Death and Taxes

Oooh, it’s that inevitable time of year again… not death, hopefully, but taxes. In the US, most people’s taxes are due on April 15th, so it’s a good day to stay away from the Post Office.

We all have an ambivalent relationship with taxes in particular and taxation in general. We want the benefits like roads and school, but have mixed feelings about defense spending (depending on your viewpoint) and definitely distrust the way politicians make decisions about government spending. There are also groups that sincerely believe that the Internal Revenue Service is a private corporation (actually a trust) that has no legal right to take our money.

On the other extreme, recent leaks of confidential bank records and news reports have prejudged and condemned those with offshore accounts as tax-dodgers, even though such accounts are legal. I’m quite surprised at how the tax authorities and progressive groups that I normally find quite measured in their thinking are ganging up together to demonize anyone who has the ability to protect their assets by moving them out of a particular jurisdiction. I cannot help feeling there is a lot of envy being expressed of those who have more money, along with a more understandable desire to see everyone pay their share. But who decides what that share should be? All this rage and frustration stems from a belief in lack – that is, a sense that there is not enough to go round, so those who have more are in the wrong, especially when the rest of us are obviously hurting from lack of work and lack of support. Seeing Wall Street bankers and other company directors receive bonuses only adds salt to the wounds. Yet this understandable layer of frustration should not give the tax authorities permission to tread on even more civil rights than they do already. Do you want your confidential bank records made public, even if you have nothing to hide? I don’t!

In the US, the Supreme Court itself has stated that no one is obliged to pay more taxes than the minimum the law requires. It is perfectly acceptable to protect your assets so long as you do nothing illegal. (Of course, figuring out what is legal can be quite a challenge, given a tax code so complex that the IRS itself doesn’t always know what is allowed and what is not.) However, in principle, there is nothing wrong with moving your assets to wherever you feel you can get the best deal or protection. We all have people to look after and dreams to pursue, and it would be great to have the use of most of our money to do as we wish. That is as grave a freedom as the others we pride ourselves on protecting.

The problem is that governments have so mismanaged public funds that now they are scratching about to find more, and they don’t seem all that concerned about how these are obtained. When the government of (say) Cyprus decides to tax savings accounts, one can’t help wondering if the US will try to make up its deficit by taking similar actions. The IRS already believes that it has the right to control ALL US dollars, globally, and to tax its citizens and non-citizen residents on money made anywhere in the world. (By the way, the US is the only country with this bizarre viewpoint.) It is completely contrary to our traditions of respecting international treaties and the right to privacy here and in other countries. It is shameful the way the US government bullies other countries into giving up their confidential banking information, and I’m sorry that Switzerland gave in (although I understand why.) Some countries now refuse to open bank accounts for Americans because they fear a backlash from the US tax authorities. Other countries are not bound by US law, no matter how hard the US tries to prove otherwise.

It’s hard to know what to think sometimes. I do believe that we have an obligation to our community, and that taxes are one way of supporting that community. Whether we have children or not, we naturally want to create and maintain a reasonable education system, because our future business, industry, science and culture depend on good education for all. Most of us drive cars, and want a decent system of roads and freeways. We all desire adequate health care, and a reasonable level of emergency services, whether it’s police, fire or medical responders. Sometimes we are attacked in such a way that armed response may be required (I thinking more of WW2 than, say, Iran or Iraq). I suspect that we really do need an organized way for everyone to contribute to services that function best on a larger level, even if we argue about some aspects of government spending.

My personal preference would be for a flat-rate tax – 10% would be ideal, without deductions. It’s easy to calculate, everyone would pay the same proportion of their income, and it relates back to the ancient principle of tithing. It would take about two hours at most to figure out what you owe, and there would be a lot less stress (and a lot more left in your pocket). Just imagine how much less time we would spend fretting over our accounts and enjoying our income! Most tax auditors and IRS inspectors would be out of a job because everyone would know exactly what to pay, but hey, I can live with that.

There, with that thought I can almost face the IRS with equanimity…