Sunday, March 23, 2014

Tax babble

As reflected by some recent posts, I have survived another year of income tax preparation.  In this post, I'm assembling some thoughts regarding taxes at all levels.  First, after discussing various tax preparation software and tax treatment of education expense, a common theme may be drawn – our current income tax process is just too complicated.  It should not take complex software to attempt to meet the requirements of tax law and it should not take extensive study to understand all of the nuances.  It would be a welcome relief if we could get rid of the present income tax centered form of taxation and move toward a sales tax on the Federal level.  Why not?  In most states, businesses are already adept at collecting sales tax and in others I have little doubt that if the businesses have been able to cope with the nightmare of income tax, they can certainly figure out sales tax.  Second, I would also argue that sales tax may be a fairer way to raise revenue.  Simply stated, what can simpler than the precept that if you can afford to spend money to buy something, you can also afford to pay a tax on that item?  While not perfect, sales tax would eliminate much “under the table” revenue that we all know exists, but has been hard to touch.  Further, sales tax would help to spread the cost of our government by all who partake – and this includes “illegal” immigrants, those on temporary “visas” as well as tourists – all can contribute to a degree proportionate to what they partake in the goods and services of the Nation.

It should come as no shock to regular readers of MTQ that I would not leave state and local governments out of discussion.  New York State’s tax situation is dire – it is too complicated and much too expensive.  I am no fan of our governor, Andy Cuomo; he has given the feel that he will cram what he believes is good for you down your throat whether you want it or not.  Did someone say, “Casino Gambling”?  He and his team have saturated the TV with their infomercials in regards to the Governor’s plan.  Among them is the creation of tax zones where he is lauding “no taxes for 10 years” for new businesses.  That sounds excessively generous to me.  After all, if these new businesses aren't going to pay their share, who is?  Well, that would be the rest of us taxpayers.  The bottom line is if state expenses are at a certain level, the revenue to meet this level must come from somewhere.  I understand providing an incentive, but in 10 years these businesses very likely will come and go before ever contributing to the state coffers.

Andy’s second initiative piques my interest.  As I understand it, it is the lowering of property taxes by coercing local governments to consolidate.  Small local governments may have made sense at one time when the country was more rural in nature.  However, as urban and suburban sprawl has occurred, lines have blurred and in addition to being expensive to maintain, they begin to largely represent much duplication of effort.  Often, this area of New York is referred to as the “Capital District”.  While Albany, is New York’s capital, much of the population is spread around Albany.  This includes the cities of Schenectady to the west as well as Troy and Rensselaer to east and smaller cities such as Watervliet and Cohoes along the river.  There is also the sprawling town of Colonie tying the cities together and within the town, 2 villages.  The school picture gets even more convoluted; for example, we have some folks who live in Schenectady, but their school district is Colonie.  Many of these government entities have their own police, mayors, chiefs, etc.  Unfortunately, there is often much self interest in preserving the status quo so if Cuomo can entice these local fiefdoms into doing the right thing and shave some of the high property taxes, I will gladly give the devil his due.  On this point I agree with Cuomo that the excessive property taxes in New York State desperately need to be addressed.  An excellent case in point is this Times Union House of the Week.  As reflected this is a recently constructed 3 bedroom, 2 bathroom ranch style home and most of us would also agree that while this home is very nice, it is not extravagant.  Its list price is just shy of $300,000.  The kicker is the taxes - $8,627 per year… wow, this means that even after you struggle to pay off the mortgage you will be stuck with paying over $700 per month just to keep up with the taxes.  Yes, these are taxes, not a “HOA” (homeowners association) where your money is going to pay for community greenery or a shared pool or play area… its taxes to government.

I was a longtime resident in the Village of Colonie and despite my remarks here, will note that if you have to live in the Capital District of New York, the Village of Colonie is a great choice.  I lived near Cook Park (the village park).  Unfortunately, Cook Park has become saturated as a baseball park (I say unfortunately, because I'm not a baseball fan; if you are, perhaps, you would take the opposite tact).  Along this path as a baseball resource, I attended a park function and recall Mayor Frank Leak proudly proclamating to the audience that the extravagant lighting for the baseball fields was installed at no cost to the tax payers; it was paid from fees collected from development projects.  While Mayor Leak may have been semantically correct, if you consider government revenues as something to be used for the good of its citizens, one may question whether baseball interests (a narrow special interest) should have been the spending priority.  Certainly, the developer fee revenue could have been used in a number of ways, including a reduction in property taxes so the bigger picture is that this choice was made at taxpayer expense.