The U.S. Tax Code Is a Godawful Mess (Your Weekly Reminder)

How much are four boxes of used books worth to your local library? This tax season, perhaps it's better to ask how much they're worth to your accountant. Humorist Joel Stein had four different people do his taxes—an online service, H&R Block, a small accounting firm, and a mega accounting firm—to see if his choice of tax preparer would affect his tax bill.

The short answer is that of course it matters.

Take Stein's books, for example: H&R Block told Stein his four boxes were good for a $400 deduction; the mega accounting firm told him they were worth $250; and the small independent accountant said the books were worth $1,250. Stein made a total of $431,388 in 2011 (it pays to be a humorist, apparently), so the books alone aren't that big a deal, but they're just one deduction.

The variation in Stein's full returns was even more stark:

- H&R Block charged him roughly $400 to prepare his returns and had him owing the IRS $1,227 and owing California $1,160.
- Taxslayer.com charged Stein $30 and said he'd be "receiving a refund of $92,309 from the IRS and $27,245 back from California." The second time Stein used the site, he got "just $16,695 from the IRS and owed California $21,992."
- The small New York accounting firm charged him the same amount as H&R block, and had him "getting a $1,488 refund from the IRS and then giving most of that to California—$1,019."
- The large firm in L.A. charged Stein $1,200 to prepare his taxes and had him paying the "feds and California $2,592 and $1,952, respectively."

What's really funny/depressing about Stein's experiment, which you can read about in Bloomberg Businessweek, is that when he spoke to Mark W. Everson, who headed the IRS from 2003 to 2007, Everson "predicted that all four of my returns would come out the same, since, unless you lie, the numbers all plug into one formula." 

For more hair-tearing, read Jacob Sullum on President Obama's phony tax reform. 

Comments

[TiggyFooo]

You are totally right dude it really is a big mess.

http://www.Anon-Tool.tk

[TiggyFooo]

So who comes up with all that crazy stuff I wonder.

http://www.Really-Anon.tk

[Soc Indv Sparky]

We all do, Tiggy. We all do.

[ChrisO]

It pays to make everyone a criminal.

[Mr. FIFY]

Barry's working on that, Chris.

[Rich]

Mark W. Everson, who headed the IRS from 2003 to 2007, ... "predicted that all four of my returns would come out the same, since, unless you lie, the numbers all plug into one formula."

Every day, randomly select two IRS agents to independently prepare a sample return. If their bottom lines are not exactly the same, both agents should be fired.

[robc]

Not, to be fair, make it three. That way if only one screws up, the "correct" one doesnt get fired.

If all 3 differ, all 3 get fired.

[Rich]

You're very kind, but missed my larger point about the tax code.

[robc]

No, I dont think I did.

[Mr. FIFY]

Fire ALL of them, just to be fair.

[anon]

I like this.

But only if it's repeated enough times to get all IRS agents fired, so that there's nobody left to enforce the tax.

[Ramjet]

As a former CPA, I can attest to the fact that you will NEVER get the same answer from different IRS agents for the same question. Fair Tax or Flat Tax, please.

[TELLMOFF]

You are a stupid former CPA. All the record keeping, arithmetic, and judgement would be the same to arrive at "taxable income". Going into the tax table to find "tax owed" takes no time at all. Even a libertarian should be able to understand this.

[Brandon]

And of course, all of the IRS agents, H&R Block, independent CPA's and everyone else who has been tested on things like this and gotten different results are stupid too, right? It couldn't possibly be that you're just a full-of-shit troll. No, the system is perfect, and anyone who disagrees with it is stupid. Totally sound argument.

[TELLMOFF]

Learn to read. I didn't argue in favor of the complicated tax laws. I argued against "fair tax or flat tax". If you went to college, demand a refund.

[sloopyinca]

No, what you do is randomly select 250 IRS agents a day and fire them.

That's it. Nothing else. And if you do this every day for a year, the nation will be fairer to the taxpayers.

[Raymond Luxury Yach-t]

And it is always good to get rid of unlucky people.

[Jeff P.]

Liberty Tax service presses the unemployed into service by dressing them up in foam rubber Statue of Liberty costumes and making them dance on street corners. It's like corporate hazing.

[Mr. FIFY]

Odd they'd use that name, as "liberty" has nothing to do with taxes.

[cue Tony]

[sloopyinca]

Not true, Mr. FIFY. You see, the liberty is for the money, and they are freeing it from you so that it can go home, to its master the government to be spent as it should: on consequence-free loans to the politically-connected and make-work programs for highway sign-makers and auto workers.

Why do you hate money?

[Mr. FIFY]

For the same reasons I hate children, obviously.

[Today's Tom Sawyer]

Ah, so money is like the One Ring returning to its master. It all makes sense now.

