Posts tagged with: Taxation in the United States

29taxes.2-500In an attempt to trap Jesus, some Pharisees and Herodians asked him, “Is it lawful to pay taxes to Caesar, or not? Should we pay them, or should we not?” In response, Jesus said,

“Why put me to the test? Bring me a denarius and let me look at it.” And they brought one. And he said to them, “Whose likeness and inscription is this?” They said to him, “Caesar’s.” Jesus said to them, “Render to Caesar the things that are Caesar’s, and to God the things that are God’s.”

The Pharisees and Herodians “marveled” at Jesus answer, but had they asked an agent of the Roman IRS they likely would have been given a similar answer.

Governments have always had to contend with citizens who make what are considered “frivolous tax arguments” to avoid complying with tax laws. Such arguments rarely work (it’s usually not effective to try to present a creative interpretation of tax law to the people who interpret tax laws) but people keep trying.

The IRS has an entire list of responses to the most common frivolous tax arguments. Here are four of my favorites:
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ben carsonIn 2012, Dr. Ben Carson, former head of pediatric surgery at John Hopkins Hospital, rose to media attention at the National Prayer Breakfast in Washington, D.C. During that speech, he told the audience, including President and Mrs. Obama, that he didn’t mean to offend anyone, but he wasn’t going to be “politically correct,” either. Since then, Dr. Carson has been a regular contributor to The Daily Caller. He recently spoke in Sikeston, Missouri, and gave his prescription for what ails America.

Of all that’s ailing America, including the decline of education, Obamacare, politicians run amok, and government spending, the doctor offered various prescriptions. The Founders, [Carson] said, knew that the country relied on an informed populace. We must not be misled by “slick politicians and a dishonest media.” If we will “spend a half hour learning something new every single day … [we] become a formidable friend of truth and a formidable enemy of deception.” (more…)

IRS-300x300Adopting a child can be a laborious, time-consuming, and expensive process. So why is the IRS trying to make it even more laborious, time-consuming, and expensive? As David French notes, in 2012, the IRS requested additional information from 90 percent of returns claiming the adoption tax credit and went on to actually audit 69 percent:

So Congress implemented a tax credit to facilitate adoption – a process that is so extraordinarily expensive that it is out of reach for many middle-class families — and the IRS responded by implementing an audit campaign that delayed much-needed tax refunds to the very families that needed them the most. Oh, and the return on its investment in this harassment? Slightly more than 1 percent.

This audit wave got almost no media coverage, but what was the experience like for individual families? In a word, grueling. Huge document requests with short turnaround times were followed by lengthy IRS delays in processing, all with no understanding for the unique documentation challenges of international adoption.

Read more . . .

(Via: HotAir)

Blog author: jballor
posted by on Tuesday, February 19, 2013

My friend John Teevan of Grace College sends out a monthly newsletter, “Economic Prospect.” He passes along this in the current edition:

I found this note from a newly retired accountant (age 66) who has not gone on social security yet. His income as a part-time accountant in his town was $60,000.

“My income is $60,000 and my IRS taxes are 10,000, my FICA deduction is $8,000, my state income tax is $2500, and my property tax is $6000. So I pay a total of $26,500 in taxes leaving me $33,500.

However, I have additional costs that I would like to (but can’t) deduct from my income. As I watch ‘government accounting’ I realize that these should be considered real costs.

I have saved $200,000 and invested the money in bonds earning 1% ($2000).

I could have invested that money in CDs earning 5% (10,000), but as the Fed has lowered the interest rate the cost to me is the difference: $8000.

In addition I am now entitled to social security and at my level of income over the years I would have received $28,000 this year, but I have chosen not to take Social Security saving Uncle Sam that money.

So I have contributed a total of $36,000 to Uncle Sam in foregone interest and foregone Social Security payments. Who got the benefit of that $36,000?

Uncle Sam; not me.

So if I add up my total contributions to the government this past year I paid $26,500 in taxes and paid $36,000 in lost income. These two come to $62,500…more than the $60,000 I earned.

While I enjoy my new job, when I think about this, I start to feel like one of Pharaoh’s slaves toiling to roll immense stones up from the Nile to his pyramid.”

Send John a message if you’d like to be added to his “Economic Prospect” list. It’s always a great read.

Blog author: jcarter
posted by on Wednesday, December 5, 2012

What is the “fiscal cliff”?

The term “fiscal cliff”, which is believed to have originated in Congressional testimony by Federal Reserve Chairman Ben Bernanke, refers to the substantial changes to tax and spending policies that are scheduled to automatically take effect in January 2013. The changes are intended to significantly reduce the federal budget deficit.

What are the tax and spending policies that will change?

