Taxing Matters

Today is tax day in the US. I think it goes without saying that most cultures are united in their dislike of the government getting into their pockets any more than necessary although there certainly are differences as to what various cultures think of as “necessary”. Europeans seem to have the greatest tolerance for high taxes but, of course, there has to be some way to pay for all those weeks of vacation and social benefits that some other regions of the world (including North America) as a general rule don’t get.
 

Tax Day is upon us

 We have a President that is in hot pursuit of what he believes is a tax policy that requires a “little bit more” out of those he thinks should pay what he deems their “fair share”.  It costs a lot of money to have all those secret service agents on the golf course after burning up copious amounts of jet fuel and advance team personnel hours getting the POTUS to his “home” state of Hawaii or is it Illinois? Do you think the secret service agents do double duty - protecting the President’s (golf) balls from going OB? But I digress.

In 2009, according to a memo from the Joint Committee on Taxation, a bi-partisan Congressional committee, only 49 percent of Americans owed money on their Federal income tax returns. For tax year 2011, the non-partisan Tax Policy Center estimated that only 54 percent of Americans would pay any amount of Federal income tax. The top 20 percent of Americans earn 53.4 percent of the total U.S. income, but pay 67.2 percent of total income tax [source: Tax Policy Center].  Maybe government spending is the problem our leader should be focused on given the President doesn't seem to feel half of the population should pay any tax.

Why is the fair share of tax for half of the citizens in the country – zero? I think our tax policy could be improved but I also think everyone should pay something even if it is a token amount.

The ex-pat has a completely different situation than half of Americans who pay no tax. The ex-pat pays in the country they live in and in the US even if they didn’t set foot in the America one day in the year.

The US is one of the only countries in the world that makes citizens living overseas pay taxes at home when they pay taxes in the country they are living in. Yes, skeptical readers, there are certain exclusions that lower the tax burdens of ex-pats but those exclusions are minimal.

When I lived in Japan, my employer paid KPMG (a large global accounting firm) to do my taxes for Japan and the US. My employer paid all of my Japanese taxes and the extra taxes due in the US because my income was higher when I was working overseas. If the company hadn’t paid my taxes I could not have afforded to live overseas. The first year living Kobe my Japanese taxes were almost as much as my salary. When I got the tax bill in Yen and did the calculation back into dollars, I thought there was an extra zero mistakenly added to the bill. The company wired me the money for the tax payment and that was taxed too. When I complained that taxing the tax payment as income was a like a “circular reference” in a spreadsheet, the local tax office said it wasn’t “because we only tax the first transfer not every time”. Not sure of the logic but fortunately it was not my money paying the tax.

My employer paid the tax without complaint as a “cost of doing business” and I got a nice postcard in the mail from the Ashiya Tax office thanking me for paying my Japanese taxes and giving me a lucky number for the “tax lotto” drawing. I never won the lotto drawing but I saved the postcard.

Being transferred from Japan to China after five years was largely driven by the fact that Japan’s tax laws got even tougher after five years as a resident. The company wanted me to stay in Asia but they didn’t want to pay taxes that amounted to more than my base salary and part of my bonus.

China was even tougher – the company had to pay a higher % of my income and subsidies for housing, the kid’s school, etc each month but at least they gave me a few more deductions.  The tax laws of China also become more severe after five years in country which was part of the reason I never saw year six as a resident of Shanghai.

So between golf boondoggles and keeping Air Force One in the sky, maybe the President should think more about elimininating expenditures like the one below than contemplating what "fair share" means when his target group is already paying most of the tax and half of America is paying nothing. Happy April 15th.

This is just one useless expenditure on a long list of government waste






 

 

 

The Artful Dodger

The recent banning of dodge ball in some American schools would be humorous if it wasn’t so sad. The state that got the ball “rolling” in this case was New Hampshire. Seems odd that a state that has “live free or die” on their license plates would be the first to put an end to this gym class classic.  The ban is part of a larger movement to end “human targeting” activities. Wow! I guess boxing and sumo are probably at risk too. How about the business of being a “head hunter”? Seems like asking somebody to the prom is a human targeting activity. In all my years of school I can’t remember a single serious injury in a dodge ball game but I will confess that I broke a girl’s arm in six grade during a heated kickball battle. She was pitching and I was kicking. Sue Pierce if you read this, I really am sorry….

