It’s That Time of Year Again: Tax Time

Well, tomorrow at midnight is the deadline to submit your federal income tax, so I thought this would be a great occasion to talk about the subject. For those procrastinators out there, you better get busy. As for me, I filed my taxes just as soon as I could; I’m not too fond of giving the government an interest free loan because of their over-taxation, so I want to get my refund just as soon as possible.

Also, given the upcoming presidential elections in 2008, I think this is a particularly good time to have a lesson on taxes. You see, Republicans tend to run on a platform of cutting taxes and Democrats tend to accuse Republicans of only favoring tax cuts for the “rich”. That begs the question, how do you define rich?

Rich is a relative term; to the poorer half of Americans, the wealthier half of Americans would certainly be considered “rich.” Using that definition of rich, just about any tax cut proposed would be a tax cut for the “rich.” You see the wealthier half of Americans pay 97% of all income tax. And if you think you are not among the wealthiest half of Americans, you may need to think again. If you make more than $44,000 a year, you are in this classification of “rich.” And most people with a college degree, working full time make more than $44,000 a year.

Now, maybe you don’t like that definition of “rich.” Maybe to you, “rich” is the top 25% wealthiest Americans. In that case, still you have the “rich” paying 85% of all income tax, and therefore once again, just about any tax cut proposed would be a tax cut for the “rich.”

When I graduated from college in 2001 and began working full-time, I indeed was making a little more than the average mentioned above. President Bush had just been elected and he had run on a platform of tax cuts. His opponent, Al Gore, had made that accusation that Bush’s tax cuts would only help the rich (see http://usgovinfo.about.com/library/weekly/aa100600a.htm). Yet later that year, I (a hard working, middle class, bottom of the corporate totem pole, worker) got a tax refund check.

So the next time a political candidate proposes tax cuts or accuses the tax cuts of only being for the “rich,” remember that one man’s “rich” is another man’s “hard working middle class.”

Sources: http://www.irs.gov/pub/irs-soi/04in06tr.xls
http://en.wikipedia.org/wiki/Household_income_in_the_United_States