It Ain't the Math

This somewhat rambling post is brought to you by the United States Department of the Treasury....

Tax day really snuck up on me this year! This was due in approximately equal parts to the fact that my wife usually does them, I have been very busy since the end of the holidays, and, academic that I am, I can be very absent-minded about some things. (I remembered to do them yesterday.) In the Van Horn household, I pay the bills and organize the records, but come April, I happily hand over the taxes to my wife. I don't know how she does it, but she must really love me.

This year was different, though. My wife is getting ready for an important exam, so I had to take over the tax chores. And boy! I'd forgotten how burdensome doing the taxes can be, even when they are relatively "simple" as ours still are.

Consider the instructions (p.33) one must wallow through just to determine whether one is eligible for a deduction on student loan interest:

You can take the deduction only if all of the following apply:

• You paid interest in 2006 on a qualified student loan (see below).
• Your filing status is any status except married filing separately.
• Your modified adhusted gross income (AGI) is less than: $65,000 if single, head of household, or qualifying widow(er); $135,000 if married filing jointly. Use lines 2 through 4 of the worksheet below to figure your modified AGI.
• You, or your spouse if filing jointly, are not claimed as a dependent on someone's (such as your parent's) 2006 tax return.

Use the worksheet below to figure your student loan interest deduction.

Exception. Use Pub 970 instead of the worksheet below to figure your student loan interest deduction if you file Form 2555, 2555-EZ, or 4563, or you exclude income from sources within Puerto Rico.

Qualified student loan. A qualified student loan is any loan you took out to pay the qualified higher education expenses for:

1. Yourself or your spouse.
2. Any person who was your dependent for the year the loan was taken out except that:

a. The person filed a joint return.
b. The person had gross income that was equal to or more than the exemption amount for that year ($3,300 for 2006), or
c. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's return.

The person for whom the expenses were paid must have been an eligible student (see this page). However, a loan is not a qualified student loan if (a) any of the proceeds were used for other purposes, or (b) the loan was from either a related person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan. To find out who is a related person, see Pub 970.

Got that? I somehow missed the punchline there at the end about determining who your own relatives are, but perhaps after several hours of reading crap like this, that was a good thing. I know that I wasn't in a terribly jovial mood last night. And oh yeah, I have to call my bank today to move some more money into my IRA to skirt a penalty for not withholding enough money this year. It really puts the tax man's panties in a wad, you see, when he can't play the hero and give you a "refund" of your own money each year.

Leaving aside the immorality of a redistributionist government that engages in mass theft of property as ours does, and accepting for a moment the premise that it is proper for our government to levy taxes on our income in the first place, should the process not at least be as straightforward as possible?

Yes. There will be some legalese, because questions of law require very precise formulations. But still, why do we not simply have a uniform rate of taxation, to be paid each month? I seem to recall that Ayn Rand once noticed that extremely complicated laws such as our tax code serve the nefarious purpose of making criminals out of anyone who makes an innocent misstep that the state cares to hunt down.

That is certainly part of it, but there's something in this sordid mess that applies to almost anyone, and what makes it work is precisely the deliberate obfuscation of the tax code. Read the above excerpt. No. Do not skim it. Read it. Wake up and keep reading. Make coffee if you have to. Brehem. You're still not reading. Wake up!

Yes. This junk is hard to read, and it brings to mind a cartoon my mother-in-law pointed out to me earlier in the day about doing taxes. The dad was explaining to his son why he hated tax time so much. He started out by likening it to a long, hard math test. That was somewhat funny at the time, but it's wrong. Any idiot can do the arithmetic on a tax form. What makes taxes hard is the fact that the tax code makes no sense.

Why are we not all simply paying a fixed percentage of our incomes to the IRS at the end of the year? Why is the "standard deduction" $3,300? Why should interest on student loans be tax-exempt? (And, ignoring that question, why does the government just not charge interest on such loans for such people it determines should be exempt, based on information in their applications? We do have computers for that, after all.) On what basis are married people filing separately somehow excluded from taking this exemption? You could go on and on and on. Trust me. I did. I think I nearly gave myself a headache.

The tax code is a rotting, evil-smelling stew made up of the arbitrary bones that Congress has at one time or another decided to cast towards various constituencies, the competing requirements of various aspects of the tax code that most filers neither know nor care about, and the legalistic phraseology made necessary by the fact that every single bit of this mess is encoded by law. And you, the tax payer have to read through all this -- or hire someone who you have to hope is competent to do so -- because Uncle Sam has a gun pointed at your head, demanding your money or your freedom based on what this mumbo-jumbo says you owe him, so you will pay attention to all of it.

This attending to interminable, nonsensical orders for the purpose of determining one's course of action is the exact opposite of common sense, the application of logic to data that is second nature to most Americans. (In my case: What the hell does Puerto Rico have to do with anything?) This garbage not only can easily make a criminal of almost anyone, it sometimes does a better job than even local politics of making people feel "unclean". Most people do not question the propriety of the government taking their money, so many will feel like they're being given a "break" from paying their fair share.

Depending on one's personal situation and moral stature, this feeling will range from a dull sense of relief at getting to pay slightly less in taxes, to gratitude for the break towards those who enacted it, to a criminal-like glee at someone else getting the shaft. Notice that all of these are wins for the Democrats who made the tax code so complex in the first place and for the Republicans who refused to eradicate it or even simplify it or even not play along -- during their dozen years in power as "champions" of capitalism and you getting to keep your own damned money.

The best one can hope for after wasting precious, irreplaceable hours of one's life in the process of filing one's taxes is a dim sense of relief that it is all over, that one has the government off one's back for another year, and that one can go back to thinking and acting based on one's common sense, upon the dictates of his rational mind. It is an ugly mess that one will want to confront once a year at most.

And this is why the tax code is so monstrously complicated. It keeps the welfare state entrenched, be it through the strong chance that an inconvenient opponent can be turned into an instant criminal, the manufacture of guilt (earned and unearned) concerning whether one is pulling his own weight, the clever ploy of buying votes with the voters' own money, or simply stupefying the most rational (and therefore productive and wealthy) members of society into not wanting to touch (or even think about) the very mess they should hell-bent on wiping from the face of the earth.

In a sense, I am glad I did my taxes this year. I needed the reminder. Why is tax time so awful? It ain't the math: It's the cognitive quagmire and the moral dung-heap we are confronted with in every single paragraph of the instructions.

-- CAV

PS: Check your federally-issued tax return envelopes! The same idiots who can cause you no end of trouble for not filing may have sent you a defective envelope. Mine was completely open at the bottom. Good thing I noticed that before I sent it in....

Updates

Today: (1) Minor edits. (2) Added PS.