The Good Thing About Income Taxes

I just filed my taxes, and I noticed two things:\"income

  • My taxes continue to get more complicated
  • I paid a lot in taxes last year

I may be unique, but I really don’t mind doing or paying my taxes. Sometimes it’s a lot of work and a lot of money, but I stop way short of cursing government bloat and bellyaching over the bill. There may be some things that I could do better myself if they gave me the money, but there are a lot of other things (building highways, running an army, fighting terrorists) that I’m happy to outsource.

And there is one shining silver lining to ease the pain of paying so much of my hard-earned money to the government each year, and it’s contained within the name itself: they’re income taxes. They’re unnecessarily confusing, they distort ideal economic behavior, and they support an (at-times) inefficient government. But I only have to pay them on my income.

In general, if I make less, I pay less; if I make more, I pay more.

Do I hate that my money may be used inefficiently? Yes. Do I wish I got to keep more of it? Absolutely. Am I a little bothered that some folks may not pay their “fair share”? Yup. But every year that I’ve had to pay taxes, it’s because I’ve made even more.

As a result, taxes for me have always been less of a question of “fairness” or outrage over the amount – I view them more as an engineering problem. There are things I can’t control – tax rates, what’s deductible, how the money is spent – and things I can – how much money I make, taking the right deductions, avoiding mistakes; my task is to get the best possible outcome with the limited tools at my disposal (thank you, 401K and SEP!).

A simpler tax system would be much better for the economy as a whole. But every complex rule that’s been added benefits someone, and the squeaky wheels get the grease. You need look no further than the mortgage interest tax deduction for a great example of this. Many Americans get little or no benefit from it (I myself may have just used it for the last time), but rich folks on both coasts, plus a well-organized home building industry, will fight like mad to keep it in place. As individuals, there’s unfortunately not a lot we can do to improve a system that takes a lot of time and can take a lot of our money.

But the bottom line is that in order for your taxes to be really worth complaining about, you need to have a pretty healthy income in the first place. And if you are so lucky, maybe you don’t have much to complain about, after all.

 

 

 

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