What does it mean to say, as many politicians do, that our taxes are too high? Does it mean that we tax more than is required to run the government we want? That seems unlikely, given the huge deficits we run. Does it mean that certain taxpayers, but not all of them, pay too much (and perhaps others not enough)? Maybe. In any event, the notion that our taxes are too high is a relative concept. Compared to what? Does it matter what we paid last year? Or ten years ago? Should we pay more or less than the citizens of Sweden or England or Japan pay their governments? It's not enough simply to say we pay too much (or too little).
With that in mind, consider this article from Saturday's Washington Post, which explains that many tax cuts enacted in recent years are set to expire at the end of 2012. So, if Congress doesn't do something after the election, taxpayers will be hit with a signficant tax increase all at once, unsettling expectations, harming taxpayers with modest incomes, and possibly slowing economic recovery. As the Post explains:
With Congress voting last week to extend the payroll tax holiday, 160 million workers will be spared an immediate tax hike. But the move leaves them facing an even bigger hit in January, when the holiday ends and the payroll tax joins a long list of levies already set to sharply and abruptly go up. On Dec. 31, the George W. Bush-era tax cuts are scheduled to expire, raising rates on investment income, estates and gifts, and earnings at all levels. Overnight, the marriage penalty for joint filers will spring back to life, the value of the child credit will drop from $1,000 to $500, and the rate everyone pays on the first $8,700 of wages will jump from 10 percent to 15 percent. The Social Security payroll tax will pop back up to 6.2 percent from 4.2 percent under the deal approved Friday by Congress. And new Medicare taxes enacted as part of President Obama’s health-care initiative will for the first time strike high-income households.
The Post says congressional aides are calling the coming tax-cut expirations "Taxmaggedon." But isn't this caused, at least in part, by the failure of many politicians to tell the truth about taxes? Listening to many of them, you would think that taxes are continually rising and that it is their job to bring them back to earth. Not so. Effective tax rates have been dropping for years, are currently at historical lows, and are generally lower than those of our global competitors. Read about it here and here.
Tax laws are always changing. It is important to either keep up with them or get IRS tax help to ensure that your taxes are done correctly. The last thing you want it to be audited.
Posted by: Mark Randall | Tuesday, February 21, 2012 at 12:41 PM