Happy Tax Day

Posted: Apr 18, 2011 9:48 AM
While April 15 is typically tax day, an oddity of scheduling caused a local District of Columbia holiday, Emancipation Day, to fall on Friday, so tax day was pushed to today. Last chance to get those returns in and hold of on the big bad IRS from coming knocking around your door!

Let's review some of the most ridiculous and expensive tax deductions and expenditures. Think of it this way: these are basically the federal government using the tax code for behavioral engineering. Courtesy of Nicole Gelinas:

  • * Tax exclusion for employer contributions to health insurance: $659.4 billion
  • * Deduction for mortgage interest on owner-occupied houses: $484.1 billion
  • * Lower tax rates for dividends and long-term capital gains: $402.9 billion
  • * Tax exclusion of pension contributions (defined-benefit): $303.2 billion
  • * Earned income tax credit: $268.8 billion
  • * State and local tax deductions: $237.3 billion
  • * Exclusion of pension contributions, 401(k)-style: $212.2 billion
  • * Exclusion of capital gains at death: $194 billion
  • * Charitable deductions: $182.4 billion
  • * Untaxed Social Security and railroad retirement benefits: $173 billion

Which are your favorite? Least favorite?

My biggest pet peeve "quirk" of the tax code is the existence of the status "married filing separately." This is the worst status in terms of deductions, exclusions and exemptions. It rules you out of claiming some important credits and, perhaps the worst injustice, forces a taxpayer to itemize if their spouse does. This can cause a difference of several thousands of dollars owed to the government.

And that's not even getting into the ridiculous scam that is withholding. You're saying Uncle Sam can force me to give him a yearlong interest-free loan? Where do I sign up?!