Finding the Hard Truth on Your Federal Tax Burdens

January 24, 2009 by  
Filed under Taxes

If you are a taxpayer (and barely a majority of working adults are), we are in the midst of a “perfect tax storm.”  First, we have entered the traditional “tax season” where accountants (such as my sister) put in lots of extra hours preparing returns while trying to keep their clients honest.  

We are also in what Mr. ToughMoneyLove would call “stimulus season” where politicians and government economists are falling over each other trying to figure out (and explain to each other) how to use fiscal, monetary, and tax policies to stimulate the economy.

Thus, tax season + stimulus season = perfect tax storm.

Obtaining straight information about how these various stimulus plans will affect your tax burden can be difficult.  Most members of Congress lack the time, knowledge, and comprehension skills to understand how the bills they are considering will affect the tax laws overall.  If you read an actual bill as being considered in a committee, for example, it’s filled with a bunch of “mark up” type language that changes various existing sections of the tax code.  Believe me when I say that it is a painful task trying to decipher and decode that language into something that makes sense.  

There are a few politicians who thoroughly understand what they are doing to our taxes when they pass a new law.  Unfortunately, they will publicly spin it in a direction that suits them.  We – the taxpayers – don’t figure out until it’s too late exactly what they have done to us.

Learning the hard truth about how my taxes will be affected by a proposed law –  after the damage has been done – is not good enough for me.  So I choose to get my tax burden information where most members of Congress get theirs:  The Joint Committee on Taxation.  (JCOT)

The JCOT is quite unique among the dozens of Congressional committees and conferences in several ways.  First, it works for both the House and Senate.  Second, it has its own professional staff of accountants, economists, and attorneys who (unlike most committee staffers) are hired based more on what they know, not who they know.  Third, the JCOT is as non-partisan as a Congressional committee can get.  

The JCOT is tasked by Congress to analyze and explain to members of Congress and their committees how proposed legislative and policy actions have affected and will affect the tax system and tax burdens.  Unlike other governmental bodies such as the Congressional Budget Office, the work of the JCOT is almost in real time, i.e., a proposed bill is analyzed and reported on by the JCOT before it is considered in committee.  If the Chair of the committee proposes an amendment, the consequences of that amendment will be reported on as well.  It’s great stuff if you are a tax policy wonk (or if you just don’t like paying taxes).

For example, you can go to the JCOT website right now and read its analysis of the gigantic Obama stimulus package a/k/a the “American Recovery and Re-Investment Tax Act of 2009″ that will be considered by the House Finance Committee on January 27.  I have read most of this report and let me tell you there is some scary tax burden stuff in the this bill that is not being reported.  I will be writing more about this next week. Let me just say that some of the bill should be named the “Tax Burden Re-Distribution Act of 2009.”

For those of you who are inclined towards communicating your concerns about taxes and the economy to your representatives in Congress, I recommend that you take a look around the JCOT website and its various publications.  You will then know exactly what Congress is being told, without the spin – giving you enhanced credibility.  You might even tell your Congressperson something he/she didn’t realize.

I will conclude this post with some summary tax burden information that I gleaned from one of the JCOT reports.

• The top 1 percent of taxpayers pay approximately 40 percent of all federal income taxes.
• The top 10 percent of taxpayers pay about 70 percent of all federal income taxes.
• The top 50 percent of taxpayers pay almost 97 percent of all federal income taxes.

If you want to find out where you fall within these percentages, read this JCOT report: “PRESENT LAW RELATED TO THE INDIVIDUAL INCOME AND SOCIAL INSURANCE TAXES AS IN EFFECT FOR 2009 AND BACKGROUND DATA RELATED TO THE DISTRIBUTION OF FEDERAL TAXES.”   The hard truth is all there.  (Bonus tip:  You might want to have a large supply of your favorite adult beverage nearby while you read it.)

Photo credit:  Steve Woods

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