Taxes

Maybe We Need More Tax Cheats in High Places

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Americans for Limited Government wants the Senate Finance Committee to block the appointment of Lael Brainard as undersecretary of the treasury for international affairs because of her imperfect compliance with the tax laws. The Associated Press reports:

[Brainard] was late in paying real estate taxes in 2005, 2006 and 2007. The report by the Senate Finance Committee staff also challenges the accuracy of a deduction Brainard claimed for running an office from her home. The challenge led Brainard to reduce the deduction on her 2008 return.

"Enough is enough with the tax cheats in the Obama Administration," says ALG President Bill Wilson. I'm not so sure about that. Perhaps the Treasury Department, and the IRS in particular, should be run entirely by "tax cheats," with the proviso that no American be punished for any of the infractions that the department's leaders have committed. Sort of a Lord High Tax Collector arrangement.

Even though I work from home and have a room set aside for that purpose, I am pretty sure that an audit (or a somewhat less likely review by the staff of the Senate Finance Committee) would reveal something wrong with my deduction for said office (e.g., although the room is supposed to be used only for business, just this morning I recklessly allowed our 3-year-old daughter to draw a picture there). Who among us can confidently assert that he has complied with every jot and tittle of the Internal Revenue Code, a set of requirements so vast and vague that five different accountants (or five different IRS employees) are apt to give you five different answers to the same tax question?

I sympathize with the argument that elevating "tax cheats" to high positions in the department charged with administering the tax system creates the impression that public officials are above the law. But the real scandal is that complying with the law is so difficult you can't be sure you're doing it right even when you consult experts.

In February Katherine Mangu-Ward argued that "when Tom Daschle, Tim Geithner, and other politicians cheat on or screw up their taxes…they're just doing what the rest of us do every year." More on tax code complexity here and here

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  1. “Who among us can confidently assert that he has complied with every jot and tittle of the Internal Revenue Code, a set of requirements so vast and vague that five different accountants (or five different IRS employees) are apt to give you five different answers to the same tax question?”

    Three felonies a day:

    Three Felonies a Day: How the Feds Target the Innocent (Hardcover) by Harvey Silverglate

    Harvey Silverglate does an extraordinary job analyzing the erosion of rights and the risks it carries to liberty in America in his book, Three Felonies a Day, How the Feds Target the Innocent.

    This book is a must read for anyone who cares about the preservation of liberty and putting a check on the encroachment of the federal government in the every day lives of citizens.

    He shows how the Department of Justice has led a steady march to expand their reach into the lives of ordinary Americans. The result? Panoply of laws giving them the right to prosecute just about anyone for anything at will.

    http://www.amazon.com/Three-Fe…..amp;sr=8-1

    1. I read the book. It had too much of the flavor of a defense attorney complaining about the advantages prosecutors have — just like books I’ve read in which prosecutors complain about the advantages defendants have.

      But more importantly, he addresses the symptoms, not the cause. He complains about the vagueness of federal criminal laws, but never questions the overcriminalization that lies behind it — his solution is to make the criminal laws clearer, not to repeal them. Implicit in his argument is that he has no objection to the encroachment of the federal government in the every day lives of citizens, provided that the encroachments are clearly delineated.

      And by blaming the Dep’t of Justice for using the tools that have been handed to it, he lets the real villains off the hook: Congress, for creating the laws, and the courts, for accepting the DOJ’s overreaching interpretation of those laws.

  2. But the real scandal is that complying with the law is so difficult you can’t be sure you’re doing it right even when you consult experts.

    Then don’t comply. There are ways.

  3. But the real scandal is that complying with the law is so difficult you can’t be sure you’re doing it right even when you consult experts.

    No, the real scandal is that if you know the Right People, you can get away with violating the law, but if you don’t, you can’t.

    1. Heh heh heh

  4. they’re just doing what the rest of us do every year

    How many politicians actually get fined or go to jail?

