Do You Have to Pay Income Tax?

Well, it is that time of the year again—income tax time in the U.S. Actually, tax day is not today, as I thought when I planned this article, but on April 18 this year.

Of course, most of you who were expecting to get a tax refund probably filed your return weeks ago. But perhaps others of you who, like me, have to pay more when filing have waited until near the deadline.

To ask some people, “Do you have to pay income tax?” might be a way of subtly inquiring about their income. Those below a certain level of income don’t have to pay any income tax—and last year it was reported that just over 45% of U.S. adults paid no federal income tax.

Back in 2012, that figure was given as 47%, and they were people that Mitt Romney and Paul Ryan dubbed as “takers.” (To his credit, last month Ryan admitted that he was wrong in what he said back then.) It remains true, though, that some people don’t have to pay income tax because of their limited income.

There are some, however, who contend that U.S. citizens don’t have to pay income tax because the government doesn’t have the right to demand such taxes. Actually, I have been planning to write this article ever since I saw that Irwin Schiff died last October.

I had never heard of Schiff (b. 1928) before, but he was a prominent figure in the U.S. tax protester movement and died in federal prison while serving a sentence of at least 13 years for tax evasion.

Schiff was the author of several books, including Federal Mafia: How It Illegally Imposes and Unlawfully Collects Income Taxes (3rd rev. ed., 1999). It is the only non-fiction book banned by the U.S. government—because it was judged to contain fraudulent information.

Whether by protest, by negligence, or by poor financial management, there seem to be many people who haven’t paid all their income tax and, consequently, who own the government a lot of money. There is now even a federal program, the “Fresh Start Initiative,” to assist taxpayers who owe back taxes.

In addition, I have been amazed at how many advertisements I have heard/seen recently by companies who are seeking clients whom they can help, for a sizeable fee no doubt, settle with the government for less than they owe in back taxes. So, evidently, some people don’t have to pay all their taxes because of getting behind in their payments.

In stark contrast to tax protesters such as Irvin Schiff are those who advocate taxpayer pride. Sister Simone Campbell is one such person. (Some of you will remember her as “the nun on the bus.”) She is the head of a group known as NETWORK: A National Catholic Social Justice Lobby.

I receive her/their emails regularly, and their April 1 email was titled, “Join Us in Showing #TaxpayerPride April 15! Take a Picture with What You are Proud to Pay For.” Here is the picture Sister Simone posted: 

Sister Simone says, “There are many great things that taxes pay for, and we at NETWORK are ready to show our #TaxpayerPride. We know that when we all come together and pay our fair share, our communities are healthier, happier, safer, and stronger.”

Surely it takes the sting out of paying our income tax when we realize that, among other things, those funds to go, at least in part, to make better communities for us all.

Is the “Fair Tax” Fair?

Herman Cain, the presidential candidate, was interviewed October 2 on “Fox News Sunday” and on “This Week.”As is widely known, Cain (b. 1945) was formerly chairman and CEO of Godfather’s Pizza (1986-96). From 1995 to 1996 he was also chairman of the board of directors of the Federal Reserve Bank of Kansas City.

Candidate Cain, somewhat surprisingly, won the Republican presidential straw poll in Florida last month and according to the new CBS News poll, he is now tied with Mr. Romney for first among the Republican candidates.

In both of Sunday’s television interviews, Mr. Cain was asked about his 9-9-9 tax plan, a bold proposal to replace the current federal income tax with a 9 percent sales tax, a 9 percent income tax, and a 9 percent corporate tax.

Mr. Cain has indicated that he sees the 9-9-9 plan as a precursor to the “fair tax,” which would be a national sales (consumption) tax that would take the place of the federal income tax. He is only one of a number of people actively promoting the “fair tax” idea.

But would the “fair tax” be fair? I think not.

The advocates of this new tax plan consider it fair, because “the more you spend the more you pay.” In addition, it is fair, they say, because everyone is taxed at the same rate.

However, it seems clear to me that the fair tax proposal, as well as the 9-9-9 plan, would tax the lower and middle classes more severely than at present, even with a “prebate.” In addition, unless the wealthy are already avoiding taxes through various loopholes, as many are, it means a huge tax break for them.

(The rather complicated plan for prebates is explained at www.FairTax.org.)

Take, for example, a couple with an annual income of $25,000. Most of that income would of course have to be spent on necessities, even though they might receive some prebate. Thus in all likelihood almost all of their income would be subject to the sales (consumption) tax.

But consider a couple with an annual income of, say, $250,000. They no doubt would pay far more taxes, for they would, most surely, spend far more than the first couple. But in all likelihood they would also put a sizable proportion of their income into savings, buying stocks and bonds or making other investments which would most probably increase their wealth in the future.