[R C Dean]

R C Dean's income tax reform bill.

(1) The Internal Revenue Code is repealed in its entirety, taking with it all current regulations.

(2) Two or three tax rates, say, 10%, 17.5%, and 25% for individuals. Long term cap gains (and losses) are indexed for inflation, but no other income adjustments.

(3) Each individual on a return gets a deduction of, say, $7500. No other individual deductions.

(4) Businesses are taxed at, say, 15%. All accounting is GAAP - no special tax accounting, depreciation, expenses, whatever, except distributions to owners are not taxed at the business level (if GAAP doesn't treat them that way. Whatever GAAP says your net income is, you pay taxes on.

(5) The IRS will have no authority to write regulations.

[West Texas]

Fuck income tax. Income tax is the whole problem.

[robc]

My solution for corporate taxes: eliminate the corporate income tax, however, all profits are passed thru to the shareholders, like with an S corp or an LLC. If you own the shares for part of the year, you get a prorated share of the annual profits passed thru to you (with the day you buy and the day you sell counting as 1/2 days each, unless they are same day, in which case they dont count). This would have been hard to do years ago, but is easy for brokerages now.

No tax on dividends (as the profit was already passed thru), the tax on cap gains is first adjusted for change in basis (as tax on retained earnings has already been paid, because it was passed thru) and then indexed to inflation (change in M2).

[sloopyinca]

Too complicated. How about:
1: Income Tax eliminated by Constitutional Amendment
2: National sales tax of 2% enacted by Constitutional Amendment tied to balanced budget and abolition of the Federal Reserve Bank

[sloopyinca]

I would tweak that, Mr. Dean, to include a dollar for dollar deduction for what one gives to charity. It would help get us out of this dependency on the state for the things charities are better at.

[TELLMOFF]

Your no.(4) ignores what takes the most effort and judgment: income and expenses. You do recognize an importat area of controversy that explains why tax retursn are prepared differently: "depreciation".

[protefeed]

Protefeed's income tax reform bill:

(1) The Internal Revenue Code is repealed in its entirety, taking with it all current regulations.

(2) One tax rate, say, 0%.

(3) Participation in all federal programs made optional. If you like a program, such as Social Security, you pay a fee which covers all the costs of your participation. If you don't like it, you opt out and take care of your own fn retirement.

[ant1sthenes]

My income tax bill:
1. Congress is stripped on its tax power (ok, that's more like a Constitutional amendment) and the IRS is disbanded. The 17th amendment is also repealed.

2. Each year, Congress budgets all expenditures and approves any desired debt, along with some amount of contingency borrowing. The difference between the expenditures and the debt is the Required Revenue.

3. Congress sends a bill to each state, for its share of Required Revenue. A state's share is based on the number of Representatives and Senators it has, relative to the national total. (Sort of converse of No Taxation without Represenation). DC has no representation, and has no tax obligation.

4. The state acquires the needed funds however it deems appropriate, with regard to its citizens' notion of fairness and the path to prosperity. Income tax, sales tax, sin tax, corporate tax, property tax, even tariffs on foreign goods. The only real rule is that it can't exceed its jurisdiction.

5. States that fail to pay in a timely fashion have their voting rights suspended. States that continue to fail to pay may be expelled from the union by the voting members of Congress, in much the same way as new states may be admitted. Until expelled, states and their citizens shall not be subject to any sanction other than loss of representation.

[Fluffy]

Dean, the problem is:

Businesses are taxed at 15% of...what?

Gross sales?

Because if it's anything other than gross sales, it can be gamed.

The regulation creep will always start up again as soon as somebody starts to define "profit".

Were the 5 computers I just bought an expense? Or should we add them to the balance sheet and then depreciate them? What assets depreciate at what speeds?

Can businesses deduct interest expense? If businesses can, why can't individuals?

Etcetera etcetera etcetera.

[Just Dropping By]

Can businesses deduct interest expense? If businesses can, why can't individuals?

Corporations are more human than humans, my friend.

[anon]

The problem is... Corporations don't pay taxes, consumers do.

[anon]

That sounded bad when I read it back to myself; there's no way to force a corporation to pay any tax. It's merely passed on to the consumer. So, in light of that fact, simply make any tax a consumption based tax.

[Rasilio]

Actually this is not quite true.

It is true that there is no way to force a corporation (or any other business for that matter) to pay taxes, however there are more options than to just pass the tax on to consumers.

The could extract it from workers in the form of lower compensation.

They could extract it from vendors by refusing to pay higher prices for inputs.

They could extract it from owners in the form of reduced profits.

Or they could do some combination of all of the above.

In the end however the business never actually pays the tax, it extracts it from some combination of the 3 above and remits it to the government.

Typically it has been shown that something like 80% of the tax burden is borne by employees through reduced compensation with higher prices taking up the majority of the rest and reduced profits only a very small percentage.

