The Taxpayer's Share

Taxes have been in the news of late even more than usual, and not only in America. France's new socialist president has proposed a 75 percent top tax rate, causing the investor class to seek sunnier tax climes than dreary old Gaul. Actor Gerard Depardieu took up residence in Belgium, while former French President Sarkozy plans to move to jolly old England.

Citizens of the United States, however, can't just absquatulate to some foreign country to avoid taxes. You see, the U.S. is the only major nation that taxes its non-resident citizens on income they earn abroad (see chart).

Consequently, there's been a rash of Americans lately who have been renouncing their citizenship just to escape high tax rates. One notable ex-citizen is Eduardo Saverin, a big shot at Facebook, who recently became a citizen of Singapore. (If you're thinking about defecting, read this article at the Wall Street Journal by Laura Saunders.)

What these instances of "voting with your feet" demonstrate is that tax rates, contrary to progressive propaganda, do affect behavior.

With the passage of Proposition 30 last November, California now has the highest top income tax rate,13.3 percent, of any state in the union. That caused golfer Phil Mickelson to wonder whether he might be better off bailing on the Golden State. (It would have been even worse for Mickelson had the Millionaire's Tax been fully incorporated into Prop 30, for as reported by William McGurn in the Journal, the top income tax rate would have hit "15.3% on income above $2 million.")

Not only is Mr. Mickelson getting hit by California's income tax, when he goes on the tour, he must pay taxes to other states, as well. In "Taxes: Cost of being a professional athlete," Jay MacDonald reports: "Professional sports players get taxed by pretty much every city and state in which they play." (Here's an analysis of the professional athlete's tax situation by a tax accountant.)

But having to pay income taxes to more than one state isn't just for high-roller athletes and rock stars who tour. If an average Joe works in more than one state, or lives near a state line and works on the other side of it, he too can end up paying income taxes to more than one state.

The problem for the American taxpayer isn't just tax rates; it's getting hit by multiple tax jurisdictions: federal, state, county, municipal, and even foreign. And with all the types of taxes he's subject to (income, payroll, property, sales, real estate, etc.) the American taxpayer is fairly besieged -- hit constantly and from all sides.

In today's New York Times crossword puzzle (No. 0108 by Allan E. Parrish), the clue for 60-across is: "Fair share, maybe." The president seems to be forever droning on about "fair share," as in the rich paying theirs. Google "Obama" and "fair share" together, and you're likely to get around 4,100,000 hits. But if "everyone needs to pay their fair share" of taxes, then what's the fair share of the taxpayer's income that he should get to keep? In other words, what's the "taxpayer's share"?

Although not entirely unlimited, the power of government to tax is fairly sweeping. Unfortunately, government in America doesn't acknowledge that the taxpayer should even get a share, fair or otherwise. (By the way, the answer to 60-across is: "half." But I'm not suggesting that Congress take its cues for what constitutes a "fair share" from crossword puzzles, although it would be a start.)

That there could be some sacrosanct portion of an individual's income that government can't confiscate is a thought that progressives don't want to entertain. But if put into law, such a quaint notion presents a problem: the mechanism that government would use to ensure that the taxpayer actually gets to keep his share of his income.

It may seem a reasonable thing that the taxpayer should be guaranteed a minimum share of his income, but the logistics of enforcing that minimum would be deucedly difficult. One mechanism to recoup overpayments might be a rebate. But a rebate would just add yet more complexity to our tax systems. It would be far better for the various tax jurisdictions to not get into the taxpayer's share in the first place.

Of course, hanging onto a minimum share of one's income is only an issue for the wealthy, as almost half of Americans don't pay income taxes. Americans who have never paid income taxes are like the prodigal son whose debts are paid off by his father; they're forever sheltered from the hard facts of what it takes to finance a nation. But they still want their Big Government freebies. In a short Real Clear Politics video, George Will put it rather sweetly: "The problem in the country is a consensus that... we should have a large, generous welfare state and not pay for it." So we borrow and print more money, and tax the dickens out of Phil Mickelson.

Most Americans aren't in a position to renounce their citizenship and relocate abroad, and wouldn't do so even if they could. Nor can they relocate to another state, due to the dismal employment situation. Nevertheless, Americans of modest means should care about government depredations on the wealthy. That's because the wealthy have the means to turn America around, and get the economy going, and perhaps even hire someone. But if they're going to be hit repeatedly with unreasonable taxes, rich folks may decide to pick up their marbles and go someplace where they're not demonized after picking up the tab for the rest of us.

Jon N. Hall is a programmer/analyst from Kansas City.

