Do you owe money or does the IRS owe you? Do you do your own taxes? Do you wait until the last minute to file your return? Was that wacky Ross Perot right about a flat tax being a good thing?

-- Anonymous, March 25, 2001

Answers

They owe (I think). Yes. Usually. No.

-- Anonymous, March 26, 2001

I haven't done my taxes yet. I don't think I owe anything this year, but next year I will probably owe a lot, if I'm not careful.

Do you wear sunscreen on your forehead? If so, what? MY problem is, sweat makes it run off in my eyes, and that is tremendously irritating.

I wonder if freckles are like age spots when you get older? I should look it up, but I'm lazy.

-- Anonymous, March 26, 2001

I owe taxes. Lots of money. My sister is a CPA and prepares them. Normally, I file right away, but since I owe money, I'll be one of those people that get it postmarked by the 15th.

I've had freckles all my life. I hated them growing up. I even pulled the "Jan Brady" stunt, you know, rubbing lemon all over my face. Heh. Didn't work. Anyway, they're starting to fade as the years go on.

-- Anonymous, March 26, 2001

I've been using Neutrogena Active Sport Transparent Sunblock Gel SPF 30, and it doesn't sweat off, but it does make my skin peel, so I'm looking for something better.

But we're supposed to be talking about taxes here, not freckles and sunblock! I'll go start a sunblock topic...

-- Anonymous, March 26, 2001

I just thought it was funny that you used the word "toke".

Oh yeah, taxes. Ummmm... I have to open a Roth IRA before taxes so I can make up for my lack of a retirement fund contrubution last year. That's about it.

-- Anonymous, March 26, 2001

After getting "hammered" with taxes for tax year 1999, I increased my witholding for 2000 (zero exemptions), and so received a fairly substantial refund this year. I have always prepared my own returns, partly out of a desire to understand the process. I highly recommend Quicken's TurboTax software if you are filing the long form. I purchased the basic package in January for $14.95 which, after mail- in rebates, included a free electronic filing and a copy of Quicken.

If one is required to file a state return with the Commonwealth of Massachusetts, they have an excellent web site which does not require any special software. I filed on a Sunday afternoon and the refund was deposited in my bank account by Wednesday evening.

Was Ross Perot an advocate of the flat tax? Steve Forbes certainly was, at least in 1996. I had the opportunity to hear Alvin Rabuska of Stanford, the author of perhaps the best-known book on the subject and a strong influence on Forbes, speak at a conference a few years ago. He made a fairly compelling case, at least as far as we have taxes at all.

Federal income taxation is part of my third year law school curriculum, and it is actually quite interesting material. A libertarian tax lawyer. Who would have thought?

-- Anonymous, March 26, 2001

I've used Turbo Tax and the one by Klipenger? as well. Can't say I prefer one or the other, but up until last year, I was using Quicken as a financial tracking program. Which, if I remember had added a way to calculate what you may or may not owe in taxes on capital gains from stock. [i could be wrong on that though] Fortunately I got rid of all my tech stocks before most of the crashing. Yeah! though just luck, really. I do believe an old best friend may not be talking to me as I got him into the market with my enthusiasm, and I think he rode the wave right over the crest and into Bear territory (insert frown here).

-- Anonymous, March 26, 2001

As a Certified Public Accountant, most people find it surprising that I haven't touched a tax form in the five and a half years of my career. I usually fend off dozens of questions from friends about questionable deductions, most of which don't require a CPA to answer. For my own taxes, I've used Kiplinger's Tax Cut Deluxe for the past two years. It's awfully simple to use. I prefer taking a couple of hours answering questions on-line and filling in some numbers to reading through tax forms and trying to decipher the IRS' intentions.

Steve Forbes championed the flat tax as a campaign issue because it was a means of reducing the headaches associated with the current income tax system. Most people don't like our current income tax because it is complicated due to the proliferation of deductions, credits, and other special preferences in our tax laws. Steve Forbes' flat tax system would do away with almost every deduction and credit. Under Sen. Dick Armey's flat tax plan individuals would pay 17% of all wages, salaries, and pensions, after subtracting allowances of $12,200 for a single person, $24,400 for a married couple filing jointly, and $5,500 for each dependent child. I'm hardly an advocate of the flat tax, but I do think it creates dialogue within Congress on simplifying the current apparatus and eliminating a lot of the loopholes and special interest group influenced deductions that allow small numbers of unscrupulous people to take advantage of the income tax system.