Thing is conservatives and libertarians never successfully make this argument but they should because it would be fairly persuasive to liberal ears because corporate taxation is allowing unelected evil capitalists to determine who pays for that portion of the tax code rather than that decision remaining with democratically elected legislatures.

[TELLMOFF]

Anon, your "consumption based tax" will stop me from the enjoyment of cheating the government on my tax return.

[Dylan]

Only producers pay taxes. Only producers pay for anything.

[R C Dean]

Businesses are taxed at 15% of...what?

GAAP net income.

The regulation creep will always start up again

The IRS will not be allowed to write regulations.

Were the 5 computers I just bought an expense? Or should we add them to the balance sheet and then depreciate them? What assets depreciate at what speeds?

What does GAAP say?

Can businesses deduct interest expense? If businesses can, why can't individuals?

Because this is a brute simple tax code, and individuals get one (1) deduction. Simplicity is its own kind of fairness.

We're going to have GAAP no matter what, so we might as well use it for taxes as well.

[MP]

It's still not clear why you're bothering to have a corporate tax in the first place. The only thing that a corporate tax accomplishes is that it gives the IRS the authority to decide if a business "expense" is actually an expense or income. If you're saying that GAAP becomes the legal standard, then levying a tax is moot. All that would be necessary is a submission of GAAP audited records to the central regulating authority.

[R C Dean]

It's still not clear why you're bothering to have a corporate tax in the first place.

Revenue. Politics.

The only thing that a corporate tax accomplishes is that it gives the IRS the authority to decide if a business "expense" is actually an expense or income.

The IRS will have no such authority. GAAP is God.

If you're saying that GAAP becomes the legal standard, then levying a tax is moot.

You would levy at tax on GAAP net income.

All that would be necessary is a submission of GAAP audited records to the central regulating authority.

Yes. Simple, no? No added expense for any company that is currently audited to GAAP, either.

[MP]

Double taxation has both moral and economic negatives. Thus, the political nature of the tax is solely based on the general ignorance of the population.

To which a pragmatist would answer, "Yeah, and?". sigh...politics sux.

[Fluffy]

The problem with this is that it would require every lemonade stand in America to undertake a GAAP-quality professional audit in order to file taxes.

[R C Dean]

For lemonade stands, I would think they could fill out their taxes pretty much like they do now. A thriving business in "GAAP for Dummies" manuals, etc. would probably work just fine.

If you don't need an accountant now, you wouldn't need one under the Dean Tax.

[Ska]

Well Dean did say GAAP net income. Short answer - however GAAP treats those items.

But I think there is something else that no one here has touched on and why four preparers will prepare four different tax returns. Part of accounting is using estimates and conventions. Do you think a car retailer counts inventory the same way as a milk distributor? Do you think a tech firm depreciates computers the same way as a manufacturer? Even GAAP allows companies to choose their reporting conventions for certain items. The point of financial statements is to fairly present the business' activity and financial position. There's no straight mathematical answer that you can calculate and say "yes, that's right."

[robc]

However, if the tax rate is flat, that will balance out.

Which depreciation schedule you use changes the amount of depreciation each year, but the total at the end of the schedule is the same.

Ditto for any other estimates.

[Ska]

Right, but I'm saying for any given year you can have different tax bottom lines just based on what position you take. It's not just tax law that allows these variables, GAAP does as well.

Over the long term, yes something like depreciation zeroes out. On an annual basis, however, there will be differences based on the methods used. That's just one reason why multiple preparers will come up with different answers, and they can all be "correct."

[robc]

Agreed, but as I said, it balances out. One year variation isnt a big deal, IMO.

[R C Dean]

The point of financial statements is to fairly present the business' activity and financial position.

Sounds close enough for government work to me.

[Drake]

Taxing gross sales means taxing whole industries with small profit margins into bankruptcy.

[ant1sthenes]

I don't see why they wouldn't pass it on to consumers, unless you're assuming foreign industries that are not subject to the tax would leverage their legal advantage (presumably such a situation would result either in punitive tariffs, or requiring foreign corporations to pay tax on U.S. income). The result on supply/demand/price would be similar to a sales tax.

[West Texas]

The West Texas tax plan:

1.) Repeal the 16th Amendment and all current income tax laws. Amend the constitution to clarify that taxation of income violates natural law and is a de facto violation of privacy.

2.) Enact a national sales tax with exemptions for groceries, clothing, fuel (which is already taxed), and other necessities. The bureaucrats can figure out the specifics.

3.) Punch anyone in the face who complains that this is "unfair" to poor people.

4.) Punch anyone in the face who argues that a VAT would be better, despite being infinitely more complex.

5.) ????

6.) Profit.