  5. Paul-Grayson Amendment To Audit The Fed Passes Overwhelmingly By 43-26

    1. Was that the “watered down” Mel Watt version?

  6. Perhaps the Treasury Department … should be run entirely by “tax cheats,” with the proviso that no American be punished for any of the infractions that the department’s leaders have committed.

    TLTG, but I believe it was P. J. O’Rourke who suggested that every congresscreature be put in a jail cell with only a pencil, a calculator, and the tax code until s/he correctly filled out the 1040.

    Top. Men. 8-(

  7. you can’t be sure you’re doing it right even when you consult experts.

    Kinda like sex, the hope is you get better at it as you go.

  8. That’s why I say fuck deductions- they shouldn’t be in the tax code. (Not saying don’t take advantage of them when they are there.)
    Get rid of deductions and adjust tax rates accordingly.

  9. Whenever I do my taxes, I think of an old story about a baseball scout. In his expense account, he added $9.63 for a hat to wear to games, as he had to watch one or two a day, and got a lot of sun exposure. The request came back denied, along with a note that he shouldn’t be so frivolous, that his expense reports should be more meticulous, and that he needed to keep better records.

    The next report the accountant received from the scout amazed him. It was completely itemized, with receipts for every item on the list. Attached to the last page was a note.

    “See if you can find the hat”.

    Of course, I’d never add a note to my 1040.

  10. Who among us can confidently assert that he has complied with every jot and tittle of the Internal Revenue Code, a set of requirements so vast and vague that five different accountants (or five different IRS employees) are apt to give you five different answers to the same tax question

    IRS audits are not about compliance with the tax code. They are negotiations. The trick to avoiding audits, it seems to me, is not to try to achieve full compliance, but to not throw up any red flags.

  11. As someone who has personally gone after tax cheats I think it’s important to point out that “intent” is important when you call it a crime. Getting an audit and getting fined isn’t the same thing.

    Real tax cheats can get off easy stealing hundreds of thousands or millions when you compare their sentences to someone stealing a car worth only a few thousand (or possessing narcotics).

    If you are a legitimate business person, it’s hard to compete against cheats. They get an unfair advantage over you (for being a law abiding sucker). So you want either the taxes lowered, or the government to enforce the law so everyone has to bear the same burden.

    As an example, try running a legit tobacco store in CA and see if you can stay in business against the cheats.

    Course the easy answer is to lower the tax. And I think that’s one of Sullum’s points. Needless to say, that’s the best way to handle tax cheats.

  12. Off-topic:

    The Global warming skeptic blogosphere just blew up.

    I guess a bunch of e-mails from prominent climate scientists where hacked and put up on the internet.

    Might be a hox. Still if it is not you will probably be reading about it over the next few days.

    http://www.climateaudit.org/?p=7801#comments

    http://wattsupwiththat.com/200…..-released/

    1. one more link =P

      http://noconsensus.wordpress.c…..b-of-gold/

  13. 5 different IRS employees will probably give you 8 to 12 different answers – all wrong.

  14. I revolt against the crazy tax scheme in my own frivolous way. When I get a letter saying I owe $56.39, I send them $56.94, late. I delight in having them me a $0.03 or $0.06 check to balance the account with interest, which I never cash.

  15. The Daschle & Geithner “non-compliance” as you seem to think were not even that complicated for the avergae taxpayer who does their own tax returns. Only Obama kool aide drinkers could support their failure to pay their taxes.

  16. Late is different then not paying, or like Geithner who fibbed and cheated. I don’t mind late as long as late is before the next tax bill is due. I’m always late! But they get paid before the next year’s is due.

    1. “Then” is different than “than,” and neither is appropriate in that sentence.

  17. Look, I agree that the tax laws are utterly asinine and virtually impossible to comply with to the letter, but that is hardly justification giving well connected people passes that the rest of us do not get. And certainly rewarding people with government appointments and authority over others with respect to laws that they themselves flout is utterly absurd.

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