 

 

Perhaps the dodge ball ban is just another sign of a trend that seems to have begun when the baby boomers started having kids: well-intentioned parents who decided that no child’s feelings should be hurt by failure in classrooms or on sports fields. A nice sentiment to be sure but one that seems to be a contributing factor to the growing spirit of dependency and entitlement in many areas of American life. What’s next? No contact or no score football? Or “everybody gets 2400 for writing their name” SATs?

While the good people of New Hampshire consider changing their license plates to read the “land of 10,000 wimps”, the “Tiger Moms” in Asia continue to force their children to work hard and give them very little praise even when they achieve. Meeting expectation does not merit a 2 foot high trophy and endless accolades. Yes, the stories are true. Mrs. Wang and Mrs. Watanabe are “forcing” Xiao Wu and Kentaro chan to go to cram school after their normal classes and do calculus problems followed by violin practice at night and on the weekends. I have never seen a “My child is an honor student at Chairman Mao Jr High” bumper sticker on the roads in China. The Tiger Moms would likely be doing time (going to prison) if they lived in New Hampshire.

A Tiger Mom gets ready for the day - boots not included

I don’t necessarily think the excessive pressure that many parents in Asia put on their kids is the ultimate in child rearing but I think the balance point is a long way from banning dodge ball and a grading systems where a lot more kids get A’s than C’s.

My daughters were seven and ten when we left for Japan in February, 2000. They were on swim, basketball and soccer teams while we lived in North Carolina. It always amazed me how many kids walked out of season ending award events with trophies, ribbons, medals that would have made a winning Super Bowl team in the 1970s proud. “Yes parents, your ‘Bad News Bears’ were 0-12 but let’s give them a big hand for the great season”. I was perfectly happy if my daughters only wanted to participate or just be part of a team. On the other hand, I certainly didn’t want them to be able to fill a trophy case with “participation” awards that would make their rooms look like an Olympic gymnast was in the house.

When we arrived in Japan, our kids went to an international school with students from all over the world. Standards were clear. Our girls enjoyed being challenged. A lot of their friends spoke two or three languages in elementary school. Sports were more about participation than winning but there were no “over the top” awards for showing up. My wife and I actually felt bad that there was so little emphasis on school sports but we got over it.

After five plus years in Japan, we moved on to Shanghai. The school there was more intense. Despite being called Shanghai American School, my kids were the exception – both parents were American and neither of Asian descent. We learned the difference between an “American fail” and an “Asian fail”. An American fail was an “F” and an Asian fail was anything below “A”. Actually, I was making a mild attempt at being politically correct - it wasn’t called an “American fail” it was called a “white fail”. My kids didn’t like the insult but they took it in stride.

We saw first-hand the negative impact of all the pressure on some of our daughter’s friends. Bright kids with great grades and 2,200 plus on SATs who felt the stigma of having to take home a lower score than the parents expected. Of course, they knew they would have to take the SAT prep course and test again.

There was a greater emphasis on sports in Shanghai but academic stars trumped jocks on the school’s “most admired” lists. Most parents considered sports a needless diversion from study.

The irony of the situation was that the vast majority of the Asian kids wanted to go to college in the US. The Asian parents and children all know, despite our allegedly “shiftless” ways in the US; America has the best universities in the world. The target schools were “any Ivy”, Stanford, Michigan, U of Chicago, NYU, etc, etc. Of course, Oxford and the London School of Economics were also acceptable but, by and large, getting accepted to one of the best colleges in America was required or the child was simply a “disappointment”.

Despite our lousy scores in global math and science testing, America is still a leader in innovation and creativity but how long will that last when we spend so much time focusing on nonsense like the “end of dodge ball” and changing the name of “tug of war” to “tug of peace”?

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