Life & Taxes

The conversation started amiably enough. A co-worker and I agreed that the U.S. is quickly approaching a financial crisis. Beyond that generality, however, we started wandering into territory dangerous for work discussions.

At first, she overlooked a potential point of disagreement regarding education. I voiced the opinion that if tax money followed children instead of children being assigned to where money was already going, home-schooling might become more appealing. Parents might find it more affordable to stay home with their children if their own tax money stayed home too. Children could learn at their own paces. The co-worker said, “Home-schooling is hard.” I had a lot more to say about taxes and education quality, but I let it go.

Then I overlooked the next potential point of disagreement regarding elder care. My co-worker’s sister cared for their mother rather than place her in assisted living. No disagreement until she mentioned in her sister’s state, an adult could be paid by the government to take care of her own elderly parents. I said, “Sure, that’s a tax break if the elder is a dependent.” But what she meant was that someone should be paid by government to stay home and care for the elderly. I wanted to ask whose responsibility it was to pay for that, but I let it go. After all, no one wants to see older Americans suffer.

Finally we arrived at the real disagreement: taxation. The co-worker declared that the problem is the government really needs to “tax the hell out of the rich.” I said, “I disagree.” I pointed out that “the rich” (the definition of which is another debate) are also employers and if they were penalized additionally, they might have to let some workers go. She said, “The government can take of them [the workers].”

Next I asked, “What is my incentive to get promoted or otherwise earn more money if I know I will also have to pay more money if successful?” She said, “You would want to earn more to get more things you want.” I thought to myself that I would want to use ALL of my money as I see fit, not just the portion the government decides I can use, but I didn’t voice this.

The co-worker then went on to claim that half of her wages go to taxes because she is single. Half? 50%? I can’t disagree because I don’t see her paycheck, but huh? Later, I looked up the current top tax bracket: 35%. The lowest is 10%. Based on knowing where she works, I would guess her income tax rate is actually either 15% or 25%. She says is tired of the rich getting all the tax breaks. I said, “Well, everyone should get a tax break. Why does there have to be an income tax at all?” She said, “Because there has always been one.”

Disregarding for a moment that there was not always an income tax in the U.S. (16th Amendment, 1913 – looked it up later), I asked “Does that make it right?” At this point, the conversation devolved into her stating in various ways that there is always an income tax and me asking again just because something has “always” been there, does that make it right?

Eventually, I excused myself to use the bathroom. While I was sitting there like the thinker, I decided that next time this conversation comes up with anyone, I will ask the questions below to stir things up a bit. Do any of my loyal blog readers (Mom?) have any questions to add?

1. What income level (individual or couple) do you define as rich?
2. Are you aware that earners in higher income brackets already pay more taxes by percentage than those in lower brackets?
3. Are you aware that even if there was a single tax percentage across all brackets that top earners would still pay more because that is how percentages work?