Wednesday, September 21, 2016

Taxes are weird.

I know, I am not the person you expect to say this, but it is true.

Taxes are also complicated.

Again, you probably did not expect to read that here either, but it is actually one of the reasons I love doing what I do.
I mean, the different areas that taxes reach into are probably impossible to count. Just think about the Affordable Care Act/Obamacare. Apart from however one feels about its political implications, the fact that much of its reporting and implementation occurs through a tax return is at least mind-stretching and probably mind-boggling.
These weird moments don’t always happen at the federal level, though, for that would be too easy in this complicated world. Only last week, after all, the city of Chicago passed a new tax on water and sewer usage to fund pensions for municipal employees. Again, we will have to leave politics aside – a situation where people are being charged a little extra for water so some people can retire leads to a debate where the arguments of just one side would not even fit in this space.
This new tax is only expected to cost an average household $53 in 2017, not a wild amount, but tracing the where and why of such money movement still helps highlight tax complications.
From the city to the state level, we come to New Jersey governor Chris Christie, who ended a tax reciprocity agreement with Pennsylvania earlier this month.
For those who are affected by this, you probably know too much about this situation already. For those who are not, though, let me go on just a little bit. Essentially, New Jersey and Pennsylvania residents who worked in the other state only had income taxes collected by their home state. Now those in this situation must file two different state tax returns.
New Jersey did not have such an agreement with any other state, most notably New York, so again there are clearly arguments on both side of this issue, but it all comes out again as just further complication.
Before I go, I have one more interesting piece I want to mention that can again make one question just how weird taxes and the way that we think of them can be.
CNN reports that Roberton Williams, a senior fellow at the Tax Policy Center has found that a majority of U.S. tax filers pay less in income taxes than they do in payroll taxes, including Social Security and Medicare.
These findings involve a little bit of mathematical gymnastics, as Williams assumes that employees effectively carry the burden of what they AND their employer pay for these taxes, saying their actual wages would be higher if there was no employer burden in those areas. How that would work out in a real-world situation most likely would vary from employer to employer, but that’s another bit best left aside for now.
Regardless, the piece gives an interesting look at where those mysterious numbers on your paychecks come from and what they mean.

All the situations, though, show that those numbers, how the government comes to them, and how it collects them never come with easy answers. Aren’t you glad then that you have someone you can come to when they just cause more questions?

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