The Internal Revenue Service Headquarters Building

The Internal Revenue Service Headquarters Building

When riding around downtown D.C. it is easy to mix up many of the different buildings which house the variety of departments and agencies of the Federal government.  Some buildings are unique or universally recognized, such as the the White House, the U.S. Supreme Court Building, and FBI Headquarters.  Others, however,  are not as distinctive and tend to blend together.  One of the buildings I rode by is the Internal Revenue Service (IRS) headquarters building.  Although it may blend into the architectural landscape, the IRS building, located on Constitution Avenue in downtown D.C. (MAP), stands out in purpose if not appearance.  It stands out especially on this date.  That is because today is Tax Day, the day by which American workers must submit their  individual income tax returns to the Federal government.

So if you haven’t filed your taxes yet, you have until 11:59 p.m. tonight to do so. But time is running out. According to the IRS, the average taxpayer spends 13 hours to comply with the tax code, gathering receipts, reading the rules and filling out the forms that are required. So if you did not begin preparing your return before 11:00 o’clock this morning, it may already be too late. If you’re simply not ready to file, you can always file for an extension. However, to get the extension, you must estimate your tax liability and also pay any amount, and that is also due today.

Tax Day is not to be confused with “Tax Freedom Day.” Tax Freedom Day is the first day of the year in which our nation as a whole has theoretically earned enough income to fund its annual tax burden. On an individual level it is based on the number of days the average American must work in order to earn enough to pay his or her taxes for that year. This year the average American has to work until April 21st in order to pay their tax obligations to the nation. This is a full eight days longer than two years ago.  By the way, from January 1 to April 18 is 111 days.

It is also noteworthy that this year is the 101st anniversary of the income tax. Before 1913 Americans paid no income tax. But there was no fanfare or celebration of this anniversary, because the Federal income tax is almost universally hated. However, it wasn’t always looked at that way. The income tax initially had broad public support. That is probably because less than 1 percent of the public owed income taxes. At that time, the new income tax imposed a 1 percent levy on incomes above $3,000 for individuals — equivalent to about $70,000 today. The tax rose 1 percentage point for higher incomes, topping out at 7 percent for income greater than $500,000. By the end of World War I, tax rates ranged from 2 percent to 77 percent, depending on income. World War II led to all-time-high rates. In 1944 and 1945, the bottom bracket affecting those with the lowest incomes started at 23 percent and climbed to an eye-popping 94 percent for income over $200,000. By comparison, the tax due today begins at 10 percent of income less than $8,700 and reaches 39.6 percent for incomes over $388,350.

Over time, as rates remained high and more people owed, Congress carved out more and more loopholes which have added to the tax code’s complexity and length. Consider the following examples of how our tax system has become so complicated that it is almost impossible to file your taxes correctly. Back in 1998 Money Magazine had 46 different tax professionals complete a tax return for a hypothetical household. All 46 of them came up with a different result. In 2009, PC World had five of the most popular tax preparation software websites prepare a tax return for a hypothetical household. All five of them came up with a different result. Also consider the fact that the instructions for Form 1040 were only two pages long just 75 years ago, while today they are 189 pages. After all of the changes and amendments, it’s hard to reach a consensus on the exact size of the IRS’s regulations, but recent estimates place the tax code at 73,954 pages long. Given that a standard sheet of paper is 8.5 inches in width by 11 inches in length, if you multiply the length of the paper (11 inches) by 73,954 pages, it comes to 813,494 inches. That equals 67,791 feet. Since a mile is 5,280 feet long, if you divide the 67,791 feet by one mile you get 12.84 miles of tax code. So in honor of the length of the current U.S. Federal Tax code, today’s ride was 13 miles long.

Recent additions to the tax code and the American workers’s tax burdens, President Barack Obama has formally proposed a total of 442 tax increases since taking office in 2009, according to an Americans for Tax Reform analysis of Obama administration budgets.  This does not include the 20 tax increases which were signed into law as part of the Affordable Care Act.

There are a lot of interpretations and opinions when it comes to the Federal government and what goes on in D.C.  Some people complain that the government doesn’t do enough, while others argue that the government is too involved and does too much.  But taxes is a topic where almost all Americans can agree, because people who complain about taxes can be divided into two classes: men and women.

IRS01        IRS03
[Click on the photos above to view the full size versions]

 

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