The joy of the IRS

[dwsmith]

I had to amend my 2011 tax return which wasn't a big deal. I was entitled to another $\$$95. I couldn't e-file an amended return so they sent the check to my mother's home and she simply sent the check to the bank. Today the check cleared. This when I noticed there was a grave mistake. It wasn't for $\$$95 but $\$$1095. I called the IRS today to let them know of the mistake. I was giving the information to return the $\$$1000. At the end of the call, I was informed I could be charged interest. How do they have the audacity to charge me interest for their mistake which I promptly informed them of as soon as I noticed the error?

Nothing can be said about the gall of the IRS.

 

[Jameson]

Charged interest on what? Wow, that would tick me off to say the least. I filed for my extension online and have to find the forms for overseas income soon. I believe if you make less than \$90,000 or so abroad than you don't owe anything.

 

[Ackbach]

Given a certain income, your federal income tax on that income is x. If you pay it all in one lump sum, instead of gradually as you go, then theoretically you are getting all of the interest of that money while you have it. The government views that tax money as theirs, as well as the interest it can generate.

The best outcome at tax-time, so far as I can see, is to owe a little and to take the standard deduction. That means that you slightly underpaid, and the government doesn't get any more interest than it should. You almost certainly won't get audited if you owe a little, and you take the standard deduction.

I don't believe in income tax at all, though. The IRS should not exist, or at least not be nearly so large as it is. Instead, there should be a flat percentage sales tax on the vast majority of purchases. That would be quite fair, I think, and much easier to administer. You could seriously downsize the IRS and streamline the cost of government that way.

 

[Deveno]

but would it be "fair"? i mean, someone earning less than $\$30,000$/year may well spend almost all of their income on "taxable" goods, whereas someone earning $\$200,000$+/year might spend only 50% of their income on taxable goods. so who's paying the higher tax rate then?

and would such a system encourage businesses to charge more for services, to reduce their tax burden (unavoidable with "goods")? the overall effect might be increased inflation, and reduced governmental services (like, you know, schools, roads, police...those sort of things which pfft! who needs 'em?).

my fear would be that a down-sized government might prove short-term profitable for the "average american", but leave our social infrastructure weak far into the future. drive on a road full of pot-holes, and see what that does to your car. sure, there's a lot of waste in our government, and we ought to pay more attention to what it spends and why...but the IRS staff isn't really that big of a chunk of money, in the big picture. of course, nobody loves them...money is hard to come by, no matter what the infomercials say.

 

[Ackbach]

but would it be "fair"? i mean, someone earning less than $\$30,000$/year may well spend almost all of their income on "taxable" goods, whereas someone earning $\$200,000$+/year might spend only 50% of their income on taxable goods. so who's paying the higher tax rate then?

Buying stocks and shares would be taxable. Rich people want to get richer, so they invest. We'd tax them there. If someone really has a lot of money that they're not investing, and thus not gaining, so be it. Money actually isn't any good to anybody. It's only what money can do for you that's good to anybody.

and would such a system encourage businesses to charge more for services, to reduce their tax burden (unavoidable with "goods")? the overall effect might be increased inflation,

Inflation is quite a different matter, and somewhat irrelevant to this discussion. Businesses probably would increase their prices from what they are now, slightly. But since no one would pay any income tax, the overall buying power of the consumer would increase.

and reduced governmental services (like, you know, schools, roads, police...those sort of things which pfft! who needs 'em?).

List of governmental services to eliminate:

Education (should definitely be privatized, for so many reasons)
Welfare
EPA
NEA
and many more.

List of governmental services to reduce:
Defense (should be trimmed and streamlined, as per this person's ideas, not like the way the Democrats want to eviscerate the military)
IRS

List of government services to maintain:
Police
Roads (only because privatization would be rather difficult due to the capital involved)
Law-making (definitely need to keep this as inefficient as the Founders sought to make it, so that it is difficult to pass laws)

my fear would be that a down-sized government might prove short-term profitable for the "average american", but leave our social infrastructure weak far into the future. drive on a road full of pot-holes, and see what that does to your car. sure, there's a lot of waste in our government, and we ought to pay more attention to what it spends and why...but the IRS staff isn't really that big of a chunk of money, in the big picture. of course, nobody loves them...money is hard to come by, no matter what the infomercials say.

