In a recent article by Robert Samuelson at RealClearPolitics.com called “How Big a Government Do We Want?“, Samuelson talks about a proposed Value-Added Tax (VAT) which its proponents suggest would relieve the US of its disproportionate tax burden and help to pay the deficit.
While a sales tax SEEMS like a good way to redistribute taxes to everyone who buys (instead of charging higher income taxes to people who earn more money), it is not a good solution. Implementing a VAT is complicated and, as Samuelson suggests, will only increase government.
And that is what concerns me more. Of course I don’t want higher taxes, but a bigger government is even more worrisome – because they create unnecessary spending (case in point: More of our income taxes go towards the federal pension than to education).
What’s the perfect size of government? I want it to be no larger than it was approximately 100 years ago. It want it small, the way it was before the big government era when we thought “the bigger, the better.”
Here’s why: The government is killing us while it benevolently attempts to provide us with a cradle-to-grave safety net:
It’s killing us with taxes
It’s killing our spirit of independence and non-government dependence
It’s killing our “can-do” spirit
The US was founded on liberty and opportunity and both of those things are quickly disappearing as we become overtaxed and then enslaved to debt.
Large groups of Americans now wait eagerly for their government check:
Farmers
Corporations
Earned Income Credit recipients
Seniors who obtain more in benefits/insurance value than their tax contributions would have ever bought on the open market
The government, through its hand-outs, is creating class warfare, age warfare, and warfare between small business and large business.
Those that earn more are encouraged to dislike those that earn less.
Those that earn less are encouraged to be suspicious of those that earn more.
Those that are older are encouraged to be hyper sensitive to younger folks who don’t want to pay for their benefits.
Those that are younger are beginning to begrudge the payments they must make to seniors who are better off than they are, or already have their homes paid off, while they also receive extra tax deductions, and in some instances may be excluded from paying property tax on the local level.
Small businesses looks askance at corporate welfare.
Large businesses seek to gain preferential tax treatment over smaller competitors.
Everyone SAYS they don’t like taxes and big government, but they’ve already been “bought”. They want everybody else’s government check be reduced or stopped – but they don’t want their government benefits or preferential treatment touched.
Do we have the guts to have a smaller government? Do we have the will to fight for reduced government that may actually cause our own governmental benefits to be cut? As I survey the present landscape, I don’t see much reason to be optimistic.
The IRS, and Congress, are a little heavy-handed. And by “a little” I mean “a lot”! Congress issues many, many complex laws and expects people to follow them to the letter. And each law is usually in some way connected to making YOU owe more tax. Thus, Congress’ collection agency, the IRS, normally carries a big stick, ready to whack taxpayers with it in the form of new legislation and more taxes owing.
But recently, the IRS seems to have realized that they can only bleed someone for so long. If they keep taking their pound of flesh, they are eventually left with taxpayers who have nothing else to give. And this is the case even more so now than ever before because of the economic turmoil facing the world.
So, the IRS has “graciously” conceded to “additional steps to help people who owe back taxes”… in particular, for those who are facing “unusual hardships”. . Here are some of those additional steps:
The IRS increased the authority of its employees to suspend collection when there’s a hardship situation. This includes:
Job loss
Social security or welfare recipients
Significant medial bills
Taxpayers who have difficulty making payments (because of a number of reasons including job loss) may skip a payment or pay reduced payments.
Also, the Offer in Compromise has been augmented to allow for drops in home values (which once may have created difficulty in getting the IRS to agree to an OIC). And those who have an OIC agreement but are at risk of default now have options to avoid default.
Lastly, the IRS is speeding up its delivery of levy releases by reducing the requirements that taxpayers must meet when requesting a levy release.
In some ways, it’s nice to see the IRS finally recognizing that it needs to help people who want to pay their taxes but cannot. After all, it costs taxpayers a lot of money to punish taxpayers who aren’t paying their taxes… and law-abiding taxpayers who simply are not able to pay should not face dire consequences, particularly in this economy.
But let’s be realistic: While it’s nice to see the IRS doing something about it, the only reason they’re doing it is because they know that the pound of flesh is running out. They know that they can’t get more money out of taxpayers in the traditional way, and with the economy making it more and more difficult, they have developed “creative financing” to make it happen.
Today’s taxpayer faces two huge (and growing) problems. First, they face an increasingly complex income tax system. Second, they face an economy that is making it more and more difficult to make ends meet.
Nina E. Olson is the National Taxpayer Advocate, which is a kind of independent watch dog group within the IRS. Each year she is required by Congress to produce and annual report about the problems with the IRS. Each year she produces am annual report, and each year the IRS acknowledges it and then promptly ignores it.
In her recent report, Olson outlines several problems with the tax code right now, specifically around the tax code’s complexity and the economic difficulty that Americans are facing. Here are a few highlights (and my take on them):
“Taxpayers and businesses spend 7.6 billion hours a year complying with tax filing requirements”. That is huge. To put that in perspective, every man, woman, and child in the world is given a total of 8760 hours in a year. With an average lifespan of 75 years, every person will enjoy just over 650,000 hours of life. So, if 12,000 people spent every hour of their entire lives doing income tax, they would be able to do the work required of one year’s worth of taxes!
