Sunday, February 10, 2013

Who likes taxes?

To some extent, many people are fine with taxes, at least reasonable and explainable taxes.  To a large extent most people do not like the tax process and the many hidden and irrational charges that accompany those that make sense.  Well, that's not much of daring statement to start this comment.

On the first thought the example of our New York suburb property taxes comes to mind.  They are high and painful, and to add to the pain anyone falling into the AMT trap and now into the coming Schedule A limitation shave finds that these taxes are not deductible on a Federal return.  At times it feels like one pays twice, the same as the accepted regimen of being a risk taking provider of capital to companies(a shareholder) and paying taxes on dividends from company profits that have already been taxed at the company level.  These things are annoying, but the fact is that the property taxes paid for my children to go to reasonably good schools(with the occasional exceptional educators) for 19 years combined and to pay for a nice comfortable public library that is used constantly here despite the fact that it alone probably pays enough for multiple copies of James Patterson, Clive Cussler, Janet Evanovic and Nelson DeMille and other like "minded" books to open a wing just for real new actual literature, which seems to be bought one book at a time and needs to be foraged for.

With all of that, the school system worked and the library serves it purpose, both with a little work and attention required.  Those were well spent if not perfectly administered taxes, including the Federal haircuts.  On top of that, maintaining the educational services in the community maintains housing values and housing liquidity, the latter in short supply in much of the country.

General county taxes are also high but necessary.  The police, teachers, and municipal workers here are paid handsomely compared with almost any other area in the country but maybe they deserve it.  They too must be able to afford to live somewhere within driving distance of  this fairly expensive area.  What they don't deserve is all of the opportunities to game the system through fake disability claims and the collusive massive overtime arrangements in their last year or two of employment that boosts their pensions through the roof.  But back to the last paragraph, apart from the hugely incompetent LIPA they mostly do their jobs and reassure those who choose to live in or buy into these communities.

The New York Times Sunday Business section today has an entire section entitled "Your taxes".  It's six full pages.  The lead article is "The Tax Deal That Simplified Nothing".  It details the complexity of the tax system in a way that is almost exhausting to read, and you know that they are just able to scratch the surface on this.  Over the past six years this blog has had enough rants on the lack of inflation adjustments to the tax system and the lack of recognition of cost of living differences in the country to probably create a small exceptionally boring book.  Same for the insipid growth of government bureaucracies at both state and especially Federal levels.  There is no "conservative" here that wants to castrate effective government, just someone who can see what anyone with open eyes can see.  Bureacracies have a strong tendency to grow on their own, without purpose.  I have previously written about a young acquaintance who worked at Elaine Chao's Labor Department for a summer and found that most employees came in at around the required 9am, took hour and a half lunches, and left at 5pm or modestly before that time.  During the day they sat in meetings and most of their productive time was spent angling for attendance at out of D.C. conferences where they could stay at nice hotels and eat on expense accounts.  Sounds real productive?

So there is no need to cover the "Times" articles of today.  Readers here can go to the internet tonight, start reading the articles on NYT online, and be crawling to their beds and sleeping comfortably soon.  Despite what the politicians say every election season, there is no appetite to simplify the tax code or take on these bureacracies in any meaningful way.  Most politicians within the beltway are just looking out for themselves, most notably Congress by far, and that is, in every poll, clearly a consensus thought among the American people.

To close this overly long commentary,  there is an example of a tax that was not much appreciated here and it is a certainty that most readers have their own examples.  Selling a mixed use building in Chinatown recently by nine members of a family was a coup in the sense that it was done before year end and avoided the much higher capital gains taxes that would have been applied in 2013.  Nevertheless, calculating the estimated taxes paid before January 15 was painful.  Purchased in the 1960's, without any inflation adjustments the cost basis was essentially nothing.  This historic building was maintained at no small cost and actual lots of personal work by the family but that added little to the miniscule cost basis.  As a New York City and State landmark building, every improvement had to be approved by a bunch of upper east and west side commissioners with time on their hands but took their time about it, and at times irrationally denied improvements on the interior that would not in the least have been visible from the outside.  Police protection in Chinatown is almost non-existent except in cases of violence and the tong gangs patrol much of that anyway.  So with almost no police patrol prescence or effort, those semi-legal buses that cart people to casinos were allowed to use the front of the building as one of their loading and unloading spots.  Graffiti was constantly being scrubbed from the walls or painted over.  Late night bus arrivals would have people freely urinating around the building and bums would huddle in the doorways.  A metal front door that was criticized in one travel book as the one unfortunate eyesore was a necessary move to repel periodic break-ins.

All of this is meant to say that paying significant amounts of money to the Federal and especially the State and New York City governments seemed somewhat abusive.  The Federal government protects our country, does not tax the truly poor, and provides entitlements to those who need them(and some who don't) so ok, they get theirs despite the approach to cost basis.  The State and City were primarily non-supportive and impediments to good management.  That's a personal tax gripe although none of the proceeds came to yours truly and none of the taxes were paid personally.  That said, I was involved in the transaction and the local tax side was really insulting and not liked.

Enough of this.  This reality must be accepted and change of any consequence is unlikely.

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