Tax lingo for dummies

Article by Chris Baecker. It was printed in The San Antonio Express-News about a month ago. He manages fixed assets for Pioneer Energy Services and is an adjunct lecturer at Northwest Vista College (San Antonio College, where I teach is part of the same school system). Very interesting article with alot of food for thought. Excerpts:

"The U.S. has a progressive income tax structure, with seven rates ranging from 10 percent to 39.6 percent. The more you earn in wages and salary, the greater the percentage you pay in taxes.

As a result, one-fifth of American households pay roughly two-thirds of federal income taxes. We’re already in “disproportionate” territory. Logic dictates, therefore, that those who pay more would experience a greater absolute “benefit” from an “across-the-board” cut in income taxes.

Moreover, the concept of “across-the-board” income tax cuts is itself erroneous when almost half of all Americans pay no net income tax. Either they have no taxable income, or it’s canceled out by all the deductions, exemptions, credits and other loopholes."

"“Tax cuts pay for themselves.”

Indulging the notion for argument’s sake, it’s hard to tell for sure whether tax cuts “pay for themselves.” The Congressional Budget Office doesn’t even try, preferring the use of static scoring to predict the effects; a tax cut of $1 necessarily means a loss of revenue for Uncle Sam of $1.

However, it’s safe to say that most of us do not take increased disposable income and simply stuff it under the mattress. By virtue of that fact alone, it contributes to increased economic activity.

Many of us go shopping. My uncle stuffed most all his career raises into savings, which banks typically turn around and lend to those who have an immediate use for it.

And then there are folks like a couple friends of mine.

In the last couple years, they have either expanded an existing business or opened other businesses. That requires buying new capital equipment, wiring a new building for electricity, water, etc., and hiring new staff, some of whom will pay income taxes."

"“Taxes are the price we pay to live in a civilized society.”

Supreme Court Justice Oliver Wendell Holmes Jr. coined that phrase in a 1927 court case about business insurance premiums. Before it was bandied about as a rationalization for the size of our government, “civilized society” had a simpler meaning: to protect the private property that fosters widespread prosperity; to provide police forces and a court system to settle disputes; and to carry out other government services.

Is it really “civilized” for someone to commandeer the earnings of her neighbor to pay for her pet project? The person coerced is really paying for the requisitioner’s haughtiness and lack of initiative."