It’s tax season, and everyone is talking about refunds or how much they hate paying taxes.
To be honest, I don’t get the visceral hatred people have for paying taxes. I mean, it’s not my favorite thing to have 25% of my pay taken away from me, but I do enjoy interstate highways and the government paying the interest on my student loans while I’m in school and criminals serving time in prisons. Heck, I work for a government contractor!
I may not approve of everything my taxes pay for, and I may never get the benefit of all the services the government provides. I’ve resigned myself to not getting Social Security when I retire. I’m sure, however, that some things I like are hated by others, and vice versa. We all have to pay for each other’s crap.
And of course, the US has one of the lowest tax rates of any first-world country. I’m not saying there is no waste or corruption. But if you’ve ever complained about the status of healthcare or public education or about the amount of national debt, you shouldn’t complain about taxes.
Sweden is recognized as having one of the best healthcare systems in the world. But you’ll pay up to 55% of your salary to get it.
College is free in France, with a tax rate of up to 40%.
Personally, I think that the tax code is way too complex. The best option would be a simple graduated tax rate. If you earn $75,000 a year, you’re taxed on it. No deductions for things like interest paid on your mortgage or charitable giving or hybrid cars. If you pay for medical care or school, that’s a deduction, but hopefully the system could be improved so that healthcare and education are covered.
I don’t understand why it has to be so complicated.
Another thing I’d like to address is this widely-used bit of personal finance advice: “Don’t get a tax refund! You’re giving an interest-free loan to the government. If you put that money into a savings account at unrealistic X% interest, it would earn $inflated amount over 30 years!”
The average refund in 2008 was around $2400, or $200/month. My ING account earns 2% interest. Over the past year, my 401K has lost about 35%.
If you put that $200 into an ING account, you’d earn roughly $22 over the year. At 3%, you’d get $33. If you increased your allowances to offset your 401K contributions, you’re currently down about $1800 (assuming you did as well as I did). Or, your cost of living swelled up to swallow that $200 every month and you have no savings and no refunds.
As always, do what works for you and accept that others do what works for them. I find the debt snowball method to be sort of silly, but I understand that the psychological benefits outweigh the mathematically better method. So stop mocking those of us who get the refunds and like it.