All right all you guilt-stricken government-lovers, let's hear it with the boos and hisses. Everybody together: wail and snarl and gnash your teeth, because I'm going to talk about…tax shelters.
Yes, ladies and gents, there still are truly vicious criminals in the world, the kind that make you consider rethinking your heart-throbbing opposition to the death penalty. We're talking not about tax cheats—a truly awful group of criminals in their own right—but about those who take advantage of…why, the laws that Congress has passed.
Tax shelter! The very words are enough to send shivers down a hardened journalist's spine. Why, if it weren't for all those evil rich people taking advantage of all those loopholes (a delicious word in its own right), well then maybe we could—just maybe, in the name of all that is kind and decent in the human spirit—well, maybe we could reduce the deficit.
Of course, if one considered where tax shelters come from (namely, laws passed by Congress) and what purpose they serve (the "carrot" function), one might be able to couple that with a little supply-side understanding. That is to say, the more we tax things, the less we get of them (such as, under our tax system, productivity, savings, and so on). And those things that we reduce taxes on, we tend to get more of, such as—but wait.
Before I get into talking about what tax shelters shelter, I want to point out what prompted this column. In its April 16, 1983 issue, the redoubtable Newsweek featured a screaming cover story sporting this headline: "Tax Shelters: How Millions of Americans Beat the Tax Man." I suspected that there was an implication in that headline, and my suspicion was confirmed when I read the inside article—it was filled with dire predictions of America dissolving in a cloud of smoke because the government couldn't take enough taxes from the American people.
So what's all the bitching about? Well, oil-and gas-drilling shelters have for many years been popular. Reduce taxes on such matters and you get more oil and gas exploration and drilling—risk-taking. More money is drawn into such ventures. And, yes, one result is that people prevent their money from being confiscated by the government. To some people, this means that the feds didn't get what was rightfully theirs. But that attitude generally comes from those who believe the government is legitimately entitled to everything you earn or own.
But I digress. Other good tax shelters include equipment-leasing arrangements, real-estate partnerships, and some research-and-development projects. In each case, taxation is reduced on something so that we'll have more of that thing. In each case, Congress has decided to encourage certain types of behavior. The solution, for those who don't like production of equipment, building construction, and cancer research, is to have Congress change the laws. But let's be clear about what the sure results will be: more taxes means less of the commodity. Economist Art Laffer helped teach us that.
What's the point? There are several I wish to share with you all. First, there are plenty of good tax shelters strewn throughout the tax code. They are uniformly good, because they allow people to keep more of their earned wealth, and thus government is prevented from appropriating that much more of what doesn't belong to it. We should all thus encourage the proliferation of "tax shelters" as good things—the more the merrier!
Second, when the feds and their cohorts start snorting and rooting around about "abusive tax shelters," you can bet their real goal is more money for government. And where is the real money? With the middle classes, of course. You know—the people who pay the big bucks. Some of the "abusive tax shelters" that benefit this bunch include the home-mortgage-interest deduction (under attack this very season), the home-office deduction (just about destroyed a few years back, lately resurrected, and then more recently smashed again), the tax-deductible vacation home (totally destroyed, at the instigation of IRS interests, by Congress in the 1970s), the medical-insurance-premium deduction (now gone, but not forgotten by some of us), the medical-expenses deduction (recently reduced), and casualty-loss deductions (recently reduced such that most losses can't be used). And so forth.
The inevitable conclusion? Attacks on "abusive tax shelters for the rich" go hand-in-hand with more surreptitious efforts to crack down on the middle classes. And it's working. So, do your patriotic duty and support every Abusive Tax Shelter you ever meet.
Now, many of you will say, "Screw it, I don't have enough cash to get into my own Abusive Tax Shelter—why should I see that it's fed and clothed?" Well, this is why: someday you just might have enough to need your own Abusive Tax Shelter. And what're you going to do if all the Abusive Tax Shelters have died? What if they go the way of the snail darter?
That's why someone has to do something to save the Abusive Tax Shelter, and it starts right here, right now, with all of us. I'm announcing right now the formation of the International League of Democratic Peace-Loving Abusive Tax Shelters. All they want is the freedom to be themselves, to live and not have the world blown up under them. Join now, and spend some money on an Abusive Tax Shelter.
If we all band together to raise the consciousness of people who may not understand the importance of Abusive Tax Shelters—if we can see to it that only politicians truly concerned with saving Abusive Tax Shelters are elected—well, then, maybe the world has a chance after all. Let's just hope it's not too late.
Tim Condon is an attorney and tax specialist practicing in Florida.
This article originally appeared in print under the headline "Taxes: Save Our Shelters".