Taxes have been in the news of late even more than usual, and not only in America. France's new socialist president has proposed a 75 percent top tax rate, causing the investor class to seek sunnier tax climes than dreary old Gaul. Actor Gerard Depardieu took up residence in Belgium, while former French President Sarkozy plans to move to jolly old England.

Citizens of the United States, however, can't just absquatulate to some foreign country to avoid taxes. You see, the U.S. is the only major nation that taxes its non-resident citizens on income they earn abroad (see chart).

Consequently, there's been a rash of Americans lately who have been renouncing their citizenship just to escape high tax rates. One notable ex-citizen is Eduardo Saverin, a big shot at Facebook, who recently became a citizen of Singapore. (If you're thinking about defecting, read this article at the Wall Street Journal by Laura Saunders.)

What these instances of "voting with your feet" demonstrate is that tax rates, contrary to progressive propaganda, do affect behavior.

With the passage of Proposition 30 last November, California now has the highest top income tax rate,13.3 percent, of any state in the union. That caused golfer Phil Mickelson to wonder whether he might be better off bailing on the Golden State. (It would have been even worse for Mickelson had the Millionaire's Tax been fully incorporated into Prop 30, for as reported by William McGurn in the Journal, the top income tax rate would have hit "15.3% on income above $2 million.")

Not only is Mr. Mickelson getting hit by California's income tax, when he goes on the tour, he must pay taxes to other states, as well. In "Taxes: Cost of being a professional athlete," Jay MacDonald reports: "Professional sports players get taxed by pretty much every city and state in which they play." (Here's an analysis of the professional athlete's tax situation by a tax accountant.)

But having to pay income taxes to more than one state isn't just for high-roller athletes and rock stars who tour. If an average Joe works in more than one state, or lives near a state line and works on the other side of it, he too can end up paying income taxes to more than one state.

The problem for the American taxpayer isn't just tax rates; it's getting hit by multiple tax jurisdictions: federal, state, county, municipal, and even foreign. And with all the types of taxes he's subject to (income, payroll, property, sales, real estate, etc.) the American taxpayer is fairly besieged -- hit constantly and from all sides.

In today's New York Times crossword puzzle (No. 0108 by Allan E. Parrish), the clue for 60-across is: "Fair share, maybe." The president seems to be forever droning on about "fair share," as in the rich paying theirs. Google "Obama" and "fair share" together, and you're likely to get around 4,100,000 hits. But if "everyone needs to pay their fair share" of taxes, then what's the fair share of the taxpayer's income that he should get to keep? In other words, what's the "taxpayer's share"?

Although not entirely unlimited, the power of government to tax is fairly sweeping. Unfortunately, government in America doesn't acknowledge that the taxpayer should even get a share, fair or otherwise. (By the way, the answer to 60-across is: "half." But I'm not suggesting that Congress take its cues for what constitutes a "fair share" from crossword puzzles, although it would be a start.)

That there could be some sacrosanct portion of an individual's income that government can't confiscate is a thought that progressives don't want to entertain. But if put into law, such a quaint notion presents a problem: the mechanism that government would use to ensure that the taxpayer actually gets to keep his share of his income.

It may seem a reasonable thing that the taxpayer should be guaranteed a minimum share of his income, but the logistics of enforcing that minimum would be deucedly difficult. One mechanism to recoup overpayments might be a rebate. But a rebate would just add yet more complexity to our tax systems. It would be far better for the various tax jurisdictions to not get into the taxpayer's share in the first place.

Of course, hanging onto a minimum share of one's income is only an issue for the wealthy, as almost half of Americans don't pay income taxes. Americans who have never paid income taxes are like the prodigal son whose debts are paid off by his father; they're forever sheltered from the hard facts of what it takes to finance a nation. But they still want their Big Government freebies. In a short Real Clear Politics video, George Will put it rather sweetly: "The problem in the country is a consensus that... we should have a large, generous welfare state and not pay for it." So we borrow and print more money, and tax the dickens out of Phil Mickelson.

Most Americans aren't in a position to renounce their citizenship and relocate abroad, and wouldn't do so even if they could. Nor can they relocate to another state, due to the dismal employment situation. Nevertheless, Americans of modest means should care about government depredations on the wealthy. That's because the wealthy have the means to turn America around, and get the economy going, and perhaps even hire someone. But if they're going to be hit repeatedly with unreasonable taxes, rich folks may decide to pick up their marbles and go someplace where they're not demonized after picking up the tab for the rest of us.

Jon N. Hall is a programmer/analyst from Kansas City.