Several major tax provisions are set to expire at year’s end:
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After every electoral defeat—whether suffered by Republicans or Democrats—a period of hand-wringing and soul-searching inevitably develops in the days and weeks after the election. Journalists and politicians take to print to explain “What went wrong” and “Here’s what should be done differently.” Although the solutions are almost always what the pundits were saying before the election, the exercise in self-reflection is, on the whole, a much needed corrective. But too often the advice tends to be of the always terrible, “We should be more like the party that won.”

A prime example is an article today by Wick Allison, publisher of The American Conservative. Allison voted for Obama in 2008 and hinted that he would do so this year too. So it probably shouldn’t be surprising that that his economic solution looks similar to what President Obama would endorse.

Allison says that the “Republican Party can appeal to ‘Judeo-Christian values’ as long as the sun shines and their voices hold out. But they’ve abandoned the most basic moral value of all: fairness.” While he may have a valid point, Allison muddies the argument by his misunderstanding of both taxation and fairness:

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Blog author: jcarter
posted by on Thursday, March 15, 2012

As society becomes more secularized, the calls for churches to pay their “fair share” become more vocal. Erik Stanley, senior legal counsel for the Alliance Defense Fund, explains why churches should remain exempt from paying taxes:

Why is your church tax exempt? Why should it continue to be tax exempt? If I were to sit down and ask you these questions, would you have a clear and coherent answer? I suspect this is something we seldom think about. After all, tax exemption for churches has always been given and we assume, because of its historical longevity, it always will be given.

The fact that many Americans cannot explain why churches are tax exempt indicates a forgotten history and is emblematic of a society that has systematically devalued the church as a beneficial societal institution.

Read more . . .

In “Stop Coddling the Super-Rich” investor Warren Buffett, one of the world’s wealthiest men, makes a case for upping the tax rate on the “mega-rich” in America. In a response published on National Review Online, Acton Research Director Samuel Gregg observes that “this is a broken record that Mr. Buffett has taken to re-playing over the past five years.” He points out that the U.S. tax system is already heavily progressive (no pun intended) and that the label “mega-rich” may not be as obvious as Buffett would like us to believe:

It’s safe to say that a substantial number of these people operate small-to-medium-size businesses that don’t play the corporate welfare game a la General Electric, that are already subject to some of the world’s highest corporate tax rates (most of which is paid by the owners of companies), that reinvest much of their income in expanding their activities and taking on new risk, and, above all, that employ people. They are the engine of growth and employment in America today — not the United States government. Why on earth would we disincentivize them from creating value and jobs by raising their taxes?

Read Samuel Gregg’s “Taxing Warren Buffett” on NRO.

Blog author: jballor
posted by on Friday, June 17, 2011

Today at Capital Commentary I discuss the size and scope of the tax code in the US relative to its basic purposes.

In “Back Door Social Engineering,” I argue, “When governments run huge deficits in part because of the complexity of its tax system and the ability of people and institutions to engage in large-scale (and legal) tax avoidance, there is something deeply wrong with the system.”

The basic purpose of taxes is to raise money for the government, not to determine social behavior. We have laws for that.

Read the whole thing here.

Jordan Ballor has already done a fine job of commenting on A Call for Intergenerational Justice, and I’m sure that others will be chiming in on the PowerBlog as well. I’d like to focus on a couple of points that stand out to me from an initial reading of the document.

I suppose it says something about a document when you can’t finish reading the title without alarm bells going off. “Intergenerational Justice” is a fine sounding term, but what does it mean in the context of the statement? While it isn’t spelled out in any detail, my best guess based on the text and the known political positions of many of the signers is that “intergenerational justice” refers to a continuation of the various Federal entitlement programs that make up the lion’s share of the mandatory portion of the Federal budget. To wit:

“Effective programs that prevent hunger and suffering and empower poorer members of society must continue and be adequately funded.” 

The only program specifically mentioned in the document is Social Security. The authors of the statement believe that the program can be modestly changed, but no indication is given that any radical reform will be tolerated:

“We must make Social Security sustainable. We can slowly increase the retirement age, modestly reduce benefits for more wealthy seniors, and increase the amount of income taxed to pay for Social Security.” 

I think it’s fair to infer from the limited detail provided by the writers of this statement that there is little enthusiasm for major reform of the core Federal entitlement programs that ultimately lie at the root of our debt problem, and no consideration of the idea that these programs may have been ill-concieved, or that the Federal government might not be an appropriate vehicle for meeting such basic human needs. The programs are there, and for the demands of “intergenerational justice” to be satisfied, they must remain in place.

