Tag Archives: taxes

Income Tax: No Honor Among Thieves

Hundreds (RGBStock)

Former US congressman (and presidential candidate) Ron Paul kept a placard on his desk reading “don’t steal — the government hates competition.” Unfortunately for taxpayers, that competition is getting more frequent and more bold. According to US News and World Report, nearly a quarter of a million taxpayers filed affidavits claiming identity theft in 2016, while the IRS stopped nearly 800,000 more fraudulent tax returns.

On April 6, Internal Revenue Service commissioner Josh Koskinen informed the US Senate that fraud-enabling information on as many as 100,000 taxpayers may have been compromised via an application allowing students applying for financial aid to import their tax data. This single breach seems to have produced more than 20,000 fraudulent tax returns, only 2/3 of which were caught ($30 million in “refunds” were sent out).

How did we get here? It’s a long story, starting in 1913 (with the 16th Amendment and the creation of a federal income tax, which initially applied to only a few of the richest Americans) and passing through World War Two when more and more people got hit up and government economists (including a young Milton Friedman, later an icon of the libertarian movement) came up with the idea of “withholding” tax revenues from paychecks instead of just collecting once a year.

The average American worker gets robbed on a weekly basis. His or her employer, acting on behalf of the IRS, skims a portion off the top of each paycheck. In a gesture of seeming magnanimity, the gang hands some of the loot back over each year to nearly eight out of ten victims — but only after the victims spend considerable time and/or money filling out paperwork, due by mid-April (this year, on the 18th).

Is it any surprise that competing thieves would look for ways to game a trillion-dollar-plus scheme that pays out (as of 2015) $278 billion in refunds? According to the Department of the Treasury, “[a]s of May 2, 2015, the IRS reported that it identified 163,087 tax returns with more than $908.3 million claimed in fraudulent refunds and prevented the issuance of approximately $787 million (86.6 percent) in fraudulent refunds.”

Even if the IRS is completely correct about how many fraudulent returns were filed and how many were caught, that’s a $121 million payday for the IRS’s freelance counterparts. That’s a drop in the bucket compared to what the IRS itself steals, but it ain’t chump change.

Fortunately, income tax refund fraud is an easy problem to fix. The smaller scheme depends on the bigger one. Repeal the income tax and the problem solves itself!

Minus the income tax, other existing federal income taxes would fund Washington at spending levels typical of the late 1990s. I don’t remember running into anyone back then who claimed that government was too small. Do you?

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.


The Target of the “Border Adjustment Tax” is You

Federal_Debt-VS-Taxes (Photo credit: Wikipedia)

“[O]n life support,” says US Senator John Cornyn (R-TX) of the “Border Adjustment Tax,” proposed during last year’s GOP presidential primaries  by US Senator Ted Cruz (R-TX) and backed by Speaker of the House Paul Ryan (R-WI). If the idea is indeed dead, American workers and consumers should heave a sigh of relief. It’s a very bad idea, in more ways than one.

The BAT is promoted as a “tax on imports.” Which, I guess, is technically accurate, but doesn’t tell the whole story. It’s not just a tax on  imports. It’s a tax on people who buy the imports. That is, it’s a tax on you.

For obvious reasons, retail merchants don’t like the idea very much. It would force them to raise prices on lots of items. Which is the same reason you shouldn’t like it, unless you like paying more for stuff than you pay now.

For equally obvious reasons, some American manufacturers love  the Border Adjustment Tax. Every extra dollar you have to pay in tax for something made abroad is a dollar they don’t have to find ways to cut from their manufacturing costs to compete on price. For them it’s the equivalent of running a race in which their competitors have to carry backpacks full of lead and they don’t.

The politicians behind the idea love it because it would let them give their business cronies a huge tax cut — reducing the corporate tax rate from 35% to 20% — without reducing government spending.

Ultimately American consumers pay both types of taxes, of course, but the BAT would shift the burden to customers who buy goods made in China, Mexico, South Korea, Pakistan and so on, hurting retailers who sell those things in order to subsidize American manufacturers at everyone else’s expense.

All this talk of “tax reform” is just smoke and mirrors, a way of disguising the reality that every dollar government spends has to come from somewhere, and that that somewhere is taxation. Borrowing money is just promising to tax later. Inflating the currency is just a hidden tax.

Shifting the tax burden around with tricks like a “Border Adjustment Tax” isn’t real reform, it’s just rearranging the deck chairs on the Titanic. The first step in any meaningful reform is for Congress to commit to spending no more money than it takes in. The second is for it to start taking in less.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.


“The Price We Pay for a Civilized Society,” 2016 Edition

English: Many dollar banknotes.
Hundred dollar banknotes. (Photo credit: Wikipedia)

“Tax Day,” the deadline for filing individual federal income tax returns, falls on April 18 this year. Usually it’s April 15, but a federal holiday, Emancipation Day, bought you the weekend if you’re running late. I feel your pain. Sackcloth and ashes! Wailing and gnashing of teeth!

In addition to the annoyance of filling out a bunch of paperwork and maybe even sending a check to Uncle Sam if he didn’t take as much as he wanted out of your paychecks over the course of 2015, you’re in for the usual series of lectures about how this business or that billionaire didn’t pay “their fair share.” Case in point: Javier E. David’s April 16 column for CNBC, “Corporate tax dodging costing US billions in annual income.”

Let’s try an experiment.  I have a dollar in my pocket. OK, I’m taking it out. Now, instead of giving it to you, I’m putting it back in my pocket. Did my actions “cost” you a dollar? No, they didn’t. That dollar was never yours to begin with.

Similarly, when David complains that “Apple, General Electric, Microsoft and Google engage in tax havens that costs [sic] the US $111 billion annually,” he’s getting it backward. That money belongs to Apple, General Electric, Microsoft and Google, not to “the US” (by which David means “the US government”). Wanting it and not getting it is not a “cost.”

Ditto the 1040 you’ve probably filed or are about to file. In most cases, every dime involved is money you earned that the government previously embezzled from your paycheck, or demands that you cough up now (I say “most cases” because some lower income filers end up getting back, through “refundable credits,” money than they paid in).

So here comes the libertarian line that induces tantrums and seizures in lovers of big government:

Taxation is not, as Oliver Wendell Holmes, Jr. put it, “the price we pay for a civilized society.” Taxation is theft, pure and simple. It’s no different in principle than any other embezzlement scheme or protection racket.

If there’s a difference at all, it’s a difference of manners. Muggers and extortionists are morally superior to government in that at least they don’t pretend they’re doing this stuff to you for your own good.

Next time a politician regales you with tales of all the great things he intends to spend billions on, remember who he’s getting that money from, and how.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.