Thursday, January 15, 2009
Ignorance and taxes
Americans, it turns out, are profoundly ignorant of the most fundamental aspects of the federal income tax. This is basic stuff, not the obscure complexity that so delights lobbyists, politicians, and rifle-shot beneficiaries. The question is, what conclusion do we draw? Several occur to me:
Only about half of American households pay the federal income tax, and in most of those households the return is so simple that there is no important reason for people to waste valuable brain capacity on the subject; and
In many of those relatively few American households where the stakes are high enough to justify knowing something about the tax code but not so high as to justify expensive outside tax advice, only one adult needs to know much about the federal income tax -- the other one signs the return and keeps his or her fingers crossed.
Everybody else answered those questions correctly.
The tragedy, of course, is that all those "unaware" people are also allowed to vote.
6 Comments:
By 
, at
Thu Jan 15, 09:42:00 AM:
TH,
Don't entirely agree with you here. I'm a pretty well educated guy and do my own taxes (not ridiculously complex but I do itemize, own a home, have savings in various different vehicles, have multiple flavors of income at different tax rates, etc.). I think this puts my in your second bullet point... and yet, I don't know all of the answers. My take on the five questions here:
Amended return - I knew that one
Tax bracket - couldn't tell you... I know what my income is but see no reason to be aware of exactly what my highest marginal rate is. I know it's higher than I'd like it to be, but that's what happens in a world of unlimited government.
"Knowledge of current tax laws" - I'm dubious of how this one was worded (multiple choice question? unaided responses?). Of course, for those of us who do our own taxes, this isn't applicable anyway.
Recent legislative changes - These may affect me... I figure I'll learn more about them when I start to actually do my return later this quarter.
Tax credit vs. deduction - I knew that one too.
By , at
Thu Jan 15, 11:52:00 AM:
"The tragedy, of course, is that all those "unaware" people are also allowed to vote."
I disagree.
I understand a fraction of the tax code, but to paraphrase Dr. McCoy, "I am an architect, not a Senator".
The real tragedy is that our elected officials and their bureaucracy is so ignorant of the tax code, and it's effect on me and millions like me and by extension the entire world.
By , at
Thu Jan 15, 07:42:00 PM:
I have only one rule for the accountant -- keep me out of prison.
By 
JPMcT, at
Thu Jan 15, 07:53:00 PM:
I did my own taxes for years, but as my income rose, so did my inability to continue to do this. I am now virtually dependent on my accountant.
Why?
Simple. Once you get into a certain tax "bracket", you become the actual TARGET of the progressive tax code. Congratulations...your hard work entitles you to become the mama pig and you are rewarded with a slew of sucking pigs...all of whom collectively vote to keep you on your side providing the milk!!
So, now I have real estate LLC's, a pile of K-1 forms, a list of "alternative minimum" calculations and various other worksheets that basically do a bunch of arithmetic telling me that my mortgage, medical, charitable and work expenses DONT qualify for deductability.
Why bother? Because if I don't get it right...I also get to pay penalites and interest.
Meanwhile, Virginia now has a Democratic governor, two Democratic senators and I am about to get a Democratic president.
Talk about "Taxation without Representation"!!
It won't be long, though, before the top layer of this HUGE PONZI SCHEME gets sucked dry...then good luck to all of you who weren't "lucky in the lottery of life".
crap.....
By Cas, at
Fri Jan 16, 08:26:00 AM:
During my many years in the military, the combined pay for my wife and I STILL left us in that percentage of American households that do not pay any federal income tax; in reality, like many people who pay all year (via payroll deduction) we ended up NOT having an actual tax liability on April 15.
My wife got so digusted with the tax laws that she took most of the H&R Block courses, and then worked for them for about three years, before doing the same thing (helping people file tax returns "electronically," as it was then called) for the DoD.
Now that we fell like we are actually making enough "to get by," the government thinks we are part of the greedy rich, and feel the need to redistribute our "wealth."
By Donna B., at
Sat Jan 17, 12:50:00 AM:
I have to nitpick: owing nothing more on April 15 or getting a refund does not mean you do not pay federal income tax.
Those who don't pay are those that get back every cent withheld for FWT, and sometimes more.
You know what I really hate? The penalties for not having enough withheld and not paying in enough estimated quarterly tax.