Absent from the discussion, however, is any mention of the intergenerational injustice that these social programs represent in the first place. For instance: I’m in my mid-thirties. I cannot remember any time since I became politically aware that I believed Social Security would be solvent and able to provide benefits to me when I reach old age. Politicians and commentators have been talking about the coming collapse of Social Security since I’ve been reading political commentary. Various temporary fixes to the program have been enacted, but none of them fix the structural problems that plague the program and lead to the ongoing crisis – they just shove the inevitable bankruptcy back by a decade or two (and the same is true of Medicare and other similar entitlements).

And this is nothing new. Today, I just happened to pick up John Samples’ The Struggle to Limit Government and read the following passage describing the arguments over Social Security in its early years:

The intergenerational character of Social Security attracted criticism from the start. M. Albert Linton, an insurance executive and advisor to the program, argued that Social Security would create a large and intolerable burden on future generations. He noted that Social Security’s experts planned eventually to devote as much as 20 percent of taxable payroll to benefits, a sum that the generation of 1939 had not devoted to the program. Why should the current generation be allowed to commit future generations to a burden it would not now impose on itself? Linton’s admonition had no effect on Social Security officials. During a presentation about the future of the program, the council’s chair, J. Douglas Brown, remarked, “Après moi le déluge.” Future generations could take care of themselves; the experts of 1939, not to mention the politicians running in 1940, had little interest in what happened to people who did not exist. 

So, Wallis et al., what say you? If the programs you so desire to save were designed in a way that took no account of their sustainability or of the wellbeing of future generations, and if those same problems persist today and even threaten to completely overwhelm the Federal fisc, why the insistence on saving them? Is there no other way to provide for human needs than through a bureaucracy? It strikes me as odd to demand the maintenance of fiscally crippling entitlements in the name of intergenerational justice when just treatment for future generations was of no concern to the designers of the entitlements in the first place.

One additional point from the “Call” jumped out at me from the “Core Proposals” section. Specifically:

“We must reform the tax code. We should remove many special exemptions, end many special subsidies, and keep the tax code progressive.” 

There is a lot to agree with in that statement – the Federal tax code is monstrous, and it is very likely that there is no one person with the capability to understand it in all of its intricacy. It is filled with all manner of loopholes, exemptions, and subsidies, and needs to be brought under control if we have any hope of understanding exactly how Washington obtains and distributes its revenue. But why the insistence that the tax code remain “progressive”? Why must that be part of any “Christian” proposal to address our nation’s debt crisis? Is progressive taxation truly just? When I read that statement, I recalled reading a contrary opinion from one of my favorite theologians and commentators, R.C. Sproul, on just this issue:

Alexis de Tocqueville, when he came and examined the great American experiment of democracy, said two things can destroy this experiment: One is when people learn that their vote is worth money, that you can bribe people to get their vote or that you can use the vote to somehow shelter yourself from financial or other obligations imposed upon others. Have we taken the blindfold away from lady justice? Are we not all equal under the law? 

On the contrary, we have an income tax structure today that is inherently unjust. We almost never hear anybody discuss this injustice. But when God set up a system of taxation, He did things differently. God said I’m going to impose a tax on my people and it’s going to be ten percent from everybody: The rich man and the poor man are not going to pay the same amount. The rich man’s going to pay much more than the poor man, but they’re both going to pay the same percentage. They’re both going to have the same responsibility. That way the rich man can’t use his power to exploit the poor man, saying, “I’m going to pay five percent, but you’re going to pay fifty percent.” The rich weren’t allowed to do that. Nor were the poor allowed to say, “We’re going to pay five percent and the rich are going to pay fifty percent because they can afford it.” What that is ladies and gentlemen is the politics of envy that legalizes theft. Anytime you vote a tax on somebody else that is not a tax on yourself, you’re stealing from your brother. And though the whole world does it and though it’s common practice in the United States of America, a Christian shouldn’t be caught dead voting to fill his own pocketbook at the expense of someone else. Isn’t that plain? Isn’t that clear? And until we get some kind of flat tax, we’re going to have a politicized economy, we’re going to have class warfare, and we’re going to have the whole nation’s rule being determined by the rush for economic advantage at the polls. Don’t do it. Even if that means sacrificing some benefit you might receive from the federal government. Don’t ask other people at the point of a gun to give you from their pockets what you don’t have. That’s sin.

I don’t write any of this to call into question the Christian commitment of any of the signers of “A Call for Intergenerational Justice.” In fact, I have little doubt that the signers of the document do indeed have a deep concern for the poorer members of society that they hope to defend in their actions. I’m more interested in pointing out that this document is exactly what its subtitle claims it to be: “A Christian Proposal for the American Debt Crisis.” Emphasis on A. It is not the Christian proposal; it is simply one of many responses that well-intentioned Christians can have to our current crisis. And it is entirely possible that well-intentioned people can have blind spots or propose economically flawed solutions to pressing problems. That seems to be a big part of what’s going on here.