-- Anonymous, March 27, 2001

The flat tax proposal is so logical and simple...you know those weasel's will never do it (let us do our taxes on a postcard). I read where only one!! congressman in Washington does his own taxes... and that's the problem... not enough people realize just how insane it is. I remember laughing out loud 2 years ago at the convoluted maze of forms, and contradictory instructions (those I could actually understand). It was out of a surrealistic movie (Brazil?), (& even worse than Microsoft programing logic). I don't understand why more people aren't totally outraged by it. Well, I guess I do....most people never realize that their with-holding money is theirs. If they had to write a check every month they might get more upset. Most people find that out when they start a business and have to hire people just to keep the tax-man at bay... sort of like legalized extortion.

I'm putting off my own taxes till the last minute, as usual. I thought I'd finally get a break this year. Although I'm in my 40's, I retired about midway through last year. Since my weekly with-holding amount was based on a full year's worth of income, I figured I'd drop way down in AGI and get a lot returned. Wrong! Most of my stock funds must have all sold lots of holdings throughout the year.... the capital gains of which are then passed on to the fund holders. The IRS then wants a cut of that nonexistent "paper" gain. So that extra with-holding I looked foward to ...is gonzo; and I'll still owe... well, you don't want to know. And to add insult to injury, those funds lost value (share price) by the end of the year, so their worth (on paper anyway), is down 15-20% from what it was worth last year. To be fair, they gained over 45% the previous year, so it's not a total fleecing... a nice fleecing none-the-less.

They tax your income (state, local and federal), and if you save and invest it, helping to create jobs and a healthy financial climate, they then tax your dividends every year.... when you finally sell your investment, they tax you again for capital gains ... and when you then use that, to say, buy a car... they tax it again. If you're unlucky enough to die, they go through your pockets again. You couldn't make it up.

-- Anonymous, March 28, 2001

OK, Jack. I understand the feeling. But "they" also build and maintain your roads and bridges, pick up your garbage, clean your water, maintain your parks, put out your fires, protect your property, enforce your laws, jail your lawbreakers, adjudicate your conflicts, educate your children (or at least your community's children), treat your community's mentally ill, assist your community's poor, help care for your elderly, help fund your basic scientific research, provide for your nation's defense...

Now, it's indisputable that "they" often do a really inefficient and ineffective job of providing all these services. Indeed, "they" don't even do a very good job of collecting the revenues that pay for the services - not when you count all the deadweight losses connected to the tax code complexity people have been complaining about here.

I'm definitely into doing anything and everything to get a better bang for our tax bucks (i.e., collectively pay as little as possible for the public goods we collectively decide we need). But for all that needs to be done, even now it's hard to see how you or any of us could create as much value or earn as much income absent the things that "they" do to maintain the physical and social infrastructures of our communities and country.

-- Anonymous, March 28, 2001

The flat tax would be a great idea. Taxes are so complicated. The worst is capital gains because if you have a dividend reinvestment program and through it you buy say 2.12345 shares at $34.4546 per share one quarter and 2.45234 shares at $29.2398 per share the second quarter and this goes on for a couple of years for a number of stocks in your portfolio and then you only sold some of your shares, figuring out what your capital gain was becomes a real nightmare. And then some of the shares will be subject to the long term capital gains rate and others will be subject to your marginal rate. And the schedule that you have to fill in takes you in circles. This is why I have not filled in my taxes yet. I am an honest citizen and I want to pay my fair share. Unfortunately, calculating my fair share is an ordeal that I always put off until the last minute.

-- Anonymous, March 29, 2001

Cap Gains Tax --- arrrghhh! --- Part of it is a tax on profit, on the gain you get when you sell something for more that you paid for it --- but much of it is really an inflation tax --- If you buy something and sell it ten years later you are selling it for dollars that have less value than the ones you used when you bought it but the government treats that numerical difference as if it were a real profit and makes you pay taxes on it.

