Common Sense – Ch 3 Tax Code Prt 1

By dancingintheraine

September 25, 2009

Category: Uncategorized

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<p><b><u>The Political Weapon Of Choice:  The U.S. Tax Code</u></b></p>
<p>     The tax code that started in 1913 as fourteen pages now exceeds sixty-seven thousand. </p>
<p>     An income tax that was promised to only apply to the wealthiest 1 percent in 1913 quickly grew to 5% in 1939 and then, following World War II, to almost 75% of all Americans.  To soften the tax blow, the government did what it always does:  it reframed the argument.  When “War on Terror” was considered to be too aggressive it was changed to “overseas contingency operations,” which is supposed to sound much friendlier.  The same idea applied to our tax agency.  The “Bureau of Internal Revenue” was renamed the “Internal Revenue Service” to, as the government puts it, “stress the service aspect of its work.”</p>
<p>     Talk about smiley-faced fascism.</p>
<p>     Six of President Obama’s nominees were either tangled up in the tax code’s complexity or were simply crooks who sought to defraud the government.  But since they were all well-traveled in political circles.  Congress graciously excused their tax “issues” as honest mistakes.</p>
<p>     But what if they weren’t?  What if some of the people now working in the higher levels of our government are no different than imprisoned tax cheats Wesley Snipes or Richard Hatch, who conveniently “forgot” to declare the million dollars he won on <i>Survivor</i> as income?</p>
<p>     Here’s the problem:  We’ll never know because both the media and the people failed the Republic.  Why did no one demand that each of these nominees explain their behavior under oath in televised hearings?  Why did no one demand that the harshest of penalties be imposed on every one of these people for what they’d done—even if it was a mistake?  After all, if you leave some income off your taxes, I’m pretty sure the IRS will not be accepting <i>“sorry,” “I forgot,”</i> or <i>“I used TurboTax”</i> as an excuse.</p>
<p>     And that brings us to admitted tax violator Timothy Geithner.  As Treasury secretary, he is the person responsible for not only leading America out of our economic crisis, but also for overseeing the IRS and enforcing the very laws he failed to obey.</p>
<p>     Here is a man we were told was the <i>only person smart enough</i> for the Treasury job, and yet he wasn’t smart enough to pay his payroll tax?  He’s a “brilliant” economist and yet he wasn’t brilliant enough to figure out his tax bill, even though his employer (the IMF) had done the math, cut him a check for the right amount, and made him sign an affidavit acknowledging that the check was to be used for his payroll tax?</p>
<p>     Wow! I sure hope he understands a credit default swap a little better than explicit instructions like “Send this check to the IRS.”</p>
<p>     Congressman Charlie Rangel from New York chairs the House Ways and Means Committee, which means he’s responsible for writing the tax code.  But, apparently, he’s not smart enough to follow it.  He allegedly failed to pay taxes on seventy-five thousand dollars in rental income from his villa retreat at the Punta Cana Yacht Club in the Dominican Republic.  His excuse?  He didn’t know the tax applied to rental properties in the Dominican Republic.</p>
<p>     An investigation began under the “most ethical” congressional promise keeper, Nancy Pelosi, who said that a full accounting would be done no later than January 2009.  Perhaps they’re using the same math to figure their calendars as they used on their taxes, because January came and went, as did February, March, and April—and we still haven’t seen a report.  But they did find plenty of time to reappoint Congressman Rengel as chairman so that he can continue to oversee the writing of the tax law in the meantime.</p>
<p>     If we give all of the people who filed incorrect tax returns the benefit of the doubt and assume that every single one of them simply made an honest mistake, then doesn’t common sense tell us that maybe the tax code is just a little too complex?</p>
<p>     Our tax code is not just about collecting revenue for the government.  If it were, then we would have followed Russia’s example (yes, <i>that</i> Russia, as in the former Soviet Union) and instituted an easy-to-follow, hard-to-dodge flat tax.</p>
<p>     The Russians were having difficulty collecting taxes under a progressive income tax system complete with different tax brackets, deductions, and exemptions.  So Russia converted to a flat tax and the results were amazing and immediate.  In less than a year, the income raised under the flat tax was about 25% higher (adjusted for inflation) and voluntary compliance with the law went up.</p>
<p>     Unfortunately, unlike the Russians, we work hard each year to make our tax code <i>even more</i> convoluted.  How bad is it?  It now takes Americans about 7.6 billion hours to prepare their taxes.  That would be like hiring 3.8 million full-time people just to prepare our taxes and address all of the tax-related issues that we deal with every year. In 2006, Americans spent $193 billion just to comply with the tax code.</p>
<p>     Why does it take so long and cost so much?  Because the code is changes almost every year—more than five hundred times last year alone.  And it’s done for two simple reasons:</p>
<p>     1.  Favors can be done for special interest groups and hidden in the complex framework.</p>
<p>     2.  The tax code can crush an enemy without leaving any bruises or broken bones and reward allies without leaving a money trail.</p>
<p>     Here are the realities of Washington.  If you’re a friend to those in power and fail to pay your taxes, its considered a simple oversight and you move on to become secretary of the treasury.  But if you’re considered hostile to those in power then the same mistake will be used to destroy your reputation.  For a recent example, look no further than Joe the Plumber.  But this isn’t a new political tactic.  Do you think it’s purely a coincidence that Martin Luther King, Jr., was targeted as a tax cheat or that both Jesse Owens and Joe Louis were investigated for tax-code violations after they spoke out against the government?</p>
<p>     A complex and confusing tax code is a weapon that can be used to intimidate enemies (windfall profits tax on oil companies) and punish the innocent but politically unpopular person (a 90% tax on corporate executives) while rewarding friends with exemptions, deductions, and individualized loopholes.</p>
<p>     It’s been said that “the power to tax is the power to destroy,” and both the Democrats and the Republicans have used that power irresponsibly for political gain.  Too many people in Washington have forgotten how much sweat and blood go into earning an honest dollar.  I am convinced that if we could get politicians to spend six months picking fruit, pouring cement, or waiting tables, they’d have a much deeper appreciation of their sacred duty to spend our tax money wisely.</p>
<p>     Common sense tells us that if we were required to pay our taxes in terms of physical labor instead of money, we would have put an end to wild spending a long time ago.  For example, if a roofer were required to work on twenty new homes instead of paying taxes or if a car mechanic were forced to repair fifty new engines as his debt to the government, we would have rebelled against wasteful spending decades ago.  In many ways it’s easier to part with our money than our time but common sense tells us that they are one and the same: Time is money.</p>
<p>     It’s time we take away the ability of Congress to bribe or punish companies by using the tax code.  If a company breaks the law, use the criminal code, not the tax code, to punish them.  Companies and individuals should rise and fall on their own merits, not on the basis of tax breaks, subsidies, and other goodies that Congress uses to buy votes and bribe voters.  And if all else fails, then maybe we should do as Professor Sowell once suggested and move Election Day to April 16.  (Have you ever noticed that Election Day and Tax Day are almost as far apart on the calendar as you can get?)  What better way to hold people accountable for how they spend our money than to decide the fate of their careers the day after we cut our checks?</p>


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