if you are self-employed. The income tax is particularly onerous because it has become so complicated. Alternative minimum tax? I still struggle with this. Separating employment from self-employment income and expenses? Same thing.
The complexity of the income tax has been brought to us by Congress, which has, at the behest of rich taxpayers and corporations, introduced many loopholes and deductions over the years. Consider the fact that wealthy people may deduct their mortgage interest for as many as three homes. Most state governments, like ours, tie their income taxes to the federal schedule, building in the same exceptions that result in higher income people paying much less than the marginal tax rate on their total incomes.
State governments, and even local governments, add to this circus by granting often huge tax breaks to woo companies to move to their jurisdictions (including away from other Minnesota towns), ostensibly because they are creating new jobs. In some of these deals, employers are permitted to keep the income taxes withheld from their workers' salaries as part of their packages.
These giveaways, which have only very weak and largely ignored performance requirements, are unfair to existing businesses. For instance, in Minnesota, numerous smaller towns and suburbs gave large tax breaks for new Bass and Cabelas sports chain stores. The founder of St. Paul-based Gander Mountain protested this unfair competition for his stores. But the Minnesota Legislature refused to reform its tax increment financing structure to prevent this. (Gander Mountain filed for bankruptcy earlier this month). Why should we support big box retail at all, given that most pay low wages and often deliberately do not offer full-time employment to avoid paying benefits?
In contrast, the sales tax requires no mailing in of payments or complicated forms. It hits us in small nicks we become immune to, though paying Minnesota's current rate of 6.875 percent adds up to quite a big over 12 months.
So, we could have a much simpler, more transparent and fairer tax system. Both Democrats and Republicans have variously tried tax simplification, but haven't really made a dent. The lobbyists are very successful in Washington!
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Still, though I grumble, I am happy to pay taxes. I wish so much weren't going to feed the military industrial complex and that more would go to veterans. I wish that public funds for our schools and public colleges were more generous and fairly financed - education for all - and much better pay for K-12 teachers, who are my heroes and heroines. And, having had a bruising battle with the IRS over a stupid interpretation on their part (which I won after months and months of exasperation), I wish that the Congress would stop continually starving the agency of its funding. That's one reason why so many of us hold the agency in low regard.
Achieving a fairer and simpler tax system, and changing the allocation of its proceeds, is, lucky for us, a function of the democratic political process. And so... vote! Join your preferred party caucus. Think about running for office! And let your elected officials know how you think!
