THE WONDERFUL WORLD OF TAXES.

• Author: Binnings, Tom
• Position: THE ECONOMIST

We've all heard Benjamin Franklin's reference to death and taxes being life's only certainties. They are why we've searched for fountains of youth as well as tax havens since the beginning of consciousness. With taxes, some celebrate victory, depending upon who they are and how they earn and spend their money. Considering the recent hoopla over federal tax changes, it's worth reminding ourselves of basic tax realities.

Let's start with the total cost of government. This can be calculated in different ways, but excluding payroll and Medicare taxes (technically forced savings for our retirement years), the total federal tax burden was 14 percent of all personal income in 2015. To this we need to add 8 percent for state and local taxes in Colorado (which is the 15th lowest burden in the nation). Combined, 22 percent of our personal income is for government services.

Or is it? At the federal level, deficits have become the norm. That adds another 2.8 percent of personal income, which essentially defers the cost to the future (probably our children). Locally, many states like Colorado have become fiscally balkanized, with taxes levied below the level of local government to pay for some costs like infrastructure, libraries, schools and fire protection. All told, including fees for specific government services and primary and secondary education, the total government sector costs close to 30 percent of total personal income.

Economists look at taxes from several perspectives. These include fairness among those with similar and different abilities to pay, simplicity in administration, connectedness between payors and beneficiaries, adequacy to cover costs and stability over time. Political scientists might add representation and transparency to the assessment since democracies typically assert people should vote to tax themselves and that taxes should be in plain view. Another tax element centers on whether some taxes effectively create incentives or disincentives for specific behaviors like investing, buying a home or smoking cigarettes.

There will always be arguments in democracies over people paying their "fair share." In 2015, 4.4 percent of households earned more than $200,000 in taxable income, representing 42 percent of all taxable income. This group paid 56 percent of all federal taxes. Conversely, households earning less than $75,000 (75 percent of all households) earned 22 percent of all taxable income and paid 14 percent of all taxes...