The whole point of downsizing the government is that the government is terrible at many of the things listed in my "eliminate" list above. Education, in particular, is much too important to be left to the incompetent hands of the government. The government cannot make good economic decisions for me, because the government cannot keep track of all the variables necessary for me to make good decisions for myself.

For more on this, I would highly recommend the Austrian economists: Carl Menger, Eugene von Bohm-Bawerk, Ludwig von Mises, Friedrich von Hayek, and Murray Rothbard. Together, they have completely closed the Marxist system, and pretty much any other big-government system as well.

Give me liberty or give me death!

 

[Deveno]

Taxing stocks would go a ways towards reducing the inequity. The point is, poorer people often spend the greatest percentage of their income just SURVIVING. A man's gotta eat, and gotta sleep, one cannot do without. When ALL your income goes towards things you actually need, ANY percentage taxed means...you live worse.

I admit the welfare system is rife with fraud, and probably inefficient as well. But what is your alternative proposal...let them eat cake? I've been well-off, and I've been flat broke and homeless, and what I can tell you...life at the bottom is HARD. You wind up selling your own blood just so you can eat. The "burdens" of the over-taxed just do not compare with that. Faith-based charities are a joke. Leaving the care of the destitute to the mean, self-righteous and miserly...it's like hiring child molestors to run orphanages. I fail to see how eliminating the welfare system is going to create income-earning opportunities for those who have none. What do we do about that (what is it, 7-1/2% now)?

And the real injustice is...even if one were to accept that the recipients of welfare were all shiftless and lazy, unmotivated people, who ought to be forced to find gainful employment, what of their children? Sorry, son, you should have been born to more responsible parents. The trouble with insisting on individual responsibility is that not all individuals are responsible. Who takes up the slack? I'm open-minded...whose responsibility is it, ultimately, to see that life is as fair as it can be?

With privatizing education...how does that work? Who pays? Who determines the educational standards? Will college retreat to being within the grasp of only those who can afford it? Will the future shape of society be that a man's worth is literally his worth? If you're well-to-do, you're by default, superior? I find that concept abhorrent, and all too prevalent. There's a sizable amount of luck involved in one's circumstances, how do we level the playing field? Surely you're not proposing we just regard 5% of our population as "disposable"?

My point is, the government isn't SUPPOSED to make good decisions "for you". It's SUPPOSED to make good decisions for the COUNTRY. If you can show me ideas how America will be a better place (on average) for EVERYONE, I'm all for it. My problem with most Marxists regimes is that they concentrate so much power in the hands of the government, it is no longer accountable to anyone. Then corruption sets in, as people within the government vie for as much control as they can grab. And there's no one to tell them: no, you can't just do that. The "checks and balances" we have (and sometimes ignore, such as when our president decides he can start a war whether Congress agrees or not), are so far the best part of our system we have going.

But, let's look at what we spend, and what might actually "do the most good":

Social Security: around 21%. What a mess! Frankly, I'm out of ideas on this one. Our birth rate is shrinking, which means fewer people are paying for more. Something's got to give, but should it really be people who have worked all their lives who get the short end of the stick? Let me know your ideas on this one.

Defense: this comes next at (depending on how you slice and dice the numbers) anywhere from 16-20%. While I don't advocate "gutting the military", modernizing, and efficiently re-structuring it is undeniably a good thing. In my mind, the Department of Homeland Security should just...go. If it's a threat from abroad, it's military jurisdiction. If it's here in the US, it's FBI/Justice Department. We could trim anywhere from 4-6% right there. That's HUGE.

Medicare/Medicaid: this is also big (13% + 7%). Everyone knows this is broken. No one agrees on how to fix it. Employers certainly do NOT want to take up the slack, as insurance costs leave them less money for wages (which also means less tax money for the government). Here, privatization may be the only viable option. I don't really LIKE the idea, but it's the best alternative I see.