“Taxpayers spend $193 billion a year complying with income tax requirements, an amount that equals 14 percent of the total amount of income taxes collected”.
80% of individual tax payers have to pay to get help with their taxes (either for someone to complete them or for software).
There are changes to the tax code every single day. In 2008, Olson points out, there were over 500 changes.
These are just a few of the many problems Olson has highlighted in her report. You can read the IRS report here.
Olson’s report is very informative. It tells us that the tax system is so unwieldy and complex that no one can efficiently navigate it and this creates more problems than it solves.
Just imagine if Americans were suddenly given 7.6 billion hours of their lives back. I’m sure that stress and crumbling family life would be positively impacted. Just imagine if Americans were suddenly given $193 billion back. We wouldn’t feel the need for a BandAid stimulus package. Just imagine if taxpayers could sit down in an evening with clearly written papers and could quickly fill out their income tax forms. I believe we would minimize late filings and tax mistakes.
For further reading, visit the National Taxpayer Advocate site, here: taspresskit.irs.gov.
If I was pulled over for driving 75 mph in a 55 mph zone, and I received a ticket, most people would say that I deserved the ticket. I would agree.
But what if I was going 75 mph in a zone where the posted speed limit was posted as “the square root of 3025”? The very thought of requiring a calculator in order to drive the limit is laughable.
And wouldn’t it be ironic if I was going 75 mph in a zone where the speed limit was posted as “the square root of 3025” but I was the one who had helped to create that sign? Some might say that I should know better. Others might say that my mistake was a natural consequence of an overly complicated system.
Thankfully, our speed limit signs are clearer than that. But our tax laws are not. They are far more complicated. And the above situation is going on right now with a highly placed politician.
Tim Geithner is the Treasury Secretary under Barak Obama (and most of you know that that Treasury is in charge of a number of things including the IRS).
And guess what Mr. Geithner did: He failed to correctly file his income tax during the years of 2001 and 2004, resulting in more than $40,000 worth of errors. Now, just to be clear, he DID file his income tax. This is not a story about tax evasion. However, he committed two errors, which are fairly common:
He hired a housekeeper and while she was employed by him, her working papers expired.
And, while working with the IMF, he was considered an independent contractor and failed to file self-employment income tax returns.
To Mr. Geithner’s credit, both issues were resolved:
The housekeeper married an American citizen and remains in the US.
But the reason I titled this blog “A telling mistake” and told the speeding story at the beginning was to illustrate the following: Tim Geithner is an educated man who works very close to the pulse of finances – first with the IMF and now with the Treasury (and IRS). And if he makes an error that is common, how much easier is it for the hardworking men and women of the US who are NOT as close to financial decision-making?
Your recent election to the highest office in the land was a loud call from some American voters that they wanted you in office. And those who didn’t vote for you? Well, you’re their President, too. As you recognized at your inauguration, we live in challenging times.
I’m not here to talk about wars or the economy or the work you have to do in representing the millions of people who did, and who did not, elect you to office.
I’m writing this letter to remind you that the White House is not your house. It is my house… and the house of the millions of other taxpaying Americans who live in our great nation. In other words, the work you do and the decisions you make should always be guided by remembering the people on whose backs this nation is funded. You should follow the Constitution, and not do anything that contradicts it.
As a fellow American, representing other Americans, I write to you requesting the following considerations:
Don’t be drawn into Washington’s bad habits of spending millions of dollars without fully realizing that each and every one of those dollars came out of a taxpayer’s pay check. Plus the interest which must be paid to the government’s creditors
Remember that you were voted in my millions of people who have to work long days (and sometimes 2 jobs) because they are overburdened in the taxes they pay. If they paid less tax, they would have more to spend and spending is good for the economy.
Right now, you probably have other people preparing your income tax return for you because your focus is on the American impact of global affairs. But don’t forget that millions of Americans will have to prepare increasingly complicated income tax returns.
Bureaucracy is costly. While a small part of the government’s bureaucracy is Constitutionally necessary to run our country, simplicity and clarity should win out every single time. Your administration should model for American companies what a lean, efficient, spending-conscious organization should be like.
Your taxpaying public is made up of less well off people, middle class, and wealthy people. And all of those groups should be treated fairly and not punished. America is a land of opportunity, not class warfare. We shouldn’t tax the rich just to give to the less well off. That is a form of tyranny of the majority toward the minority. We all hope to someday do well, please don’t treat those folks who happen to be doing well like cash cows to be milked for the rest of Americans spending whims.
We’re a great nation in a world that is experiencing turbulent economic times, and our hard-working, taxpaying people are already suffering under a terrible tax burden. We need you to follow in the footsteps of our Founders and spend less on bailouts and things that will cause tax increases, and more on restoring the sense of limitless opportunity in this country!