[Joe M]

The Joe M plan cannot be revealed to the public, but send me a check for $20 to get all the details.

[Sevo]

Joe,
Is that deductible?

[Night Elf Mohawk]

You have to buy it to know what's in it.

[Joe M]

Sure, if that gets your check mailed, sure.

[Mr. FIFY]

Do you have a newsletter, Joe? I am intrigue.

[sloopyinca]

I'd subscribe to it.

[BakedPenguin]

I spent all my discretionary money on the tax plan developed by the Minister of Taxation for Nigeria.

I hope I hear from him soon.

[robc]

True robc tax plan (for the real world, fuck you John):

1. Repeal the 16th amendment.

2. Pass a new amendment outlawing income/sales/vat/property/etc taxes at the federal, state, and local levels.

2. Institute a single land tax at ~6%, with the money split 2% to Feds, 2% to state, 2% for city(ies*) and county to fight over.

*my house is in 1 county and 2 cities.

[Torontonian]

What value is the land tax based on?

Property less improvements? Appraised market value?

Not so simple.

[robc]

Land.

Property less improvements. That is the point of the single land tax, all labor belongs to the laborer, so improvements arent taxed.

And yes, appraisal isnt simple, but its easier than what we currently have.

[Randian]

If I own a floor of a building, is that land?

If I own a coal mine, is that land?

[robc]

No*. Yes.

*Now, if the floor is part of a condo complex or something, you probably do own a portion of the land underneith. But that is a contractual issue.

[MP]

Property taxes make a bit more sense at the local level, where services are generally the same for all residents. At a national level, property taxes overlook so much other wealth that there would be a heavy imbalance. So I think fairness issues due come into play.

Unless, of course, you expand your definition of "property" to be Assets - Liabilities...thus a wealth tax. But then you get into privacy issues.

There's no easy solution. I think it's why sales taxes become so appealing as a reform tactic, because then you're more directly siphoning off economic activity. But sales taxes will never gain traction as the sole mechanism due to regressivity issues.

[robc]

Who is discussing property tax?

SLT is specifically NOT property tax.

[robc]

I oppose wealth taxes and sales taxes for the simple reason that both are immoral.

SLT isnt, it is anti-rent-seeking.

Its my moment of sounding like White Indian, but I dont see any natural law property rights arguments that I buy.

The best I can come up with is: the government granted the deed and it probably works best (its also my moment of treading delicately into "fuck utilitarianism"). But, as such, deed holders, copyright holders, and patent holders should probably pay for their rent seeking ways.

[MP]

SLT is specifically NOT property tax.

I don't see how. A tax on assessed value is a Property Tax. If you want to exclude structures, fine. I don't agree. But I don't see how it's fundamentally different from a Property Tax.

[robc]

The difference is a property tax includes structures.

Semantics. One is a land tax, the other is a property tax.

[Randian]

Because not all property is land, whereas all land is property. I own a condo, which is property, but I do not own the land underneath it.

[robc]

If you want to say the land tax is a subset of property tax, I will agree. But Im avoiding the phrase "property tax" for the very reason that it brings in other things that wouldnt be taxed.

[Randian]

How is a coal mine land but a building floor not?

[robc]

A coal mine is a volume of earth, hence clearly land.

A building floor may or may not be a volume of earth that you own, depending on who is the deed owner.

Walk it thru.

Guy A buys a tract of land. He owns it. He builds a building on the land. He sells a floor to Guy B, but doesnt sell him a piece of the underlying property. However, he charges B a HOA fee, and the HOA pays the SLT and paves the parking lot and provides water and etc out of that fee.

The alternate is that B gets a portion of the underlying land and thus pays the SLT directly.

Either way, its getting paid. The existence of the building doesnt change the SLT. Who owns the land and pays the SLT is determined contractually.

In theory, the same applies to the coal mine, but I figured the mine included the surface, so same owner.

If the mine owner merely bought the mineral rights, then the contract would determine if he pays the SLT.

[Rasilio]

Ugh Georgism never did makes sense to begin with, however it is even more flawed now.

That said passing this would lead directly to the creation of seasteads because a floating platform is not "Land" (in the Georgist view land can be neither created or destroyed)

[robc]

So, which tax is less immoral than the SLT?

Like I said, the SLT is the only tax system I can support. It has its flaws, but its better than anything else tried.

[R C Dean]

That is the point of the single land tax, all labor belongs to the laborer, so improvements arent taxed.

But the market value of land reflects its location, mostly in proximity to things that are valuable because of the "labor" that is "mixed" into them.

So this is still an indirect tax on labor, isn't it?

And, of course, it will be passed through by landowners to their tenants/customers, so its an indirect tax on labor that way, too.

I could easily see negative land values if this was the sole source of tax revenue - the taxes would exceed any conceivable income stream, leading, ultimately, to a collapse in the land market and your tax base.