Unemployment/Welfare/Social Services: around 12%. A large part of this is unemployment benefits. If you paid the taxes for these while working, you should be entitled to receive them, yes? I DO suggest that more welfare benefits be shifted from cash payments to payment-in-kind type benefits (such as with the EBT cards for food stamps), to cut down on fraud. I have a hard time with reconciling elimination of programs aimed at children with my own innate sense of decency.

National Debt: 8.5%. This is just the interest payments. Unless we make some progress in some OTHER category, we're stuck with this one. Everyone has a right to be upset about this one, but everyone also has their own ideas about who should take it in the shorts. The good thing about Ackbach's proposals is we WOULD make progress on this, if they were done right (and the people in Washington didn't just go all giddy with the extra funds).

Everything else is (comparatively speaking) small potatoes. Complain about the EPA or the DOE or NASA or farm subsidies all you like, they're not really part of "the big picture". Draconian measures in the various cabinet departments might squeeze around 3-4% savings, but LOTS of people would not be too happy about it.

The Department of the Treasury (which the IRS is part of) is fairly far down the list at around 1.25%. I don't know how much of this funds the IRS, but we're talking about a small slice of the pie.

******

All this said, I think much of it is a moot point. I foresee a world-wide economic collapse, based on a world running out of natural resources to plunder to fuel economic expansion, together with an exploding population dictating an increasing devouring of these same resources. Economics is becoming increasingly globalized, due to the increased communication and transport abilities technology has given us. Nationally, I predict fresh-water shortages by the 22nd century (in this country), and the political fallout over water rights could have profound economic consequences. Enjoy it while you can, this may well be the high-water mark of our civilization.

 

[Jameson]

I know that entitlement programs is an issue that most people in the US feel very strongly about, one way or the other. At times I see merit in both sides' arguments but I don't know how to justify to what and to what extent people are entitled to something. General safety, infrastructure, upholding the rights in the Constitution are all things that I think the federal government should provide, uphold or protect but it gets complicated real fast after basic order. When more power is given/taken by the powers at be, at least in the US, it seems really unlikely to ever be returned. In the end, I see it as since the government inherently has nothing and produces nothing without using the resources of others then it should not serve primarily as a provider of prosperity. I know that my view on this is greatly due to me being born into a great family and if I were born into poverty I would be very happy to have help, but the federal programs don't fix the real issues causing the lower class to remain there and I don't think this is related to insufficient funding to do so.

On a separate note, after living in a country for 2 years that had 3 different governments in a century I've noticed that Americans don't seem capable of imposing any kind of fear into the US government. We didn't go through the same things Europe has in the 20th century with countries going left and right, borders moving and disappearing. I think that we will argue about every issue until the end of time but I don't see how even under the worst of conditions the people here would do something close to a revolt. I don't want that to happen of course, but when a government never has to fear its people no matter what, then corruption and taking more and more power seems inevitable. So to lead back to my first paragraph I don't see how significant differences will be made through our current system and I don't see us forcing change physically so a lot of these debates seem like nothing more than an intellectual exercise.

So in general I just mean that I don't know what the ideal level of government involvement is and I feel that the US as a nation has so much political information around daily (24 hour news, radio, internet, opinion pieces) but we aren't doing much about our discontent.

In Russia politics are so easy One party, one leader, no need to show up to vote - it will be taken care of for you. Not a joke.

 

[Deveno]

Well, you've got a point there. A lot of economic disparity in this country is the fruit of centuries of different levels of prejudice: the rounding up of Native Americans to reservations, the segregation of black Americans to ghettos (or Hispanics to the barrios), and in earlier days, the relegation of Jews and Irishmen to jobs no one else wanted. Even though some of the injustices have been rectified by legislation and social change, the sins of the fathers really ARE visited upon the sons.

