Friday, September 21, 2007


Today’s “Fix the Tax Code Friday” question at Kelly Phillips Erb’s TAX GIRL deals with the way property taxes are assessed. Her concern was that because of where she lives within her municipality she receives less overall township services than those who live in other areas, yet all homeowners are taxed based on the assessed value of their property and not on use or need of services provided. I commented on the post to agree that this is basically unfair and to add the fact that, in New Jersey at least, all homeowners share the cost of the local school system whether or not they have any children who actually use the system. In my case I never had and never will have children, yet a part of the rent I pay on my apartment goes to fund the school system. I am paying for municipal services that will never benefit me.

To be honest, I did acknowledge that in the long run a good school system benefits all residents. Better schools translate to higher and more sustained property values and a better educated population is good for everyone.

In the course of writing a commentary on the Alternative Minimum Tax for the National Association of Tax Professional’s quarterly TAXPRO JOURNAL I mentioned the fact that recent tax cuts have created an increasing number of American “non-taxpayers” – individuals and families who pay absolutely no federal income tax, or who actually “make money” on their 1040 due to refundable credits. I suggested, as I have done here in the past, that perhaps we should have a true “Minimum Tax” that requires each and every non-dependent American to pay at least $100.00 in federal income taxes!

After sending the commentary off to NATP it occurred to me that this is also relative, to a degree, to Kelly’s conversation on property taxes. It concerns the same issue. The inequity is not limited to property taxes. The growing number of lower-income American “non-taxpayers” are actually receiving the benefit of many more direct and indirect (federally funded) government services than I am. Yet they pay absolutely nothing for these valuable services while, because my income is relatively higher or, more to the point, is taxed at a much higher effective rate due to the lack of spouse and/or children, I end up paying for services I do not receive and subsidizing others who pay absolutely nothing for the wealth of services and benefits they are getting.

I have no easy solution to the issue. It is a basic, probably inescapable, reality of an income-based tax system. It is just something to think about, and something that should be kept in mind when certain political camps complain that tax cuts benefit only the wealthy and not the working, or non-working, poor. Let’s face it – tax cuts benefit those who actually pay tax!

That is my 2 cents worth (although I think that amount should be adjusted for inflation)!

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