I sent in my income tax money early this year – two days before the deadline. Also, I was more careful than I usually am.
Last year I had to pay a fine because I forgot to send in one of my estimated tax payments. So Friday when I got up to the counter in the neighborhood post office, I decided to pay $1.90 to have the clerk make me receipts so that at least I could prove that I had sent my income tax returns and my checks to Uncle Sam and the state of Arkansas before the deadline.
Nowadays more than half of the people in the United States pay accountants to fill in the blanks on the 1040 pages, and I’m one of them. Even that popular filing on the Internet for $50 was beyond my ability. Fifty years ago only one-fifth of individual tax payers used an expert to help them. All I do is to collect the records of my income and outgo, give it to the professional and he fills in the 1040 blanks that are too complicated for me.
TV networks and newspapers have been telling stories about the possibility of having the Internal Revenue Service people fill out the 1040s for everyone. They would send us our 1040s and either the bill or a refund. Nowadays, the IRS can easily get earnings from employers, brokerages and banks.
California tried doing it last year for its state income tax and filled out returns for 11,500 people. It is doing it again this year. Those promoting this country-wide idea suggest that the IRS would deal only with the taxes of people with simple gains and losses. Naturally, companies like H&R Block that do income-tax work for more people than any other company are fighting this idea. (By the way, H&R Block is having big problems. New York state has sued it for $250 million for the way it made mistakes in making out 1040s for its New York customers.)
I asked David Foster, the administrator of income tax administration in Arkansas, what he thought of his workers doing all the work for the rest of us so that all we would have to do would be to send in a check or receive a refund. He said he wanted to look at it “for a very long time” before attempting it because so far he had “no comfort” with the idea. It’s too bad, but I think he’s right. Think about all the people he would have to hire to do the work. Like most people, I think we are already paying the country and the states too much.
But a little research shows that we are better off than people in many other countries. The Wall Street Journal reports that last year national and state income taxes took in about 26 percent of our country’s output. By comparison, the government of Sweden took 50.6 percent of its nation’s output, in France, 43.4 percent, in England, 35.6, and 35.5 percent in Germany.
Income taxes began in American when the Populist Party started working for the tax in 1882 so that the rich would have to pay to improve the nation. Congress finally passed it in 1909 and in 1913 after the states approved it, the law became the 16th amendment of the Constitution.
States have income taxes, too. In 1929, Arkansas Gov. Harvey Parnell pushed a 5 percent income tax through the legislature that would provide money for schools. Parnell also managed to get the first tax on cigarettes passed by the legislators.
Gov. Dale Bumpers, looking desperately for more money to run the state in 1971, asked the legislature to raise the 1929 rate to 9 percent for income taxes. The legislators wouldn’t go for a 4 percent raise, but they finally agreed to raise it to 7 percent, which is where it remains. Last year, 1,600,000 Arkansans sent in their 1040s and 1,103,000 paid.
There are eight states that have higher income taxes than ours. The highest are California and the District of Columbia – 9.3 percent for a person with an income of $41,000 or more among the movie stars and 9.3 percent for our president and other government workers making $30,000 or more.
Nineteen states charge less than Arkansas, including four states that border us – Louisiana, Mississippi, Missouri and Oklahoma. And Texas has no state income tax. There are six other states that are so generous – Alaska, Florida, Nevada, South Dakota, Washington and Wyoming. Two states, New Hampshire and Tennessee, collect only a percentage of money from interest and dividends. So by my calculations, Arkansas is totally surrounded with states with no or lower income taxes.
I’m not smart enough about our national income taxes to know if they are too high, but I am grateful that President Bush has reduced it a bit. And there doesn’t seem any way we could reduce what the state must charge. While reducing it would be justified since Arkansans are the third poorest people in the nation, that fact would never change if the state doesn’t have the money to have better schools and colleges, good highways and interesting and inviting attractions so that people and businesses would want to live here.