Eventually, the pass-through of taxes to people who couldn't do without a geographic footprint would probably allow land to trade under a system that would be, essentially, tax-farming, but the potential for severe disruption strikes me as pretty significant.

[robc]

the taxes would exceed any conceivable income stream

If done properly, its supposed to exactly match the "rents", so if the tax rate is set too high, it SHOULD crash the land values, so that the tax paid equals the "rents" received.

And, of course, it will be passed through by landowners to their tenants/customers, so its an indirect tax on labor that way, too.

No, it wouldnt be passed through. It is, in theory, a tax without a deadweight loss.

see?

[R C Dean]

The land tax may have had some validity in pre-industrial/agricultural societies, but in this day and age its like taxing trains to fund your entire transportation budget.

[robc]

Its the only tax that I dont have moral apprehensions about.

Since we arent going to get rid of them, like I would prefer, we might have to include copyrights and patents in the SLT.

I dont see why the SLT is any less valid today.

[Drake]

So the key to retiring is not to own land?

[robc]

The point of the SLT is to extract the "rents" from the land. No more than that.

Your comment makes no sense at all.

[Drake]

With your plan, in order to own "land" you have to pay what would be a stiff tax every year.

Therefore, you cannot own some land, raise some food and retreat from the world. You must either have enough accumulated wealth or a steady stream of income to pay off the government. Otherwise, you will face default on your taxes and I assume they will take your land.

[robc]

All land generates rents. You use those to pay the tax.

[sloopyinca]

All land generates rents. You use those to pay the tax.

If I build a ranch with a self-contained solar and wind powered electrical supply, a well and septic, enough food production to feed my family only and a big-ass wall separating me from the outside world, how will it produce rents? Especially if my sole goal is to be self-sufficient and have nothing to do with the outside world?

I'll default on my tax liability in the first year, and the fact that I spent nothing or consumed nothing outside of my fence will not keep the taxman from confiscating my property.

[robc]

It produces rents, you may not monetize them, but they are being produced. In this case, you are "paying" them to yourself.

[sloopyinca]

If I can't monetize them, then how am I supposed to satisfy my tax bill?

[robc]

You can monetize them, you are choosing not to.

How do people pay property tax bills? Land tax will be a lot easier.

[sloopyinca]

So, under your plan, I'm forced to use land in a way I do not want to just so I can pay the government.

Fuck that shit.

[robc]

Also, without the SLT, you would still be defaulting on your property taxes.

Especially if my sole goal is to be self-sufficient and have nothing to do with the outside world?

Thats all well and nice, but anarchy doesnt and cant exist.

[fried wylie]

enough food production to feed my family only

Commerce Clause, you banjofucker.

[robc]

Just realized how hilarious it would be when the state of Wyoming presents the Feds with their 2% bill for Yellowstone.

[fried wylie]

*my house is in 1 county and 2 cities.

How is that proper?

[robc]

It isnt.

But I am in the city of Louisville and in the city of Middletown.

When the city of Louisville merged with the county, they didnt make any kind of exceptions for the smaller cities within the county.

So I get to pay taxes to both (although I no longer pay county taxes).

[Loki]

I used TurboTax this year, and the first time I did it, I ended up owing the feds ~$2000 and getting back ~$2000 from the state of CO (I don't recall the precise off the top of my head). There was an error when I hit save and had to go back and re-do everything.

Using the exact same information the second time I came up owing the feds $3500 and getting back $2500 from CO.

I fucking hate our tax code. You'd think software would come up with the same answer everytime, but apparently our tax code is so complicated even computers can't be programmed to figure it out.

[Pro Libertate]

This reminds me of the "No capes!" scene in The Incredibles, only with income taxes.

No income taxes!

[Episiarch]

There are vastly different levels of quality in whom you choose to help prepare your tax return. Let me tell you: choose wisely, because like anything, the incompetence out there is rampant.

[Ska]

Agreed. You might end up with a guy like me.

[Episiarch]

God forbid, Ska. I never go to WOPs for my taxes, anyway. Just Jews. I'll allow my doctors to be WOPs or Jews, but not my accountants.

[Scruffy Nerfherder]

It's hard finding a competent CPA that will push the boundaries on taxes. As with everything else, there's black and white, then there's gray. I take the gray for myself and make the IRS ask for it. Most CPAs I've met just give everything up to the IRS so that they avoid any problems down the road. At which point I ask, "What am I paying you for?"

[robc]

TurboTax gave me a $500 deduction a few years ago that I thought was questionable (it was very, very gray, bordering on black). I tried to read the tax instructions from the IRS and figure it out for sure and never was 100% convinced either way, so I went with TurboTax.

