Facts About the Tax

Posted: Apr 04, 2008 12:04 PM
Facts About the Tax

Ah, springtime, when a young man’s thoughts turn to -- paying taxes.

This year, many of us will get a treat. Not long after we cut a check to the IRS on April 15, we’ll get a big check back from Washington. It’s a special “economic stimulus” package, passed in record time this winter by lawmakers who say they aim to bolster our economy -- and certainly hope to gain our vote in the fall.

How’s the government going to pay for this? Simple. It’ll just borrow the money from future taxpayers so it can “give” us all more money today. But this approach gets things exactly backward. The problem with our economy isn’t that the government “gives” us too little. It’s that Washington takes too much away.

Let’s consider a time, within living memory, when the country really was dealing with a crisis. A friend recently stumbled across a 1040 from the year 1943. There were a few things going on that year.

The U.S. was at war with Germany, Italy and Japan. Our troops led an allied invasion of Sicily in Europe, and battled the Japanese in the Aleutians, the Solomon Islands and on Tarawa Atoll. The three-day invasion of Tarawa killed 1,000 Americans and left another 2,000 wounded.

Back home, the government rationed fat, meat and cheese (so there would be enough to feed the troops) and implemented a freeze on wages and prices (to try to prevent inflation). In short, the entire country was mobilized in a fight it simply had to win.

That’s what makes reading this 1040 especially interesting. The taxpayer, who lived in Longview, Washington with a wife and two children, worked for Weyerhauser. He earned $2,635 (less than $52 a week) and paid $142.86 in taxes.

With the country hanging in the balance, this man’s tax burden was slightly more than 5 percent of his income, and that includes $38.86 for a special “Victory Tax.” There wasn’t a Martin Luther King Day holiday in 1943, of course (King was only 14) but if there had been, that taxpayer would have earned enough by that date in mid-January to pay his federal taxes for the entire year.

Compare that to today. According to the Tax Foundation, in 2008 the average American will work 74 days to pay federal taxes.

“We’re not being taxed, we’re being bled,” my friend points out. If he was paying taxes at 1943 rates, “I’d have saved an extra $15,000 a year for the last 6 years alone, and I’d be living in a house of my own and driving a nice new car.” But that’s not how it is. “Instead, I rent a very humble place, and drive a 14 year old minivan with 240,000 miles on it, trying to save enough to scrape up a down payment on something new.”

That’s not uncommon. Tax Foundation President Scott Hodge notes, “Americans will still spend more on taxes in 2008 than they will spend on food, clothing and housing combined.” Just think how comfortable the average taxpayer’s life could be if he paid “only” 5 percent in taxes.

And while today, as in 1943, “there’s a war on,” you wouldn’t know it -- at least, not based on how much the federal government invests in defense. Last year 19.4 percent of federal spending went to defense, down from 27 percent during the Reagan administration and way down from the 44 percent it reached in 1969 during the Vietnam War.

These days, a growing portion of federal spending goes to entitlement programs. The U.S. spends almost 11 percent of GDP on entitlements and barely 4 percent on defense. The total cost of Social Security, Medicare and Medicaid is projected to absorb 18.9 percent of GDP by 2050. In the years ahead the Air Force may, as the bumper sticker says, have to hold a bake sale to buy a bomber.

The first step toward a solution is to change the day our taxes are due. We shouldn’t pay in April, when the flowers are blooming and the sun is shining. Instead, make taxpayers cut a check on Nov. 1, so they’re still feeling the sting of taxes when they go to the voting booth.

Oh, and eliminate federal withholding. Too many people assume they’re “getting” money back from the government, when in fact the government’s been holding on to their money all year. We should allow everyone to enjoy their entire paycheck -- if you earn $50,000, you’ll take home $50,000.

Then make everyone file quarterly estimates and pay their taxes all at once. When taxpayers are forced to fork over thousands of dollars at a sitting, they’ll realize just how much Washington spends and they’ll demand change.

It won’t be easy to fix our tax process, just as it won’t be easy to defeat Islamic extremism. Then again, it wasn’t easy to prevail in World War II. But we did. Just as we can, and must, stop Washington’s tax-and-spend policy.