Thus, the latter would pay a far smaller percentage of their income for taxes while increasing their wealth in years to come. In most cases, the greater one’s income, the smaller the percentage of that income would be used for taxes.

So, the so-called fair tax cannot be called fair for low income people struggling to get by financially. Conversely, it would unfairly favor those with above average incomes.

In Favor of Raising Taxes

This may well be my most unpopular posting yet, for I am writing in favor of higher income taxes.

This coming Monday is the deadline for filing federal income tax returns this year—three days later than usual because of a Washington, D.C., holiday on April 15. Those of you who are due a refund likely filed your tax return some time ago. Others, like me, probably waited until near the deadline to file, for payment of taxes due must accompany their return. And even though retired, I had to pay a considerable amount of tax this week.

So why would I be writing in favor of raising taxes?

As we all know, there is a very serious budget deficit in this country. There are many Congresspersons, especially those supported by the Tea Party movement, who are determined to reduce the deficit by reducing the budget. But here is the problem: in their effort to reduce the budget they are suggesting cutting off funds for some very important programs.

We all agree that wasteful or duplicate programs, and there certainly are some of those, need to be eradicated. But such cuts would make only a small dent in the deficit, so other cuts are necessary. (Some of us would like to see significant reductions in military spending, but that is not likely to happen.)

Unfortunately, many of the cuts now being proposed would negatively impact needy people here in the U.S. as well as in others parts of the world. On April 1, a group in D.C. fasted and protested to oppose "the proposed budget cuts that would eliminate $7.6 billion from domestic programs that impact low-income women and children. Other cuts,” they said, “would potentially eliminate feeding programs for 18 million of the poorest and hungriest around the world.”

Instead of cutting programs for the poor, the tax cuts for the wealthiest two percent of Americans should surely be eliminated. The extension of those cuts this past December was a big mistake. Why in the world should billionaires be given tax cuts and then programs to help the poor be eliminated because of the lack of funds?

Further, profitable corporations should be required to pay taxes. As you have probably heard, General Electric had billions of dollars of profits in 2010 but paid no income taxes at all. The same was true for Exxon Mobil, Bank of America, and many other large and wealthy corporations in the country.

After the tax cuts for the wealthiest Americans are eliminated and large corporations are required to pay taxes, if there is still need for further revenue to reduce the deficit, as there likely will be, then taxes should be increased for all of us except for those who have minimal incomes.

The federal deficit must be reduced and the budget needs to be balanced, but not on the backs of the poor. If it takes a tax increase to maintain the government programs that provide vital assistance to needy people in the nation, especially children and the elderly living in poverty, then so be it.

Thoughts about Income Tax

Well, today is the day, the day by which we USAmericans have to file our annual income tax return. I hope all of you who were required to do so have, or will before the day is over, get your filing done. (Some of my Thinking Friends are not USAmericans, so this posting may be of limited interest to them.)

Yesterday I sent in June’s and my tax forms via the Internet, and we had to pay nearly $5,000 more than we had already paid. But I was not altogether unhappy to make this payment, for there are a lot of needy people who are helped by the government each year, and I consider our tax payment primarily for their benefit.

As a pacifist, I do not like to pay taxes to support the U.S. military, and I especially don’t like to pay taxes to cover the expenses of the preemptive war against Iraq, which I consider an unjust war. So I am quite unhappy about my tax money going for that.

Years ago I toyed with the idea of being a tax resister, refusing to pay the portion of the federal tax that was used for war. Through the years there have been people who did that, and I admire their courage and consistency—but I have not able to do the same thing. Still, I am attracted by the idea and am happy that some are still working for a “peace tax fund.”

The National Campaign for a Peace Tax Fund is a not-for-profit organization which advocates for passage of the Religious Freedom Peace Tax Fund Bill (RFPTFB). In April of last year, Rep. John Lewis (Dem., GA), along with eighteen cosponsors, introduced the RFPTFB as H.R. 2085 in the 111th Congress. If passed by Congress, this legislation would establish a governmental trust fund into which designated conscientious objectors would be able to pay their full federal income taxes.

In 1972 Rep. Ronald Dellums (Dem., CA) introduced the first Peace Tax Fund Act in Congress. (Dellums is currently the mayor of Oakland, CA.) And since 1982, the National War Tax Resistance Coordinating Committee, a coalition of groups from across the U.S., has continued to provide information and support to people involved in or considering some form of war tax resistance.

But until the (unlikely) time comes that income tax can be diverted from support of the military, I will just have to consider that, whereas some people are glad to support the Pentagon but resent their tax money being used for people on welfare, my taxes are mainly going to help people who need, and receive, assistance from the government.