Marty: It is Tax Day time, once again

Thursday, April 15, 2010 is tax day again. That’s the deadline
for most people to file their 2009 federal and state tax returns;
taxes have also been in the news for other reasons.
Thursday, April 15, 2010 is tax day again. That’s the deadline for most people to file their 2009 federal and state tax returns; taxes have also been in the news for other reasons. Immediately after passing the new healthcare legislation designed to save billions, the feds started looking for ways to pay the bill and higher taxes instantly came to mind. If you didn’t see this one coming you should visit your eye doctor, you need new glasses.

The front men and talking heads soon started leaking stories threatening to implement the dreaded VAT – Value Added Tax. Versions of VAT are used extensively around the world. It’s like a national sales tax except more complex usually including business-to-business transactions. Realistically, it’s a consumption tax. 

The VAT is usually collected at multiple points in the commerce chain and can be well hidden from the consumer who – as always – pays it all in the end. Except for big-ticket items like cars, most articles in Europe have the VAT built into the price tag – out of sight, out of mind. VAT rates vary by commodity, but in Western Europe general items average about 19-percent. No, that’s not a misprint. 

VAT rates on food and other specialized items like pharmaceuticals can run from zero to six-percent. Like most taxes, once the system is in place the rates are all about politics, financing and how much the taxpayers will tolerate.

It’s hard to tell if those fanning the VAT flames are serious or just playing bait and switch at this stage. Their ultimate intention may be large hikes to income, excise and sales taxes, then fending off any complaints with the “alternate-ogre” argument – “Don’t complain, we might have had a VAT.” That’s my guess, but your guess is just as good.

Naturally, if they implement a VAT there will be some reductions in income or other taxes, but they will only be temporary. Politically, the current income tax code is just too handy to give up. It allows politicians to load up the goodie-bag for all their friends and supporters and to attempt to micromanage the economy from the halls of Congress.

Over the last fifteen months, we have been treated to a parade of the best, the brightest, the well-connected – and often the richest – coming before confirmation committees and opening with a mea culpa of why their taxes were underpaid.  Are they crooks, incompetent or is it that no one really understands the tax code? Even the former chairman of the House Ways and Means Committee that writes the tax legislation claimed that he did not understand the code after he was caught dodging taxes; sorry, he can’t reasonably use that excuse.

Every year the government takes the old broken down tax code and hangs ten more tons of bailing wire and duct tape on it with the hope that it can go out and play just one more game, but that just complicates the mess. The average taxpayer does not have to deal with the worst portions of the code, but they do have to determine what applies to them and that’s difficult enough. Those who use the complex parts are forced to get professional help. Everyone talks about fairness, but no one can define it. Worse, we almost never get honest feedback on what changes did or didn’t work as designed.

I’ll be writing the same column about this time next year; you may want just cut it out and save it because the details may change, but the issues will remain the same. 

Marty Richman is a Hollister resident.