I don't think the federal government of the United States should have MORE power, or grow larger than it is...we're probably stuck with what we have already. That said, in some ways we've changed very little from the medieval times of the local fiefdoms...instead of land-ownership, we've just shifted the source of power to less tangible assets (the corporate world). People left to their own devices appear to be unrelentlessly selfish, a good government can mitigate this somewhat (but, in practice, often fails to).

In all honesty, a lot of political debate in America is something along the lines of: "shall I buy a Ford, or a Chevy?" Very few Americans even contemplate overthrowing the government, we pretty much accept the status quo, and instead debate over the "focus" of our current system. Perhaps this will be our undoing one day, but the stability of our political system is undeniable (and probably envied by more than a few war-torn countries).

As for dwsmith's original post: yes, that is just stupid. Typical bureaucratic snafu. I would send them a check for 999 dollars and 99 cents. They'll lose money trying to collect the extra penny

 

[Jameson]

One of the first things I noticed when arriving in the US this time was how political discussion was everywhere. Russia has a horrible system right now but the people I talked with all seemed just as interested in politics, both their own and the US's. I didn't mean that our long period of one government is a bad thing. It's amazing really when you consider governments are failing today in some countries and the effects of WWI and WWII on the rest of the world geographically.

Anyway, watching various news sources confirms for me that this liberal vs. conservative battle is so unnecessary. Many people pick 1-2 issues that they will not budge on, often times an issue not extremely pressing in current affairs, and base their political worldview on that. These two parties speak like they are so different but the way they act isn't as different as it seems. Going back to what I said about talking about politics just for the sake of talking about it, we are so busy with the party vs. party battle that ideas like getting rid of the IRS and other huge federal institutions isn't seriously considered by most; it's just too weird. Ron Paul is drastically different than Romney or Obama, but isn't taken seriously in the media because the things he says are outside of the normal differences in political viewpoints. Third party candidates just can't make it so I feel like we're stuck with the illusion of two opposing choices. I'm not endorsing anyone, just saying non-traditional candidates don't have a chance.

About federal income taxes: on the radio I've been listening to a lot of shows about taxes related to the super wealthy. From everything I gather taxing the rich more wouldn't even make a dent in the government deficit. It's not about finding money we need, it's about fairness. Instead of looking at a major problem of government spending, we are focused on a much smaller amount of money with the super rich. Federal Income Tax started with the 16th amendment in 1913. Lots of the Cabinet positions were founded past 1950. Every time one of these agencies is added, more regulatory power is given to the federal government.

\Me talking about politics too much

It's so easy to get sucked in and instead of writing a couple lines about the how one topic it quickly becomes a giant political analysis and approaching a short essay and it's 3:30am. Should have written: "Yeah, I hate the IRS too."

 

[Deveno]

One of the cool things about the US is: it is by and large, a happy country. The irony of this is, we often don't KNOW we're happy. The rural areas are the best, something about the pace of urban living winds people up, and the stress isn't helpful (but the excitement still draws people to them).

You're right on the money about the fairness issue. Almost everyone agrees the the "people in the middle" (the middle-class) are the unhappiest about the tax situation. There are tax breaks up to a certain income level, and ways around taxation (tax-free investments/tax shelters) for the wealthy (on paper, they can be penniless, administering a trust for a non-profit organization, for example), but the middle class is basically stuck with paying it. Which can have the effect of marginalizing disposable income (the kind economists would like to see boost our anemic economy).

The whole idea of the two-party system (in theory) is that each side attempts to thwart the other, so that nothing gets done unless an overwhelming majority agree its a good idea. Of course, pay raises for Congress itself are usually not so hotly contested P). Another unfortunate consequence of this, is that often substantial legislation is buried in a law so byzantine, no one knows what is being done until it's too late (so called "pork-barrel" legislation, in which a representative for a certain area pushes through something advantageous for the region he/she is from, is often passed this way, in the form of "riders" or "amendments" buried in the fine print).

My girlfriend believes that Bush was the devil. Her mother believes Obama is the devil. Common sense dictates they can't both be right (unless, mayhap, the Oval Office is possessed by evil spirits, eh?).

But, yeah, nobody like tax collectors. Seems like it's always been that way.