The IRS immediately disallowed it (and another $1). I didnt fight it (I know the $1 was legit, but it wasnt worth it to send the paperwork) and they sent me a refund $501 less than originally submitted.

[Scruffy Nerfherder]

I certainly wish my taxes were simple enough to run thru TurboTax, but with one S-Corp and two LLCs, it's just too complicated.

The overhead of compliance with the IRS is a massive expense that noone talks about that much. It would be great to put a few thousand tax preparers out of business just by simplification of the code.

[robc]

One S corp and one LLC this year.

I dont do their taxes on TurboTax, but after everything is passed thru to me, my personal ones are easy enough for TT.

[West Texas]

My businesses have grown to the point now that I've decided that this is the last year I can use Turbotax. Next year I'm going to have to hire a professional.

On the one hand, yay! No more doing it myself!

On the other hand, Shit! Expensive!

[JW]

Evidently, according to those with friends overseas, we're one of the few countries that have tax returns. The feriners view this process, rightly, as nuts.

[Rasilio]

Yeah, a couple decades ago I used to work as a courier doing small package delivery. We were all independent contractors who were paid per delivery (52 - 56% of the deliver fee went to us).

Most of my family was doing the same at the time and most of them used this same accountant to do their taxes and they all loved him because he always got them huge returns.

Turns out that he wasn't even pretending to follow the law, he was inventing deductions out of the blue just to inflate the returns and make the clients happy.

Fortunately for me I never used the guy, I made so little money at the time I was able to fill out my own return in less than an hour but the rest of my family was screwed when the IRS discovered what was going on.

Fortunately for them however the IRS knew the accountant was not even telling his clients what deductions he was claiming for them and was not colluding with them to commit tax evasion so they were nice about it and didn't hit any of them with penalties, but they all still ended up owing $10,000 or more in back taxes.

[tarran]

It's the taxing authority of the Fed Gov and the lack of any check to its power. What we need is a little tax competition and state oversight:

Repeal the 16th and 17th ammenment.

New ammendment: The states shall appoint senators for terms of 6 years. Senators shall serve at the pleasure of the state governments who can recall them at any time.

New Ammendment: The States shall furnish the Federal Government with the revenues for its operations in proportion to population. The Federal government may not issue any new debt. The Federal Government may only provide money to state treasuries with 75% majority vote in the Senate.

New ammendment: (Implementation of Ron Paul's plan to ditch the Federal Reserve)

New ammendment: Any bill that is passed in one house, and when legislated in the other house and ammended so that >= 25% of the text of the original bill has been altered, or the original text comprises less than 75% of the passed bill shall be resubmitted as a new bill in the originating house rather than going through reconciliation.

[Episiarch]

What the fuck is an "ammendment"? You type worse than NutraSweet. THAT'S NOT A COMPLIMENT.

[tarran]

You are so fucking provincial, Epi. I learned English from English (as in from England) books and I occasionally use British spelling conventions.

[Warty]

Christ, so you're a Limeyphile as well as ugly. Fuck you.

[Episiarch]

Provincial?!? This coming from a guy who goes to Copley Square to get his hair done? You sicken me. You probably vacation on the Cape instead of in Rhode Island.

[John]

The Cape is just Jersey Shore with dropped Rs.

[tarran]

Why would anyone go to Copley Square to get their hair done?

I go to the baahbeh around da cohnah from my house.

[Episiarch]

I note you don't deny the Cape accusation. That tells me all I need to know.

[tarran]

I don't deny it because it's even more farcically absurd than going into Boston to get a hair cut.

You think if I could afford a place on the cape I would even be talking to smelly proles like you?

[Geoff Nathan]

Err... Sorry. No dialect of English spells 'amendment' with two m's. The word has only one. From Latin ex 'out of, from' + menda 'fault, blemish'. You only get double letters in cases like this when the Latin prefix is con- ('commit') or in- ('illegal') or other instances where the prefix ends in n
But on the other hand, jumping on people for spelling errors is kind of a waste of time, and besides the point.
Says the linguist. FWIW...
You may now resume your normal bickering.

[Episiarch]

Thanks for the pedantry in our stupid little joke, Captain Buzzkill.

[Pro Libertate]

It's not pedantry when a linguist does it.

[Geoff Nathan]

+1
Sorry, can't always tell when folks are funnin' and when they're being jerks. But I should acknowledge that the jerkitude density has gone way down recently, and I should have been more sensitive.... Or tolerant... Or something.

[tarran]

He probably didn't laugh when Archer tried calculated the age of consent under a metric system either.

[R C Dean]

No dialect of English spells 'amendment' with two m's.

Really? I've never seen it any other way.

[Geoff Nathan]

Tsk!

[R C Dean]

God-Emperor Dean would, of course, be interested in replacing the income tax.