Please note, except for my home I hold almost no investments outside of 401k type things, so my opposition to capital gains tax is not based on much expectation of personal gain if it were to be eliminated or reduced but more due to the basic lack of fairness.

Jen... you noted that taxes pay for lots of needed government functions and I agree with you on some of that. Citizens have established government for the protection of the common community and each citizen has an obligation to pay a fair share of taxes to support that. I have never in my life as a voter cast a negative ballet on any school funding proposal, etc. However, the further government gets from the people the worse it gets. I trust my local government; if their performance displeases me I can vote them out of office, I can attend town meetings (this is New England), etc. My state government, however, is rife with corruption and graft, bloated with money-hungry and power-hungry politicians and special interests. My vote counts for very little at a state level. At a federal level... hah! The feds waste billions and billions of dollars... pork and more pork and special interest legislation... hundreds of billions of dollars poured into "school aid" that has produced bloated bureaucracy but no improvement in schools (if anything, they are getting worse!)... and now that the federal budget appears to be in surplus, these blood-sucking federal parasites act as if this is their money and are arguing about whether or not they should allow taxpayers to keep a little bit more at the end of the year.

-- Anonymous, April 01, 2001

My wife has been working in the tax preperation business for several years. This year we took a huge leap and bought our own tax preperation franchise.

I'd been doing my taxes on computer since the early 80s, first using a spreadsheet called "supercalc" on an Osborne I, and then Macintax on a Mac SE. If you are comfortable reading rules and dealing with numbers there isn't any reason to not do your own taxes. If you are not comfortable with numbers, have a complex situation, or just would rather spend your time doing something else then paying a preparer makes sense.

I usually try to adjust my W-4 to get within a hundred dollars of paying zero taxes. Usually i suceed, but I've screwed up once to the tune of $7k.

We see all kinds of wacky tax situations in our business. Some of the day traders are having nightmares, owning huge taxes dispite losing money overall for the year.

One good thing the Clinton Administration did in their last year (yes, please note, Jim says something good about Clinton) is tightening up rules on earned income credit a bit. EIC is a good program, but there are of folks who have abused it in the past.

I don't agree with one flat tax rate, but I do agree with President Bush that there should only be three or four brackets. The proposed new ranges of 10% to 33% seem fair to me.

I support Bush, but I sometimes dream about the riches that would come my way had Gore been elected. All "targeted" tax breaks are goldminds for us tax preparers. Gore's plan would have doubled our business.

Jim

-- Anonymous, April 01, 2001

I should've figured there's a site dedicated to this.

http://www.salestax.org/

I read through the 2 proposals, and I'm not sure why there isn't more interest.

-- Anonymous, April 02, 2001

No! No! No! Sales taxes are the ultimate in a regressive tax. Sales taxes hurt the poor and average the most. Think about it... in lower income brackets almost all money is spent on buying things. In upper brackets, even with very lavish lifestyle, it is difficult to spend anywhere near the same proportion of income on "stuff" as thoes in lower income ranges have to.

They might say oh, but there will be refunds for money spent on the essentials of living... sure, and then Congress passes various laws and regulations saying what is needed and what is a luxury, etc., etc. loophole after loophole. By the way, remember what happened to boat manufacturing a few years ago... huge luxury tax placed on large pleasure craft, sales nose-dived, thousands of people who had been employed in boat-building lost their jobs.

Besides which, once they got that law through, they'd soon find a need for income tax (oh, but give it a different name... wages tax or cash flow tax or...)

-- Anonymous, April 03, 2001

(didn't know the thread continued past my last....isn't this designed to send automated update replies?)

