Thursday, April 16, 2015

It’s the Most Wonderful Time of the Year

Which type of person are you? The one who filed their taxes in January, got the refund by President’s Day and remind everybody of how nice it is to have it done? Or the one who scrambles in the days before April 15 to get everything together and hit “send” just in the nick of time? Perhaps you’re the one who knows that October 15 is the final, final date when all extensions expire and aim to file by then. I’m a bit of a hybrid, filing my and my family’s returns usually in the February / March time frame. Even utilizing software and being organized, the process is laborious, intrusive and confusing. And that’s what makes this the most wonderful time of the year!

Tax Time is when Americans of all stripes most directly interact with the government. 136,887,000 returns were filed in 2014 with 86% being done so electronically. According to a 2012 Fox News poll 79% of Americans support requiring everyone to pay something in taxes. In 2014 USA Today reported an AP poll that found 58% of Americans describe the filing of taxes as easy and only 38% say it’s hard. When broken down by economic group those making $100,000 or more had a higher percentage who found it difficult – 45%. The U.S. tax code started with 400 pages in 1913 and a century later in 2013 was 73,954 pages. According to the IRS 90% of taxpayers use a tax professional or software to complete their return.

Tax Day for LGBT Americans is particularly challenging. APReports that for those people who live in states that do not recognize their marriage that the couples have to complete 5 tax returns – one federal as married, one federal for each person as a template to then file one each at the state level for each person. Divvying up costs and deductions is not only a complicated mathematical process, it’s emotionally disruptive to have to divide your married life up because your state doesn’t recognize your relationship.

The U.S. tax code includes a “marriage penalty.” In the progressive rates that are the basis of the U.S. tax philosophy and code, the more one earns, the more one pays in taxes. So if two people come together and file jointly, their incomes are combined and they move into a higher bracket. The code also includes many incentives and deductions to encourage (or discourage) certain behavior. Politicians want Americans to buy houses (borrowing money, paying interest, etc.) so there is a large financial benefit for home ownership. Buy too many houses though – and have them as vacation getaways or rental properties and that is discouraged with limitations on deductions and even increased rates.

The priorities of encouraging or discouraging behavior of the citizenry have been a core function of the tax code and the primary argument that the political parties have. One wants to raise taxes on one group of people and redistribute it to others while another wants to reduced taxes to one group of people and redistribute it to others. It’s in this area where the divisive political discourse has festered for most of the past several decades. 1986 was the last time the code was “reformed.”

Election Day is held on the first Tuesday in November under a 1792 Federal law. The reasons included issues of the completion of the harvest and before the harsh winter weather allowing for most who needed to travel to vote to do so. Most of the considerations for choosing early November no longer apply, but it’s unlikely that Election Day will change.

Tax Day hasn’t always been April 15.This date became effective in 1955 Tech Times reports why: “"According to an IRS spokesman, the move 'spread out the peak workload,' but there's another explanation. Turns out that as the income tax applied to more of the middle class, the government had to issue more refunds. 'Pushing the deadline back gives the government more time to hold on to the money,' says Ed McCaffery, a University of Southern California law professor and tax guru."

No matter when Tax Day falls, how government spends taxes is one of the most contentious issues of our time and politicians have been unable (or unwilling) to find compromises. Perhaps the easiest way to see how Americans really feel about paying and filing taxes would be to move Tax Day to the first Monday in November. The day before Election Day. This Most Wonderful Time of the Year would be more so when electoral decisions would be directly related to the one thing that nearly Americans do to interact with the Government they elect. And let’s make it easy: let’s have the Presidential, Congressional and Senatorial candidates be the last question of the tax software before hitting “submit”?

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