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There, that ought to bring the readers running!
Nope, it's not fiction. Mostly I avoid fiction that's depressing. Who needs it? Real life has enough material for depression.
I just finished reading "Perfectly Legal: The covert campaign to rig our tax system to benefit the super rich - and cheat everyone else". It's by David Cay Johnston, a New York Times reporter who covered (US) tax news and policy for nine years.
Before I read this, I would have predicted that taxes were relatively fair. I thought that the blatant loopholes used by the rich had been closed by tax reforms back in the 80's. I'll admit that prior to reading this book, I hadn't sought out any tax knowledge beyond what came my way via TV, radio, newspapers, and magazines. Since I read a lot, that probably means I knew more than 90% of the population before I read this book. That's a scary though, since what I thought I knew was wrong.
Death and taxes, as the old saying goes, are life's two certainties. Neither is pleasant to contemplate, so we avoid that. Unfortunately, when we avoid dealing with something that's inevitable we only postpone the problem. Sure, you can avoid contemplating the unpleasant prospect of your own death by not making a will, but that merely passes the problem on to your heirs (and probably adds probate costs too). If we, as a society, aren't able look at what we are buying today with our government's spending and decide how it should be paid for, we will be creating future problems.
There's a lot to be outraged about in Perfectly Legal. I'll lead off with the one item that stood out the most for me. It's almost certainly not the biggest problem the book deals with, but it's easily grasped and obviously wrong. If this doesn't bother you, then probably nothing else in the book will either. It might make a good political issue too. We may all disagree on how much tax we should pay, but it seems just plain wrong for people to pay no taxes and brag about it in print.
That's right. There's a tax avoidance scheme called the 861 position which is named after a section of the tax code. It's claimed that this section means that salaries payed by American-owned companies aren't taxable. Congress, however, does not agree. There's a $25,000 fine for using frivolous arguments like the 861 position in court. Despite this, there are businessmen out there who use this argument to avoid paying taxes themselves and to avoid withholding taxes from their employees. They even took out ads in USA Today and The Washington Times promoting their views. Why? Because lack of IRS enforcement in their cases had convinced them they were correct. Even after going public, only a few out of an estimated 1,500 businesses have been prosecuted.
How could the IRS miss this? In part, it's because the IRS has been squeezed for resources in recent years. Bashing the IRS can make just about any senator or congressman look good. In part, it's because the IRS is good at looking for "detail cheating". In other words, they're good at spotting deductions that out of the ordinary. It turns out that the IRS isn't very good at looking for people who don't file at all. Neither of these reasons explains the people who get away with filing returns with zero on all the income lines, another popular approach to tax cheating. Apparently, the IRS didn't even start looking for zero income returns until the year 2000. What the hell? If I was designing an IRS audit system from scratch, no reported income would be red flag number 1. Sure, there's people out there who don't earn anything, but
How big is this problem?
"The IRS has not undertaken a serious study of tax evasion for years. But if the figures from the last study are simply adjusted for inflation, then tax evaders cheat the government out of $300 billion per year. The problem has grown more than the economy, as Secretary Paul O'Neil told Congress in 2001."
It's not clear to me which kind of cheating we're talking about here, detail cheating or flat-out avoidance, but $300 billion is a least a handle on the scale of the problem.
What's wrong with the idea that it's patriotic to pay your taxes? Ok, when you see the government doing things you don't want to pay for (unnecessary wars, for example), it's hard to feel good about it. On the other hand, my taxes also pay for education, medical research, helping veterans, and supporting the elderly - to name just a few good things. Sure, the government sometimes wastes money, but it doesn't only waste money. I think the anti-tax crowd has been trained to ignore what the government does for them and see only the waste.
Stay tuned for part 2 (it will probably appear on 4/26)
Thanks to![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
psongster for recommending Perfectly Legal
Nope, it's not fiction. Mostly I avoid fiction that's depressing. Who needs it? Real life has enough material for depression.
I just finished reading "Perfectly Legal: The covert campaign to rig our tax system to benefit the super rich - and cheat everyone else". It's by David Cay Johnston, a New York Times reporter who covered (US) tax news and policy for nine years.
Before I read this, I would have predicted that taxes were relatively fair. I thought that the blatant loopholes used by the rich had been closed by tax reforms back in the 80's. I'll admit that prior to reading this book, I hadn't sought out any tax knowledge beyond what came my way via TV, radio, newspapers, and magazines. Since I read a lot, that probably means I knew more than 90% of the population before I read this book. That's a scary though, since what I thought I knew was wrong.
Death and taxes, as the old saying goes, are life's two certainties. Neither is pleasant to contemplate, so we avoid that. Unfortunately, when we avoid dealing with something that's inevitable we only postpone the problem. Sure, you can avoid contemplating the unpleasant prospect of your own death by not making a will, but that merely passes the problem on to your heirs (and probably adds probate costs too). If we, as a society, aren't able look at what we are buying today with our government's spending and decide how it should be paid for, we will be creating future problems.
There's a lot to be outraged about in Perfectly Legal. I'll lead off with the one item that stood out the most for me. It's almost certainly not the biggest problem the book deals with, but it's easily grasped and obviously wrong. If this doesn't bother you, then probably nothing else in the book will either. It might make a good political issue too. We may all disagree on how much tax we should pay, but it seems just plain wrong for people to pay no taxes and brag about it in print.
That's right. There's a tax avoidance scheme called the 861 position which is named after a section of the tax code. It's claimed that this section means that salaries payed by American-owned companies aren't taxable. Congress, however, does not agree. There's a $25,000 fine for using frivolous arguments like the 861 position in court. Despite this, there are businessmen out there who use this argument to avoid paying taxes themselves and to avoid withholding taxes from their employees. They even took out ads in USA Today and The Washington Times promoting their views. Why? Because lack of IRS enforcement in their cases had convinced them they were correct. Even after going public, only a few out of an estimated 1,500 businesses have been prosecuted.
How could the IRS miss this? In part, it's because the IRS has been squeezed for resources in recent years. Bashing the IRS can make just about any senator or congressman look good. In part, it's because the IRS is good at looking for "detail cheating". In other words, they're good at spotting deductions that out of the ordinary. It turns out that the IRS isn't very good at looking for people who don't file at all. Neither of these reasons explains the people who get away with filing returns with zero on all the income lines, another popular approach to tax cheating. Apparently, the IRS didn't even start looking for zero income returns until the year 2000. What the hell? If I was designing an IRS audit system from scratch, no reported income would be red flag number 1. Sure, there's people out there who don't earn anything, but
How big is this problem?
"The IRS has not undertaken a serious study of tax evasion for years. But if the figures from the last study are simply adjusted for inflation, then tax evaders cheat the government out of $300 billion per year. The problem has grown more than the economy, as Secretary Paul O'Neil told Congress in 2001."
It's not clear to me which kind of cheating we're talking about here, detail cheating or flat-out avoidance, but $300 billion is a least a handle on the scale of the problem.
What's wrong with the idea that it's patriotic to pay your taxes? Ok, when you see the government doing things you don't want to pay for (unnecessary wars, for example), it's hard to feel good about it. On the other hand, my taxes also pay for education, medical research, helping veterans, and supporting the elderly - to name just a few good things. Sure, the government sometimes wastes money, but it doesn't only waste money. I think the anti-tax crowd has been trained to ignore what the government does for them and see only the waste.
Stay tuned for part 2 (it will probably appear on 4/26)
Thanks to
psongster for recommending Perfectly Legal