David: You imply a false implication in the tone of my last post. I don't begrudge the government payment (taxes), from the services it offers; I was only railing on the frustrating impenetrability of it's tax system (in light of Jen's specific questions). When Money magazine gives out it's mock returns to a variety of different professional tax-preparers, accountants, CPA's and the like.... and gets returns from these "experts" that differ by as much as 200%, or more (were talking real money here - thousand's of $'s); something is SERIOUSLY wrong. Or do you like living within such madness? It fosters a low-regard for all manner of governmental institutions.... (pollice, laws, regulations, etc), which, in the long run, is not a good thing for society. One major reason why a flat tax (of one form or another, a bracketed one that has fair and firm deliniations.... or whatever..) is hard to invision these weasels passing, is because everyone of us would know exactly what the rate of taxation is. Do you have any idea what you paid last year...not on sales, or local, or property, or state, or fees and registrations, or "added" fees,.....but just on federal income tax? The process is so convoluted and labrynthian, that no one is able to figure it out (the rate), so criticism is silenced (a lot of it). If there was a set rate...say "21.5%" this year, EVERYBODY would know when congress increased (or decreased) it to another rate. Instead of standing behind 20,000+ pages of obscure code, the pols would have to stand in the light of day, and risk getting their asses voted out (you know what happens when cockroaches have the light shown on them?).

As for the subject of government services... there was a disturbing news story in the Htf Courant (CT) last week. Seems that gov (fed,state & local) is the #1 employer in the state. From a voting point-of-view, that's disturbing. If the gov becomes so far-reaching it steamrolls more and more influence and benefits to it's own, that's troubling. The founders designed government as a necessary evil for exactly the opposite reason: to protect the minority from the tyranny of the majority. It was about the individual's freedom. That orig system now smacks more and more of socialism, and as an independent libertarian, that disturbs me.

Government now does much more than the Constitution addressed (courts, police and the military). And almost all of it far worse than the private sector (read: competition). Let's take the highways...there's a local road (Rt2) which was just finished being widened for a 300-yard stretch. Some major blasting of rock involved.... but not a huge undertaking. It took 'em 5 YEARS!!! During that time the nearby Mohegan casino undertook a much bigger blasting/ road constuction project. Wanna guess how quickly it was done, and how much in incentive bonuses were received.

And for those that think the gov can do a "fairer" and better job at things like medical care and retirement (congressmen have their own system - with our money - that doesn't tick you off?) than the private sector...ask your self this: Is not food the most essential thing we all need? (more than medical care or retirement) Then why not have the gov do that? Have them do away with supermarkets, restaurants and the competion there-in. Have them set prices and deliver a box of "US gov approved/authorized" groceries of officially grown, manufactured food-stuffs to your door every week.(No more twinkies or potato chips). Think of the time and effort you'd save. If you shiver/recoil at the thought of some moron beaurocrats determining what you SHOULD eat (and losing that freedom of choice), why is it not equally clear that government corrupts in the same way when it gets it foot into the door of heathcare, retirement, education, and so many other areas of regulation. The founders were well aware of the human propensity for such corruption and taking of freedoms by governmental power....they almost couldn't agree on a best way to safeguard those virtues....it scared them to death (the potential tyrany of government); and they never even heard of Stalin, Hitler, Mao, Pol Pot, Idi Amin....Time to get off my soapbox... I need a beer. Where's that 1040?

-- Anonymous, April 04, 2001

I might add, that the low income & poor don't seem to be any worse off in the 3 states without state income taxes.

Of course, there are too many variables to say why, but I think it shows it can work.

(and don't you think Jen should have a picture of her legs on her site?)

-- Anonymous, April 04, 2001

Probably my all-time favorite bit of political wisdom:

"It is a melancholy reflection that liberty should be equally exposed to danger whether the Government have too much or too little power, and that the line which divides these extremes should be so inaccurately defined by experience."

James Madison (letter to Jefferson, October 17, 1788)

I agree completely that activities for which it's possible to establish competitive markets should be left to those markets. But there are some things that markets can't do, or rather things for which efficient markets can't readily be made. Those areas tend to be left to governments (as well as private civic organizations), and it's inevitably difficult to stimulate efficient, responsive performance where you can at best only simulate some of the effects of profit-oriented competition.

The big question is, as Madison observed, where do you draw the lines? I've found over many, many years of debating this issue that socialists tend to seize on selected examples of market failure to make exaggerated claims on behalf of collectivization, while liberatarians tend to seize on selected examples of government failure to make exaggerated claims on behalf of privatization.

