Wednesday, March 23, 2011

Throw darts to pay less taxes

I finally finished and filed my 2010 Federal income taxes.  I found out that by throwing darts I had certain income that was charged ten percent lower taxes than other income.  To get that income, I didn't sit in a cubicle, I didn't dig ditches, I didn't wait table until my feet hurt.  I just threw some darts a few years ago, and bingo!  I pay less taxes because I'm "stimulating the economy."

What were these darts?  They were decisions to buy certain stocks.  It really didn't take a lot of work to do that.  I just read a few reports, looked up some history, or followed Motley Fool's advice.

Of this income that was taxed less, half was from gains for selling some stock and half was for "qualified dividends", whatever those are.

None of this was based on helping a business get started.  I bought shares in existing companies, and so all I was really doing was providing liquidity for previous owners of those shares.  That is an important service because people need to sell stock from time to time for a variety of reasons, but should providing liquidity gain special treatment?  Congress after congress seems to think so.

Congress did give a sop to people who actually show up to work.  It was called "Making Work Pay".  I don't remember what the upper limit on this deduction was, but my wife got an eight-dollar credit for the one day she was an election judge.

I don't have any clear ideas on what a more fair tax system would be, but I do think we should take a good look at what the true purpose and result of various tax gimmicks are.