Each week, The Spokesman-Review examines one question from the Naturalization Test immigrants must pass to become United States citizens
Today’s question: Why is it important to pay federal taxes?
The five-letter word that feels more like a four-letter word – TAXES. They come in great variety and name, from estate to excise, payroll to property, capital gains to corporate, sales to hotel stay, and alcohol to fuel. While standing at the pump during your next fill-up, you could look for the sticker explaining the per gallon tax on gasoline in Washington or Idaho. It may surprise you. As former President Ronald Reagan stated, “The government’s view of the economy could be summed up in a few short phrases: If it moves, TAX it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
But in the spirit of the extended tax season (the deadline to file income taxes is Monday), let’s examine individual federal income tax and how it exists as an annual reminder of our part in a substantial bureaucracy.
Acceptable answers to the question, according to the agency that runs the test, include: it’s required by law; all people pay to fund the federal government; it’s required by the U.S. Constitution in the 16th Amendment; and it’s part of our civic duty.
Here are some specifics on taxes:
Where does it go?
The three largest categories of expenditures are Social Security, defense and major health programs, such as Medicare and Medicaid. The interest on the national debt and additional programs, such as low-income assistance, use the tax collected as well. Other areas of spending include transportation and infrastructure.
For the fiscal 2019 budget, defense spending equaled about $697 billion, or approximately 16% of the federal budget.
Payments for the Social Security system constituted about 23% of the federal budget in the 2019 fiscal year, with expenditures of about $1 trillion. The Social Security system provides retirement and survivors’ benefits, along with disability payments, and is categorized as a mandatory portion of the federal budget.
The major health programs in the federal budget are Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). About two-thirds of the federal health program budget goes to Medicare. Medicaid and the CHIP require matching payments from individual states. For the 2019 budget year, about 25% of the federal budget paid for these health programs.
Safety net programs make up about 9% of the federal budget. This category includes all aid programs for low- and middle-income families that are not a part of Social Security or the major health programs, including unemployment insurance, food stamps, low-income housing assistance, and programs for abused and neglected children.
Interest on the national debt will total about $375 billion, according to the 2019 federal budget, or about 8% of total expenditures.
Approximately 19% of the federal budget goes into other categories of spending. The largest of these subcategories, at about 7% of the budget, is spending on benefits for federal retirees and Veterans. Remaining monies are designated for scientific and medical research, transportation and infrastructure spending, education, nonsecurity international spending, and all other categories.
Required by law
Specific circumstances lead to penalties assessed by the IRS. The offenses include:
• Failure to file – when you don’t file your tax return by the due date, April 15 (in a normal year not affected by a pandemic), or extended due date if an extension to file is requested and approved.
• Failure to pay – when you don’t pay the taxes reported on your return in full by the due date for that year.
• Failure to pay proper estimated tax – when you don’t pay enough taxes due for the year with your quarterly estimated tax payments, or through withholding.
• Failed attempt to pay – when your bank doesn’t honor your check or other form of payment.
Trying not to pay – tax evasion examples
Lauryn Hill – $2.3 million – Grammy-winning singer served a three-month term at a federal prison in Connecticut.
Al Capone – $265,000 (present day $4-plus million) – gangster spent seven years in prison in Atlanta and at Alcatraz.
Willie Nelson – $16.7 million, reduced to $6 million – avoided prison by paying off debt with public support of his double album release and an IRS-themed tour.
Leona Helmsley – $7.1 million – businesswoman served 21 months of a four-year prison term, attributed with the quote: “We don’t pay taxes. Only the little people pay taxes.”
Lindsey Vonn – $1.7 million – Olympic gold medalist skier avoided prison by paying her entire tax bill.
Bud Abbott and Lou Costello – estimated at least $500,000 (present day $3.9 million) – highest paid entertainers in the world during WWII, the comedians were forced to sell off assets, including homes and the rights to many of their films.
Ty Warner – $5.5 million – creator of Beanie Babies was sentenced to probation, though prosecutors attempted to appeal, seeking a prison sentence.
The Constitution – 16th Amendment
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”
This amendment empowered Congress to impose an income tax on individuals and corporations. During the House debates of Senate Joint Resolution No. 40, Members had debated the merits of collecting income taxes. Representatives Sereno Payne of New York and Samuel McCall of Massachusetts argued that income taxes should only be levied to raise revenue during times of war. Congressman Ebenezer Hill of Connecticut also worried that the tax could be unfairly levied on constituents in poorer states.
“We are ready to vote for an income tax to meet any emergencies which may arise … and to stand by the Government in time of war; but do not ask us … without consultation with our people at home, to put this burden on them in addition to one already severe because of local expenditures …” he said. Representative William Sulzer of New York, a supporter of the tax, said, “I have been the constant advocate of an income tax along constitutional lines … I reiterate that through it only … will it ever be possible for the Government to be able to make idle wealth pay its just share of the ever-increasing burdens of taxation.”
After a brisk debate on July 12, 1909, lasting five hours, the bill passed 318–14, with one voting “present,” and 55 not voting.
Ratification by the requisite 36 of the 48 states then in existence was completed on Feb. 3, 1913, with the ratification by Delaware.
Six additional states ratified the amendment before the middle of March, bringing the total number to 42.
The 16th Amendment (1913) codified the federal government’s ability to implement a nationwide income tax, thereby increasing the capacity and size of the United States government.
It was the first change to the Constitution since the passage of the 15th Amendment, which guaranteed African American male suffrage, 43 years earlier, in 1870.
Who pays – and how much?
In 2017, 143.3 million taxpayers reported earning $10.9 trillion in adjusted gross income (AGI) and paid $1.6 trillion in individual income taxes.
In 2017, the top 50% of all taxpayers ($41,740 or above in reported AGI) paid 97% of all individual income taxes, while the bottom 50% paid the remaining 3% .
The top 1% ($515,371 or above in reported AGI) paid a greater share of individual income taxes than the bottom 90% combined.
Famous words – the death and taxes quote
“’Tis impossible to be sure of anything but Death and Taxes.” – “The Cobbler of Preston,” Christopher Bullock, 1716.
“Things as certain as death and taxes, can be more firmly believ’d.” – “The Political History of the Devil,” Daniel Defoe, 1726.
“Our new Constitution is now established and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin, in a letter to French scientist Jean-Baptiste Le Roy, 1789.
When are they due?
Filing deadline during the years 1913 – 1918 was March 1, 1919 – 1954 on March 15, and as of 1955, it landed on April 15, known as Tax Day.
Due to the COVID-19 pandemic, the federal government extended the federal income tax filing deadline this year from the standard April 15 to Monday.
Wishing you a Happy Tax Day Eve!
John Kenlein is a teacher at Lewis and Clark High School in Spokane who is in his 22nd year teaching public high school students social studies, including world history, U.S. history, contemporary world affairs and civics.
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