Do you trust your neighbor not to cheat on taxes

[fintstone]

Do you trust your neighbor to pay taxes?
Mona Charen

April 15, 2005


"The difference between death and taxes is death doesn't get worse every time Congress meets." -- Will Rogers

A 2003 survey by Bankrate.com asked Americans whether they ever cheated on their taxes. Eighty-seven percent said, rather huffily, certainly not! But 13 percent said (I paraphrase), whadya mean cheat?

Well, now, 13 percent who admit to cheating is pretty high, don't you agree? That's 13 percent honest cheaters. How many people do you suppose are cheating and lying about cheating? Hmmm.

Another question in the survey may shed light on this. "What percentage of people do you think have ever 'fudged' the truth, even a little bit, on their taxes -- by doing things such as overstating how much money they donated to charity?" Answer: 49 percent.

One hates to be a cynic, but contemplating other areas of American life, one is hardly overcome with a sense of national rectitude. Professional baseball players, doctors, coaches and owners have conspired to cheat with steroids. Corporate executives are cluttering the courts with creative schemes to defraud investors, clients and customers. Students are cheating on exams (sometimes with the aid of their teachers who are attempting to beat state-mandated tests). Journalists invent sources. Employees loot their employers to the tune of $50 billion per year. Shoppers make off with about $13 billion worth of products through shoplifting every year. No one obeys speed limits.

Are we then to believe that only a small minority of taxpayers, offered the opportunity to cheat such an impersonal entity as the U.S. Treasury, are declining to do so? The Internal Revenue Service reports a gap of almost $300 billion between what taxpayers should pay and what they do pay.

Clearly, some taxpayers have more scope for dishonesty than others. Salaried employees can lie about their charitable contributions and other deductions, but it's difficult for them to hide income. The self-employed, by contrast, and small businesses have ample opportunities to fudge. As the inimitable Will Rogers put it, "The income tax has made more liars out of the American people than the game of golf has."

We can wring our hands about the epidemic of tax evasion and cheating, or we can ask: Does it make sense to collect taxes this way? It isn't just the unfairness. Seventy percent of Americans told the Tax Foundation in 2005 that they either dislike or hate doing their taxes annually. A full 77 percent believes the system needs a complete overhaul. And 54 percent offered that they'd be willing to trade some deductions in order to make the tax system simpler.

The 7 million words of the U.S. tax code are so abstruse, reports the CATO Institute's Stephen Moore, that 70 percent of the members of the two tax-writing committees in the House and Senate pay accountants to prepare their taxes. And the IRS phone counselors often give out incorrect advice.

The compliance cost for the American economy is quite staggering. The Tax Foundation estimates that in 2002, businesses, individuals and non-profits spent over 5.7 billion hours preparing taxes. Scott Moody of the Tax Foundation puts the cost of these man-hours at $194 billion -- more than the revenue of the Wal-Mart Corp. It is also considerably larger than the 2004 budget deficit of $71.3 billion.

A switch to a consumption tax would cut the Gordian knot of the tax code. All of the millions of hours of tax-planning, tax-preparing and tax-loathing would be gone. H&R Block would go out of business. You would not have to worry that while you were paying your full measure of tax, your neighbor was skating by with something less (sometimes a lot less, on the same income).

The whole intrusive monster of the IRS would no longer have the right to know how much we earn, and employers would be freed from the morass of withholding. Savings and investment would no longer be penalized.

Clearly, certain exemptions would have to be arranged for the poor. But April 15 would be a beautiful introduction to spring, instead of the day of doom it now represents.

[mikester]

You know man...I've had a few tax issues of late that have highlighted - as it is every year at this time - how much my wife and I pay in taxes each year.

It isn't pleasant.

It disgusts me to no end that most of the money that goes out of my pocket to pay taxes is seemingly wasted. I say most because I'm optomistic that there is SOMETHING out there worthy of my tax dollars.

Here in LA we are paying record property taxes; actually it's like that all over california yet our state and local governments are still drastically underfunded.