Short of rule by a God-Emperor, though, the income tax is here to stay. I say make it stupid simple and prohibit bureaucratic complexification. Arbitrary? Sure. Winners and losers? You bet. But any tax code has all of that.

Businesses will need to have income statements regardless. Tell them that if they do their income statements by GAAP, they can transfer their net income over to the tax form, multiply by 15%, and they are done.

Individuals can shelter enough to get out of the rain and buy beans and rice with their one (1) deduction. No more.

[John]

No thank you to God emperor Dean. You think taxes are high now, that would be nothing if Congress managed to have a VAT or a customs duty as opposed to an income tax. At least with an income tax people know how high their taxes are. With a VAT or a customs duty, no one ever sees the tax. There is a reason why the socialist states of Europe love them so much.

[Night Elf Mohawk]

Wouldn't you see a national sales tax?

[John]

No thank you. It would be too hidden. You could accomplish the same thing by just having a flat tax. Tax all income at the same rate. Who is the government to decide that some forms of income are worthy of more tax than others?

I would give a single standard deduction and maybe the charitable deduction and no more. No other deductions. And I would tax inheritance and gifts just like regular income. I would eliminate the corporate income tax. And then just tax the dividends and salaries as normal income. Lets totally level the playing field so that no one behavior is any more favored than another.

[Warty]

Godawful is one of the English language's best adjectives. It is known.

[Pro Libertate]

Better than gobsmacked?

[Ska]

Warty is a Dothraki. I should have realized this earlier.

[Proprietist]

So...looks like we should use TaxSlayer several times until they magically get us a huge return?

My tax plan replaces all income, sales and property taxes with land value taxes, and all corporate income taxes and capital gains with corporate liability taxes (what the company would pay in liability insurance in a true free market with no state incorporation.)

[robc]

So if the company goes for broke and goes without liability insurance then they owe nothing?

[Proprietist]

No, the tax burden will reflect how much of their liability they are potentially socializing upon society. I'd say the difference between the market value of their full liability cost minus liability insurance purchased. Thus they can either purchase private liability insurance or pay the government the difference.

[R C Dean]

what the company would pay in liability insurance in a true free market with no state incorporation.

"Limited liability" for corporations protects only shareholders, not the corporation itself.

Corporations already buy liability insurance, since they are liable for the harm they cause, so I'm not sure how this would work.

[robc]

This is about to become round 5 of "proprietist doesnt believe that an LLC structure can still be created outside the government grant. He is wrong."

[Proprietist]

I never said it couldn't per se. If people want to organize as an "unincorporated" corporation (selling stock, contracting responsibility, etc.) that's perfectly fine with me.

Doesn't change my opinion that owners should either purchase liability insurance to protect their personal risk, pay liability taxes to maintain the current corporate protections, or bear the full risk of doing business like a proprietor or partner does.

[R C Dean]

Round 5:

It is by no means clear that a purely passive investor is, or should be, responsible for anything that any agent of the corporation does.

Responsibility comes from either authority or action. A purely passive investor takes no action as an agent of the corporation, and has no authority to direct any other agent.

Under traditional principal/agent principles, it is by no means clear that a purely passive investor could be held personally liable for what the corporation (or its agents) do at all.

[R C Dean]

Of course, eliminating limited liability companies would cause a lockup, not only in the equity markets, but in the credit markets.

A bank is, really, just a passive investor, after all. If putting money into a company exposes you to unlimited joint and several liability, you're not going to see many companies getting loans, either.

Really, I see the economic cost of getting rid of limited liability companies as huge. And, all based on the idea that an investor should have unlimited liability for actions that he has no knowledge of or control over.

[Proprietist]

I know we've been in circles over this before, but I argue stil that the "passive" investor is still technically the owner of the corporation. They can get infinite profits, yet somehow limited losses, something no unincorporated individual can do.

If your teenage son wrecks your car into me and you don't have insurance, it doesn't matter how much money you have invested in your own car. It matters how much damage your car did to me.

Stockholders elect the board that hires the executives, who hire the agents. The fact that stockholders aren't more involved in the companies' initiatives and do not seek direct accountability is because the law allows them to collect profits without any responsibility. The corporations' purpose is to maximize your profits and will socialize everything they possibly can to do so.

[Proprietist]

I've also argued that lenders and creditors are logically distinct from owners, as they are not owners of the corporation and are not entitled to a percentage of that corporations' value. They are the owners of the specific assets lent to that corporation. Lenders, landlords, bondholders and creditors will still be owed the return of their pre-negotiated assets regardless of whether the company made a billion bucks or lost a billion bucks this year.

Except of course, when the government colludes with the corporation to stiff lenders out of their rightful assets via bankruptcy.

[Proprietist]

I don't see it creating a lockup. The liability insurance costs will be internalized, but offset by the elimination of the bureaucratic regulatory state, capital gains and corporate income taxation and can be reduced through better and safer business practices.

