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Sunday, June 27, 2010

Tips to Hike Your Taxes

Tax Cut Protestors Should Voluntarily Pay More Themselves

Taxes are due and refunds are flowing. What’s a good tax hiker to do? Keep his ill-gotten gains or give them back? The New York Times Magazine features a column titled “The Ethicist.” It is basically modern liberalism meets Ann Landers. As rebate checks were being cut, Ms. Tamar Kotelchuck, a resident of Somerville, Massachusetts, wrote in to inquire: “I strongly oppose the tax cut recently passed by Congress. But I’m not wealthy, and I can use the refund check the I.R.S. is sending out. Is accepting it a passive endorsement of a policy I believe will damage the country, particularly low-income individuals? Must I, in protest, refuse to use the money for personal gain, perhaps by donating it to charity?”

The columnist naturally said no. Accepting the rebate doesn’t mean endorsement of the tax code, any more than paying one’s taxes does so: “Obeying the tax laws is simply a civic obligation.”

The columnist does suggest giving away the cash as a protest. It could help the poor or fund “political candidates who would unseat those who backed the tax bill.” Naturally, one should also write political leaders to protest. But The Ethicist’s bottom line was simple — “it is not dishonorable to keep your rebate.”

How . . . liberal. Why should anyone have to live with the consequences of his opinions? It’s fine to be against tax cuts—and to cash your rebate check or, presumably, collect your refund.

In fact, people who don’t believe in tax cuts should give back the money. Just write a check or send a money order to Uncle Sam. If tax hikers want to be a bit fancier, they could help pay off the national debt by following the lead of Senator Robert Byrd, the big-spending porker who does so much to create the pressure for high taxes, and tag it for Gifts to Reduce the Public Debt. Anyone doing so, of course, should not take a deduction on his taxes the next year.

But tax enthusiasts should do more. They should lead by hiking their own taxes. If you think taxes are too low, then prove it by raising your own.

It’s really quite simple. Pick up the standard 1040 form. Although it might seem a little strange to declare more income than appears on the W-2, that should pose little obstacle to doing what is right.

Add some extra interest. Make up some sums from a couple of banks. Create names for nonexistent ones. Do the same for ordinary dividends. The IRS won’t mind.

Add some alimony. Toss in some pension payments, if you’re retired. Put down a little unemployment compensation. There’s even a line for other income. This includes prizes and awards (imagine being honored for being an insufferable social engineer and friend of overbearing government), gambling winnings (don’t worry—the IRS isn’t going to work to disprove that you won), jury duty fees (be reasonable, since you don’t get much for such service), state tuition benefits (so what if you have no kids?), and reimbursements for expenses previously deducted (who will know any better?).

Create some business income. Indeed, a would-be tax-hiker should get malicious pleasure out of posing as a greedy capitalist.

File a schedule C or C-EZ, and toss in some imagined revenue. Keep the expenses to a minimum, since you wouldn’t want to reduce too much the taxes due.

But inflating income is only the start. It’s also important to cut the adjustments to income. Forget the IRA deduction—why should the government subsidize people who want to save for their own retirements? Same thing with the self-employed SEP, SIMPLE, and other retirement programs.

Forget the interest deduction for student loans—obviously a subsidy primarily for middle-income and wealthy students. No self-respecting “liberal” would take a deduction for a medical savings account: after all, the government should be providing all health care!

Ignore other deductions and credits. After all, people’s earnings really belong to the government, so why cut its take?

Itemized Deductions

Most important, forget all of those ridiculous itemized deductions. Spend a lot on health care? Just grin and bear it. Are your state and local taxes high? They should be. Why should that reduce your federal obligation?

Same with real estate taxes, which are usually financing the failing government school system. Then there’s mortgage interest. But why should you get to deduct more money if you have a bigger, fancier, more expensive house?

No reason to take off charitable gifts, since that is obviously government’s job. Casualty and theft losses don’t warrant a deduction, since the perpetrator was probably a victim. Unreimbursed business expenses should go undeducted, since they helped you make money, a dishonorable act. Tax preparation fees—heck, the more you spend, the less you deserve to take anything off. And forget the other miscellaneous deductions. Actually, it would be simplest to take the standard deduction. Why should your misfortune or generosity be used as an excuse to starve poor old Uncle Sam? We know he needs the money more. There are also a host of credits that every good tax hiker should forgo. Drop the foreign tax credit and credits for child care and the elderly. Forget education, child, and adoption credits.

Now we come to figuring your tax. If your total isn’t up to snuff—come on, don’t be greedy!—add some other taxes. You might have to file an extra schedule or two, but go for it: self-employment, Social Security and Medicare taxes on tips, taxes on retirement plans and other accounts, advance earned income credit payments, and, one that should thrill every good “liberal,” household employment taxes. For the latter, double the number of servants that you actually have.

If all of this doesn’t increase your taxes enough, go back and inflate your income numbers a bit more. Or simply write Uncle Sam a check and say it’s to pay off the national debt. In fact, Governor Mike Huckabee of Arkansas has established the “Tax Me More” Fund for any residents who want to pay more. Alas, so far it has had only minimal success: apparently people prefer to tax other people rather than themselves.

Anyone who thinks taxes are too low, objected to the minuscule Bush tax cut, or voted for Al Gore should hike his own taxes. The Ethicist to the contrary, people who want the rest of us to pay more should voluntarily pay more themselves.

  • Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.