Profiteering

[ancient_paztriot]

Seems to me the rich are raping us all through tax scams.

 

I'd like to know how all this started. At what point did the government(s) decide the people could be taxed for personal profit through business write-offs.

 

Actually, it's hard to grow into a big business without this cheating. Is this the only justification for it… that we can't do it without your help (by forcing you)?

 

It works out that we are paying for our own destruction through such policies.

[stonehearted]

Here's an online chat with David Cay Johnston, author of Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else. This book is high on my to-read list.

 

 

Mark Lewis: Welcome, everyone. Let's get started. David, you begin your book with the statement, "I believe that taxes are at the core of our democracy." What do you mean?

 

David Cay Johnston: All governments have taxes. And governments that lose their tax systems cease to exist. Taxes are the means by which we decide how we're going to finance maintaining our democracy--who pays how much, how the burdens are distributed.

 

What's wrong with our current tax system?

 

Most Americans believe what turns out to be a myth--that we heavily tax the highest-income Americans to subsidize the poor. What the government's data show is that the middle class and upper middle class--people making $30,000 to $500,000 per year--are subsidizing the highest-income taxpayers. Tax rates on the middle and upper middle classes are rising, the government's data show, but for the people who make millions per year, effective tax rates are falling dramatically.

 

Secondly, law enforcement has collapsed. I name two billionaires who've testified under oath that for 30 years they never filed a tax return while running a business in New York. Nothing has happened to them, or to most of the many other people I name in my book who admit or even brag about not paying taxes.

 

How did things get this way?

 

Most Americans, if they ever meet a senator or congressman, shake their hand in the mall at election time. Important donors, about one in 850 Americans, get to sit down with their congressman and explain in detail their grievances. Every politician will tell you, you cannot buy their vote. All you can buy is access. Well, access has bought the attention of Congress, so that members are focused on the needs and welfare of their donors, not their typical constituents.

 

Proof? Two days after 9/11, the first tax bill introduced in Congress was estate tax relief for the victims, which did absolutely nothing for the firefighters, police officers, secretaries and volunteers who died. It wasn't a guaranteed college education for the orphans of 9/11. It was tax relief for the very narrow group, probably less than 2% of those who died, who would owe estate taxes.

 

How would you change the tax system?

 

I don't know, but you do. By "you" I mean that all of us, if we understand the reality of how our current tax system works and the principles of taxation, can come up with a better system, one that encourages strivers and rewards those who play by the rules instead of focusing its benefits on those who are already stunningly rich.

 

You direct numerous barbs at the "super-rich," whom we at Forbes like to celebrate as wealth-creators. Do you think the tax system should be designed to prevent the amassing of great fortunes?

 

The tax system should be encouraging prosperity and wealth, and making sure those are as widespread as possible. But what the government's data show is that we are taxing away the ability of the middle class to save, and damaging their prosperity. And by radically lowering the effective tax rates of the highest-income Americans, we are concentrating wealth and income very, very, very narrowly.

 

In 1970, the top 1/100th of 1% of Americans had about 1% of the income. And the bottom third of Americans had more than 10% of the income. Now, they're equal. Just 27,000 people have as much income as the bottom 96 million Americans, who in real terms have less income today than in 1970. And the number of people it takes today to account for 1% of all income? In 1970 it was more than 20,000 people. Today it's less than 400.

 

How high would the top rate be in your tax system?

 

Again, I don't know. What we do know is that relatively lower marginal rates reduce tax cheating, but for them to work, we have to broaden the tax base. We only tax about half of income each year. So if we tax all income, clearly we could significantly lower rates on everyone.

 

What do you think Congress should do about the Alternative Minimum Tax?

 

The taxpayer advocate at the IRS recommends repeal. The problem is, some really good tax lawyers say that would create new loopholes. Some other ways to address this are to set a high-income threshold for the tax to apply, say $500,000 per year and up, and eliminate, in the AMT calculations, the ordinary deductions and exemptions people take for themselves, their spouses, their children, their state and local income and property taxes, and the standard deductions. Otherwise, in 2013 about 43 million households will be on the AMT.

 

In this morning's New York Times you write about a gentleman named Irwin Schiff, who asserts that the federal income tax is illegal and does not have to be paid. Schiff clearly is an extreme case, but how deeply do Americans in general resent the current tax system? Can that resentment be harnessed to support the reforms you advocate?

 

The number of people who believe that the United States government is a criminal organization that illegally extracts income taxes and imprisons those who challenge it with no legal cause is a lot bigger than I ever imagined. There are at least 7,500 business owners who don't withhold taxes and turn them over, according to the General Accounting Office--and those are just the ones the government knows about. There are people all over the country who grit their teeth and pay their taxes but to this dangerous and nutty idea that the federal government is a criminal organization. That's a sign of how oppressive the tax system has become on the bottom third of Americans whose incomes in real terms have been falling for years, while they're being squeezed by rising taxes at all levels of government.

 

Every thoughtful American should be concerned when a man whose own psychiatrist says he's crazy--Irwin Schiff--has among his supporters business owners and others who are not on the economic fringe.

 

Any final thoughts?

 

The promise of our Constitution is that we together can work out the solutions to our problems. But doing that requires that, one, people understand what's actually happening in our tax system rather than the blather of politicians, and two, that people participate as voters and as citizens who discuss public issues with their friends and neighbors. The reason our tax system is out of whack is that the narrow segment of very high-income people who don't want to pay taxes has been actively engaged in exercising their citizenship. And too many of the rest of us have been watching Jennifer Lopez.

 

That's all we have time for today. Thanks for participating.

 

[ancient_paztriot]

This is powerful stuff you posted…

 

"Well, access has bought the attention of Congress, so that members are focused on the needs and welfare of their donors, not their typical constituents."

 

How to reach people through all the ignorance and apathy?

[ancient_paztriot]

"The reason our tax system is out of whack is that the narrow segment of very high-income people who don't want to pay taxes has been actively engaged in exercising their citizenship."

 

I say they've been exercising their criminal intent.

[theist]

I hear there never was an income tax until sometime during the last century. Not sure of the details.

 

There should be a flat tax I believe. Say 25% at the top. Graduated up according to income. The very poor pay nothing etc.

 

Say someone makes $50,000 and pays 25% ,they then pay $12,500.

 

If someone makes a million they pay $250,000.

 

It makes no sense to envy the rich as actually they are the most harrassed by their attachment to their wealth and all that it takes to manage it all.

 

"It is difficult for a rich man to enter the Kingdom of God."

 

ps thanks for the encouraging call sometime back paz.

[ancient_paztriot]

Seems alot of this scamming follows the appearance of the proction line… Yes, Henry Ford and the first car… the authority could then remove himself from the circumspect of others.

 

Yes, equittable tax and it should remain the same for many years. Why change so many laws every year? Who are they changing the laws for? Those who have access. Those with money and business and wealth and personal gratification interests… beginning to sound like a conspiracy?

 

You said:

"It makes no sense to envy the rich as actually they are the most harrassed by their attachment to their wealth and all that it takes to manage it all."

 

I think that is a perspective for a liberated soul… of which I am not. In terms of direct bearing on my life, the rich are stealing my wealth with a crooked pen… just another aspect of business.

 

I'll be in touch.