Taxes

Income taxes are in and real estate tax bills have just been sent out. A proposed new (and controversial) Illinois Gross Receipt Tax was recently defeated in the State House. You're tax burden is overwhelming, right? On the international stage, I'm afraid, you are wrong again.

According to the Organization for Economic Cooperation and Development which collects data from 30 developed nations, the 2005 income tax burden on US citizens averaged 29.1% for singles with no children and only 11.9% for couples with 2 children. Compare that to Canada at 31.6% and 21.5% or worse yet France at 50.1% and 41.7%. Total tax burden on US citizens is 25.4% of Gross Domestic Product. Only Mexico had a lower total tax burden at 19.5% of GDP. Sweden has the highest total tax at 50.8% of GDP.

The higher taxes in most of these other countries goes toward a national health care plan and pensions so, to a great extent, the higher tax burden is acceptable to all. And it could be argued that the middle class in the US share a disproportionate amount of the tax burden compared to the rich and the poor - the poor suffer from a regressive sales tax. Even Warren Buffet and Bill Gates, the two richest men in the world agree that the rich do not pay their fair share of taxes here in the US. They argue that in effect we have what amounts to a flat tax rate, which favors the rich. We probably do have the world's most complicated and convoluted tax code that might explain why a multi-millionaire here can probably spend $10s of thousands for a lawyer to save him $100s of thousands in taxes.

When I lived in England the joke was that they had the world's simplest tax form: 1) How much money did you make? 2) Write a check for this amount and send it to the tax collector. In fact it was about this simple: you tell the government how much you earned and they tell you how much you owe.

Italy has almost always been a perennial favorite in the tax evasion category with an income tax rate of 45.4%. Even Sophia Loren was prosecuted for tax evasion, where it is considered more sport than illegal activity. I wonder if it is genetic. The only charge ever brought against Al Capone during the prohibition and gang wars era was "tax evasion." It almost goes without saying that the higher the tax burden is the more incidence of fraud.

My own personal gripe was that I was probably the only person working in Saudi Arabia who was paying tax on his income. Most countries do not tax income outside their borders like the US does and SA makes enough money on oil revenue (which they own) so there is no need to tax their citizens. I find it a little ironic that there is still the perception that Democrats are the "tax and spend" party and the Republicans, who first introduced the income tax and the minimum alternative tax, are not.

Still, it is understandable that people would vote for no taxes. It is almost certain political suicide to even try and increase taxes no matter how fair or necessary they might be. Who do you think is paying the bill for the war in Iraq? Who is more illegal: illegal immigrants or tax cheats? What is more certain than death and taxes? Just stop crying about it - even if it is a time honored American tradition.

(by Marc Adami, Guest Columnist)