I pay generous income taxes to the state as well; still...my roads are in horrible shape and our schools are still performing poorly. Public services are at an all time low and budget cuts threaten every facet of what is left.

I also pay to the federal government a pretty penny or two...where is my money going there? Social Security that I will undoubtedly never see much benefit from and social policy I drastically differ with. Forigen policy that makes me sick and war that I never agreed with.

On the issue of Social security - if I never see a significant benefit from it - can I sue the federal govenrment for breach of contract? I mean doesn't them taking my money every time I get paid to pay for the benefits of someone else imply that we have some sort of a contract and by my not receiving comperable benefit from it (and having no ability to negotiate that benefit) present some sort of breach of contract?

Wow...I'm feeling creative today.

[widebody911]

Originally posted by mikester
It disgusts me to no end that most of the money that goes out of my pocket to pay taxes is seemingly wasted.

It's those damn tax-and-spend Republicans!

[lendaddy]

Lockbox

[mikester]

Originally posted by widebody911
It's those damn tax-and-spend Repubicans!

I'm not blaming a party I'm blaming them all because I didn't vote for those who were in office just some of the most recent ones who were just elected. I also did not vote for Arnold or President Bush. Republican and Democrat alike - they are all to blame as are the populace for allowing it.

VIA LA REVOLUTION!

[island911]

Originally quoted by fintstone
. . .
The compliance cost for the American economy is quite staggering. . ..

Too true.

There are a lot of deductions I give up because of the cost associated with processing them.

For example, $2.00 for business-travel parking. you get the recipt, file it, log it, track it, parse it to %, enter it, add it, subtract it . . .all for a "savings" of maybe 50 cents.

Now I get that "it all adds up" . . .. but so do all those costs associated with handeling all those little expenses.

I also get that a certain pleasure can be had by spending a dollar worth of time to Not-pay a dime to the IRS.
. . . And that speaks volumes to how awful the system is.

[pwd72s]

Originally posted by widebody911
It's those damn tax-and-spend Republicans!

Here, we agree...I am NOT happy with the current administration and Congress because it is indeed $pending like a bunch of drunken Democrats!

[island911]

Originally posted by pwd72s
Here, we agree...I am NOT happy with the current administration and Congress because it is indeed $pending like a bunch of drunken Democrats!

[fintstone]

Yes, but imagine the alternative.

[lendaddy]

Originally posted by fintstone
Yes, but imagine the alternative.

The first term really blew goats though Flint (spending). I mean Veto somethin man, gimmie something to work with. You know what I mean?

[fintstone]

I agree. Waaayyyy too much spending. But I suspect that he was only "buying" the Democreatic agenda to smooth the way for defense.
Need to get rid of the IRS, Dept of Education and other losers like NPR, etc.and spend the money to seal our borders. That would solve most of our problems.

[CamB]

What about a switch to "no personal tax deductions".

We call this "New Zealand". The only deduction really available is for charitable donations, and you need to get another form. No mortgage payments, no nothin'. I don't even fill in a tax return any more - I (and most of my fellow countrymen and women) just assume (check online) that my payroll taxes are correct, and I don't have to file a return.

No point in arguing that businesses would have reduced compliance costs for deductible expenses, etc - they have to measure expenses anyway (for accounting reasons).

just simplify your personal tax system - you don't have to go all drastic and do a (regressive, and I suspect unworkable) consumption tax as a replacement.

[fintstone]

Exactly as it should be. Deductions (subsidies) on some expenses/good at the expense of others allows the govt to interfere with the free market and detremine how private funds are spent...In effect, making some businesses losers and some winners....by law.

[CamB]

Deductions (subsidies) on some expenses/good at the expense of others allows the govt to interfere with the free market and detremine how private funds are spent

I totally agree.

we also have a consumption tax - 12.5% - only exemptions are exports (zero rated) and financial transactions (no tax payable). applies to all food, etc etc

[azasadny]

Trying to get our politicians to change the current tax laws is like trying to get a crack addict off crack! They'll never significantly change the way taxes are determined and collected because they have too much to lose.