An extra $345 to $500 billion toward paying down the deficit?

That’s right. What if we could put that kind of money toward our ‘ballooning deficit’ as the least hysterical Republicans refer to it? Wouldn’t you think that would be a good thing? Wouldn’t you think they’d be all over that? They aren’t. In fact, the Republicans and their Tea Party friends are considering cutting the budget of the very agency that could get that money.

It’s the IRS.

We’re talking about the ‘tax gap’. What, you ask is the ‘tax gap’. Simply speaking, it’s the difference between what ‘we the people’ are owed (through the IRS collection agency that we employ) by deadbeats or those who are simply math-challenged, and what they haven’t paid up.  There are a couple main components of the gross tax gap: Under Reporting, Under Payment, and Non-filing.

Under Reporting accounted for nearly 68% of the tax gap among individual filers in 2001. Imagine what it must be today. Of that, 60% is estimated to be from business and self-employment income, which is difficult for the IRS to verify.

As you can see, much of the under reported taxes are from individuals. Things like Estate, Excise, FICA and Corporate taxes are fairly easy for the IRS to verify automatically due to reporting requirements.

So why isn’t the IRS making some better efforts to take care of this problem? Remember the Grover Norquist maxim: Starve the Beast? Libertarians, Tea Party types and many within the mainstream GOP think the IRS ought to be abolished, but failing that, they can work at defunding it. And when you defund an agency enough, and it becomes dysfunctional, then you can self-righteously point and say “See. It doesn’t work. Get rid of it.”

Notice that it’s never news when government works well - keeping your federally inspected airliner safely in the air on your vacation trip through strict safety and training regulations for the airlines through the FAA, an effective Air Traffic Control System that covers the entire nation, a federally funded/financed system of effecient, modern airports around the nation, federally funded and run real-time weather reporting from federally funded satellites (so you don’t fly right into a big thunderstorm). And, if you should be in your own airplane, and the worst happens, it’s federally funded volunteers like me - in the Civil Air Patrol - using federal assets (those Cessna 182’s) and SARSAT that come looking for you.

What? Did you think all this came for free?

It’s only ‘news’ when government screws up. And being run by mere humans - people like me and you - that’s likely to happen occasionally.

However, there is another way of looking at taxes. Like maybe taxes are good. Douglas Amy, Professor of Politics, Mount Holyoke College says on his website Government Is Good:

To put it another way, you can’t support the things the government does – like caring for the elderly, establishing justice,  providing public education, fighting terrorism, and protecting the environment – and still maintain that the taxes that support those things are bad. Taxes are the lifeblood of government and so if government is basically good, then so are taxes.

Just a little Google research told me that the IRS has been trying to fix this problem for several years at least, but can’t get it done with ever decreasing funding. OMB Watch has this to offer:

The IRS has requested $13.3 billion for fiscal year (FY) 2012, a $1.2 billion increase over the agency’s enacted FY 2010 budget. House Republicans, however, are unlikely to grant that request, as they are currently attempting to cut $603 million from the IRS’s current budget. Much of the IRS’s requested FY 2012 budget increase will go toward increasing the agency’s ability to narrow the tax gap through better tax enforcement and information technology (IT) enhancements.

We want agencies to work better and more effeciently, but apparently we’re not willing to give them the tools to do just that - even with a clear, unambiguous objective.

It’s rather like a couple sitting down in marriage counseling and telling the counselor “I want things to be different.”

Yes, and just how do you want it to be different? And what ‘skin’ are you willing to put into the game to see that ‘different’ happens?

There’s the rub. Many couples just expect to keep on doing what they’ve been doing, expecting ‘different’ results. Doesn’t work very often.

Same with government.

Oh, BTW this same problem has surfaced in Wisconsin, where Gov. Scott Walker would like to take the presumed ‘deficit’ out the of the hides of state employees (while getting rid of that pesky damned union representation and money that flows to Democratic candidates) rather than go after unpaid corporate incomes taxes that would damn near deflate that deficit.

Hmmmm. The man needs couples counseling.

-maven

Welcome to April 15th: Bizarro world

The income tax has made more liars out of the American people than golf has.

Will Rogers, Illiterate Digest (1924), “Helping the Girls with their Income Taxes”

Tax season should start out with the sound of a starters pistol and the cry “Ready, set, prevaricate!”  

The tax code is so mindnumbingly complex that over 60% of us willingly pay people to fill out the forms for us. Economic behaviorists say this ‘diffuses’ the responsibility we might feel to tell the truth about that donation of 12 boxes of condoms to Goodwill.

Simplify the tax code and we could fill out a single sheet form online and send it off with a click and the single finger salute.

There was an attempt at tax code simplification back in 1986, but we’ve got over 100 years of codes and revisions, all written in very small print, in language that any English teacher would be horrified at.

According to Nina Olsen, the National Taxpayer Advocate, U.S. taxpayers and businesses spend about 7.6 billion hours a year complying with the filing requirements of the Internal Revenue Code. Furthermore, if tax code compliance were an industry, it would be the nations’ largest.

You’d surely think there would be better uses for our time, like watching Billy Mays infomercials or cleaning tile grout.

Ms. Olsen goes on the say that “Since the beginning of 2001, there have been more than 3,250 changes to the tax code — an average of more than one a day — including more than 500 changes last year alone.” It’s no wonder we’ll pay anything to avoid facing the beast.

Even trying to play by the rules can get you into trouble: either you overpay, since you can’t understand the stuff, or you accidently underpay because…. which shoebox was that receipt in? This amounts to damned if you do, and damned if you don’t. One change suggested by experts is that courts start with looking more into the intent - or lack of it - in the infraction and less at the transposed numbers and goofed up forms.

Tax code is a perverse world of rules telling you how much tax to pay and then follows it up with hundreds, if not thousands of rules that resulted from court cases where the IRS prevailed and caught a cheater. One cheater equals one new rule. Thousands of tax cheats equal … well, you get the idea.

Like your garage, once something goes in, it never, ever comes back out.

To make the tax code even more complex is the fact that at least half of the items in sections 101-140 (items specifically excluded from gross income) are there for a particular special interest - namely corporations represented by a highly paid lobbying firms. For example, what about, “exclusion of gain from the sale of principal residence?” Could the National Association of Realtors have a stake in that one? Hmmmm. The list of industries at the trough is endless. You name it and they’re there.

Trying to take on any one of these would result in the fist fight to end all fist fights, and nobody in Congress wants to start it.

Like Justice Oliver Wendell Holmes, I believe paying taxes is the price paid for living in a civilized society. Unlike the tea-party anti-tax types, I don’t think you can run a country on donations, faith based initiatives or the energy produced by flag waving.

It seems like we should be able to pare down the estimated 3.7 million words currently comprising our tax code, make it a percentage of gross income, cut lobbyists out of the loop, and give our elected representatives the chance to do the right thing rather than the thing that will get them re-elected. But that might involve campaign finance reform.

For better or worse, my taxes are finished and filed. I’m headed for a nice cold martini now.

maven