September 12, 1963

A Tale of Two Taxpayers
Part I --The Taxes They Pay



Human Events, an angry, right-wing publication, has designated April 22 of each year as "Tax Freedom Day," proclaiming that the average taxpayer "works for the government" the first 111 days of the year, leaving him but 254 days to earn a living for himself and his family. The magazine's calculations are faulty, but its editors make a point no one can ignore: in the United States in 1963 taxes are a large and heavy burden on taxpayers large and small.

From Biblical times to the present every civilized society has had taxes of some kind. In my judgment the 20th Century will be no exception; we're not going to find a magic formula for escaping taxation. In fact, I know no rational person who advocates that all taxes be abolished, for taxes are truly the "price of civilization", to be totally avoided only in the complete "freedom" of anarchy.

Today, even more than in other centuries, it is impractical for each person, acting alone, to provide his own schools, police and fire protection, and other basic community services. Taxes are simply the means by which our people, acting through their freely-elected governments, are able to buy their national defense, highways, parks, schools, courts and other facilities and services which can be obtained in no other way.

Thus taxes are not "good" or "bad" in and of themselves. Railing against taxes, as though all taxes were evil, contributes nothing to the advancement of our society. The proper areas of argument are these:
 

1. Are the services to be bought with the proceeds of taxation necessary and constitutional, or are they things properly left to individuals and private groups?
2. Are the taxes assessed, levied and collected in a manner fair to all concerned?
3. Is the money handled honestly and spent prudently?

Attention to these questions is always important, and failures of government to meet these tests should be occasion for severe criticism.

FIVE LEVELS OF GOVERNMENT

When Arizonans grouse about the expense of "government," they usually concentrate on Uncle Sam in Washington. He's a convenient target. But let's keep in mind that most of us also pay taxes to at least four other levels of government: state, county, city and school district.

For a long time I have wanted to make a thorough study and comparison of the costs and benefits of all five levels of government as they affect you and me -- and other Arizona taxpayers. This summer, with the help of a student intern from the University of Arizona, I finally found my chance, and this report is the result. I think you will find this picture of your "total tax dollar" interesting -- and revealing.

Here is how we made our study. We started by obtaining federal government figures from the current budget. Then I wrote to cooperative officials in Phoenix and Tucson to get details on state and local spending. Next I "created" two typical Tucson families -- one a family receiving $6,600, about the average annual income for skilled workers, and the second an upper-middle-class family with annual income of $18,500 (part of the top 5% bracket of income producers in this country). Let me introduce my two hypothetical families:
 

BILL CARPENTER -- Bill is a cabinet maker in Tucson. His paychecks before deductions come to $6,600. Bill and his wife Mary have three children -- one at Government Heights elementary school, one at Pueblo High School, and one at the University of Arizona. They live in a $14,500 subdivision home. The family car is a 1960 Chevrolet.

FRANK BARRISTER -- Frank is a well-established attorney who earned from his law firm last year, before taxes, $17,500. He also earned $1,000 from stock and bond investments. Frank and his wife Helen have three children, two in Duffy elementary school and one in Palo Verde High School. The family recently bought a $35,000 eastside home and drives two cars -- a 1963 Mercury and a 1960 Plymouth.


 
Taking these families as typical of two classes of taxpayers, we undertook to answer these basic questions:
 
1. What will each family pay to each of the five levels of government in 1963?

2. What government services or benefits will each family receive?

In this report I will summarize the answers we obtained to Question 1. In a second report next week I will review the answers we gathered to Question 2.

TWO FAMILIES AND THEIR TAXES

According to my study the Carpenter family will pay these taxes in 1963:
 

Tax
Amount
% of Total Tax
Federal taxes*
Income taxes
$600
Social Security
147
Fuel tax
32
$ 779
56
 
Arizona State taxes
218
15
1/2
Pima County taxes
67
5
City of Tucson taxes
113
8
School District No. 1 taxes
219
15
1/2
TOTAL TAX BURDEN
$1396
100
%

With its larger income the Barrister family will pay these taxes:
 

Tax
Amount
% of Total Tax
Federal taxes*
 
Income taxes
$3134
Self -Employment
226
Fuel tax
56
$3416
69
Arizona State taxes
591
12
Pima County taxes
156
3
City of Tucson taxes
230
5
School District No. 1 taxes
541
11
TOTAL TAX BURDEN
$4934
100
%
*NOTE: If our families use liquor and tobacco products in ordinary amounts, their federal taxes would be increased about $75 each.

SOME OBSERVATIONS

A glance at the taxes paid by these two families leads me to three observations:
 

** Many upper income people often complain about "progressive" taxes which take from them a much larger percentage of income than is taken from lower bracket taxpayers. Yet in the overall tax load there's a relatively small difference between our two families. Of their $6,600 income the Carpenters pay 22% to all levels of government; the Barristers, with an income about three times larger, pay only 27%.

** The Carpenters will pay 56% of their $1396 in taxes to the federal government and 44% to local and state units, while the Barristers pay 69% of their $4934 tax load to Uncle Sam and only 31% to state and local governments. These sharp differences reflect a basic fact: federal taxes are somewhat "progressive" (the more you make the higher percentage you pay), while the sales and property taxes largely used by states and local governments are somewhat "regressive" (the more you make the lower percentage you pay).

** If they wish to honor their "Tax Freedom Day," the Carpenters should observe March 25 -- not April 22. The Barristers should hire a band and celebrate on April 9. And celebrate they should, for thereafter they will pay no withholding tax, no sales tax, no property tax, no excise tax, no gasoline tax, no tax of any kind. They will spend the rest of the year in a totally tax-free society -- the happy status sought by many critics of government spending.

* * *
NEXT WEEK: What, if anything, do the Carpenters and Barristers receive in return for the taxes they pay?

Previous Report: July 29, 1963 -- The Big Challenge: Civil Rights and the 88th Congress
Next Report: September 25, 1963 -- A Tale of Two Taxpayers: Part II -- What Do Their Taxes Buy?


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