It's somewhat amusing, though, to hear dire warnings about creeping socialism in the United States, since we have probably the smallest (measured in share of GDP absorbed by taxes and share of total labor force employed by tax revenues) and least obtrusive (with respect to both regulatory and redistributive functions) public sector of any advanced country in the world.

This is not to say that there isn't room for further liberalization, or reform, or retrenchment, or whatever you want to call it, although interestingly enough there is a growing body of literature suggesting that the amount of government we have in the United States is pretty close to optimal in terms of a country's overall economic performance. Anyway, maybe the glass here is half-full as well as half-empty.

In terms of how convoluted our tax system is - again, I agree, it can be pretty nightmarish, especially for those with income from property. But it cumulatively got that way precisely [i]because[/i] of pressures from taxpayers to make the tax system responsive to their perceptions of equity - as well as pressures from the public to address social issues without appearing to spend money. That's where all the endlessly complicated exemptions and deductions and credits and gross income adjustments and minimums and penalties and all the rest of that junk develop from.

Two examples of using the tax system to effect social policies: the differential tax treatment of wages and benefits, which was instituted to encourage employers to provide health insurance and pensions, and thereby minimize - or rather camouflage - the true public cost of same; and likewise the use of dependent exemptions on the revenue side of the budget rather than transfers on the spending side of the budget to provide family assistance - again the aim and effect was to provide social welfare without appearing to do so. But in both cases the result is that the tax system is made more complicated and the social benefits are distributed less equitably (and less transparently) than if taxing and spending had been kept in separate spheres.

But that, after all, is how the citizens here have preferred it. Another road paved with good intentions...

I think I'm just trying to say that there are reasons why it's a lot easier to complain about all the myriad faults with our tax system (and government as a whole) than to fix them. However peverse, there are logics to all these convolutions.

As far as the no-income-tax states go, my understanding is that a variety of problems have flowed from the heavier reliance on property taxes there, including very striking horizontal and vertical tax inequities (assessed values often being notoriously inconsistant with true distributions of either wealth or ability to pay), and serious difficulties in complying with constitutional requirements to fund public education equitably. Hence there are varying degrees of pressure in all three states to institute income taxation.

Pressure is coming from another direction as well: the growth in ecommerce is progressively eroding the sales tax bases of states and localities, and thus far no one seems to have come up with an effective scheme to counter that erosion (i.e., enable collection of state/local sales taxes on interstate sales) or to level the playing field between in-state and interstate sellers. (Energy deregulation is also contributing to this problem.) Recently I've heard a pretty radical - but also pretty persuasive - solution proposed:

While the federal government converts its income tax into something more resembling a consumption or sales tax, the states should abandon their doomed sales taxes in favor of (larger) income taxes. The overall effect would be a more sustainable and less burdensome and distorting tax system than the one we have now.

I'm giving it alot of thought.

-- Anonymous, April 05, 2001

David, you are being much too reasonable and sensible, this kind of discussion is supposed to feature screaming and flaming. Maybe it's Jen's fault; she attracts a much too intellectual class of reader.

I agree with what you are saying about taxes but fear that we are facing our version of the tragedy of the commons, a devolution in the quality of both voter and elected official. I live in your little neighbor, Rogues Island, and once we move beyond the confines of South County I fear that any ability to influence government that I might have is overwhelmed by the knee-jerk single party voting habits of Rhode Islanders and the resulting highest political corruption in the nation. (Uh, that's on a per-capita or per-square-mile basis; I'm sure that many larger states can beat us out in the sum total of their political corruption... after all, Massachusetts has the 14 billion dollar Big Dig.)

-- Anonymous, April 05, 2001

Oh yeah... one other thought... David quoted James Madison. Think back to the writings of Madison (or Jefferson or Franklin, etc., etc.) Then try to imagine either Bush or Gore... oh, never mind, it's too depressing...

-- Anonymous, April 05, 2001

Most men in prison are hard-pressed to read at a fourth grade level.

-- Anonymous, April 06, 2001

Well, the rest just look at the pictures.

-- Anonymous, April 06, 2001