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On Taxes
Paul Skallas
December 06, 2023
The U.S. government, with all its might and muscle, is finally flexing back against the corporate tax-filing titans. 2024 is the year they're rolling out their own service to battle TurboTax with a free, government-backed tax filing service. They're testing it in 13 states.
TurboTax, the long-standing heavyweight in this arena, has perfected the art of drawing in customers with the allure of “free” filing, only to gradually introduce additional costs as the process unfolds. This tactic, while commercially shrewd, has long been a point of contention among users.
But this isn't just a sudden pivot. TurboTax has been fiercely guarding its turf for more than two decades, waging a silent war against any form of free government filing service that could threaten its business model. Lobbyists and legal battles have been the weapons of choice in this extended conflict, a testament to what’s at stake if a free alternative were to disrupt the market.
Across the vast timeline of history, there's this one constant: people despising taxes. It's not just a mild annoyance, but a deep-seated resentment that has frequently boiled over into outright rebellion. The annals of history are littered with acts of tax resistance, each one a testament to the public's enduring aversion to being taxed.
Many of the monumental shifts in history were sparked by tax rebellions. These weren't just small scuffles over a few coins; they were pivotal events that reshaped societies. The Magna Carta, a cornerstone of modern democracy, has its roots in tax resistance. The American Revolution, which birthed a nation, began in the same crucible. And let's not forget the French Revolution, where tax-induced outrage toppled a monarchy and altered the course of European history.
Tax rebellions have deep roots. The anthropologist James Scott, in his book describes the earliest city:
But you don’t see tax rebellions anymore. This also means we won’t see historical events that occur as a result of tax rebellions. Major events, the kind that used to spring from the flames of tax revolts, are no longer part of the narrative. It's a notable shift, marking a departure from a time when tax resistance often acted as the catalyst for profound and sweeping historical changes. One engine of history is gone. How did this happen?
1) Why Did Tax Rebellions Become Extinct? The way you perceive taxes largely hinges on your personal standpoint. The fading of tax rebellions can be attributed to the modern methods of tax collection, which have fundamentally altered the tax-paying experience for the majority of people.
2) The Young Should Pay Less Taxes Then the Old: Maybe we should use this new system of automatic withholding to rethink taxation based on human nature.
3) The Story of John McAfee: A larger than life figure that went on the run from American taxes and eventually committed suicide (allegedly).
The Tax Collector
There is one figure that has been hated for most of history: the tax collector. In ancient Rome, they were the publicani, wealthy contractors who squeezed every last denarius from the populace. The publicani operated under a system known as tax farming. The Roman government auctioned the right to collect taxes in various provinces to the highest bidder. These individuals or companies (societates publicanorum) paid an upfront sum to the state for the right to collect taxes in a certain area. The publicani then aimed to collect more than this amount from the populace to make a profit.
Fast forward to medieval Europe, where the tax man morphed into the feudal lord's heavy, sheriffs who'd shake down peasants for every grain and copper. They were more than collectors; they were enforcers, the monarch's greedy claws digging into the tattered pockets of the poor.
Then there's the modern era, where the tax collector becomes faceless, a part of the machine. The IRS. They're no longer people; they're entities, systems, faceless bureaucracies that feed on numbers and spit out demands.
Yet, the old-school loathing for tax collectors has mellowed. Why? Some say it's because we see our tax dollars at work – in roads, schools, welfare. But there's likely a deeper reason beneath this shift.
The Employee and His Taxes
Think about it: how often do taxes cross your mind? If you're clocking in and out as an employee, probably not much. It's all about the system, the setup. Your taxes? They're like a magic trick – they disappear from your paycheck before you even see them. Thanks to the modern marvel of automatic deductions and direct deposit, that tax number becomes just a ghost in the machine. You don't see it, you don't feel it. Out of sight, out of mind.
This is a new system. “Before World War II, when income tax rates were comparatively low, most people who owed tax simply paid it in a lump sum in March. Tax day was a big annoying occasion on which both employees and owners of businesses had to pay a years worth of taxes in one day. In the late 1940s that all changed with automatic deductions for employees.
Post-1950, the longstanding American landscape of tax rebellions abruptly ends. This is new. Think about the Whiskey Rebellion of the 1790s or the Fries's Rebellion of 1799 – those were the real deal, big, bold tax revolts that shook the early U.S. to its core. Fast forward to the second half of the 20th century and beyond, no more grand-scale tax uprisings. This dramatic drop-off in tax rebellions, a staple of historical drama, fizzled out because of one sneaky little policy tweak. It's kind of mind-blowing. This one change effectively sealed the fate of a phenomenon that's been hanging around since the dawn of agricultural and the first cities.
The Business Owner and His Taxes
Employees do not think about taxes, but people who own businesses or self-employed individuals do. They still have to file taxes the old fashioned way. One lump sum.
For them, taxes aren't just a line item; they're a way of life. Obsession becomes routine – hunting for deductions, strategizing every purchase for write-offs, poring over tax rebates and credits. The tax code turns into their Moby Dick, an epic tale they have to wrestle with. No magic deductions here; they feel every dollar as it leaves their hands, sometimes a gut-wrenching amount representing months of hard-earned cash flowing straight to Uncle Sam.
And then, there are the tax optimizers – the business people for whom taxes become a personal crusade. They'll pack up and move states, twist and turn their entire lives into tax-avoidance gymnastics. It's almost ideological, a religion with one commandment: lower taxes. The Republican Party? They've practically built their church on this commandment.
But this tax paranoia among business owners and freelancers? It's not new. It's probably closer to the historical norm. It’s the attitude of employees because of the automatic deduction that is new.
