Day 1,625 – Death & Taxes

Don’t get me wrong, i am not opposed to paying tax. Were i one guy on desert island i might object to some unseen force demanding i fork over 12% of my coconuts on April 15th or face a penalty, but that’s not my current reality.

Taxes are moneys paid to maintain civilization and, theoretically, to provide services on a scale individuals could not achieve. And let’s remember that, at least when it comes to individuals, even if they cheat, the top 1% pay for 36% of this country. Now don’t get me started on the corporate tax situation, that’s simply too messed up for words.

What burns me up isn’t taxes per se, it’s the intricacies of the tax code. Everybody knows there are tax brackets; one pays more as you earn more. However, what’s not so clear are the myriad cut-off points buried within the tax code. This is where Annette and I got burned this time around. It’s not that we jumped brackets, it’s that we had an adjusted gross above $150,000 (2013 was our highest-earning year ever), and because we crossed the $150k line deductions we had taken for decades were suddenly closed to us. The loss of those deductions turned our best year ever into our highest tax liability year ever.

And this is my argument: politician of all stripes hoot and holler about “cutting taxes,” or providing “tax breaks.” But the current US tax code is so complex, with so many wheels within wheels, that simply lowering one item might actually end up costing individuals more in the end. It would be a trivial exercise for the IRS to adjust a given tax rate down, but also lower the cut-off that snagged me and Annette. Hey Presto! suddenly a whole cohort just lost deductions and ends up with a higher liability. In such a situation you might indeed pay “lower taxes” but you’ve lost one or more deductions so you’re paying less tax on a higher adjusted gross. The house always wins.