A truly free market system unpolluted with moral hazards naturally incentivizes companies to act responsibly by rewarding companies with lower liability (small businesses, clean energy, etc.), punishing the irresponsible and dangerous, and keeping growth within the company's ability to self-control operations.

[Proprietist]

They can write off the insurance they purchase and pay tax on the difference. I'd prefer the liability to be fully privatized and corporations to have increased incentive to reduce their liability/risk.

I don't want artificial government liability protection for shareholders, who certainly profit off of illegal or dangerous acts of the corporation (whether or not they are knowledgeable of the acts), but are somehow not at risk in rare cases when the damages from a corporation's acts exceed the cost of their investment. And often the shareholder owning the stock at the time of tort settlement wasn't an owner at the time of the cost-cutting crime. The company should purchase liability insurance to protect their shareholders in such cases instead of using incorporation to provide that protection. And undoubtedly liability is a far, far more just basis for taxation than income.

[robc]

Im assuming you are opposed to bankruptcy laws too or do inviduals also have to pay a liability tax?

[Proprietist]

If bankruptcy laws were eliminated, I think the era of easy credit would be over and the problem would generally solve itself with people being more careful so they don't lose their property. Likewise, ending free extreme liability protection for stockholders will encourage stockholders to direct their money towards more responsible companies, and reciprocally will encourage companies to act more responsibly.

As I've said before, I support the concept of debtor's prisons only when it can be determined the debtor is acting in bad faith, which is no different from fraud in my opinion. If you take out a loan with no intention of paying it back or misrepresent your financial situation to a lender, you would deserve what you get. Individuals could always purchase bankruptcy insurance that would kick in under certain circumstances like losing a job, a family member, or other change of income affecting ability to pay debts to avoid any seizure of property or risk of debtor's prison.

[Rasilio]

I understand the goal you are going for here, however given that the potential liability claims against a corporation could exceed the entire net worth of the planet it would be effectively impossible to determine an insurance rate.

[Proprietist]

Technically true - but there is already a market for liability insurance (proprietorships and partnerships to protect their personal property, corporations to protect their corporate property). Actuaries already quantify estimated risk based on size, scope, history and activities of the company. It's true, there might be extreme outliers where actual liability payouts exceed both the value of the company and the value of insurance purchased. But currently those companies are just declaring bankruptcy and leaving victims out to dry - so any deterrent and assignment to owners of the excess liability is still far better than nothing.

Ideally, I'd like to get to a system where insurance acts as the regulatory force instead of government, and where cost cutting that increases liability risk is discouraged in place of spending to reduce liability risk.

[tarran]

I have a insurance company as a client of my consulting side business. It's really amazing the amount of things they pay attention to in the businesses they insure.

Compared to government regulators they are far more forehanded and rational.

[Proprietist]

They're rationally protecting their bottom line, an incentive government bureaucrats do not have.

The regulatory state is a misguided response to the moral hazards of corporate capitalism. Socialized liability and bankruptcy increase externalities and are logical justifications for state interference into business practices. The market then just gets even more distorted through regulations, loopholes, taxes, subsidies, etc.

The whole thing is unnecessary if you remove the moral hazards in the first place. Pollution, bad workplace conditions, fraud, etc. are naturally disincentivized by being forced into the bottom line instead of externalized upon victims and taxpayers. All the market problems the Left decries will be solved naturally, competition will improve and prices will naturally go down (even with the liability costs). Good companies won't be punished for the actions of the bad.

[Warren]

What's really funny/depressing about Stein's experiment, which you can read about in Bloomberg Businessweek, is that when he spoke to Mark W. Everson, who headed the IRS from 2003 to 2007, Everson "predicted that all four of my returns would come out the same, since, unless you lie, the numbers all plug into one formula."

Mr. Mark W. Everson should be given an atomic wedgie with his scrotum for that little bit of prevarication.

[Brett L]

Unfortunately, the numbers that go into the formula are slightly more vague than the Drake Equation.

[Old Mexican]

Tiny once said that taxes are the price "we" pay for civilization. Looks like no one knows how to correctly price that one...

... maybe because the whole idea is bogus.

[Mr. FIFY]

I briefly watched Lawrence O'Donnell last night (I have a bile deficiency), and his tax rate would make Tony so horny, he'd fuck a woman.

[John]

No. It is the price we pay to keep other people from ganging up on us and stealing all of our stuff. You go right ahead and build a tax free government free society. You will still have a civilization. And maybe a quite nice one. But it won't stop me and my evil friends from getting together, paying taxes, building a big army and wiping you off the face of the earth while keeping all of your things.

That really is all there is too it. Everything else government does is a sham.

[Old Mexican]

Re: John,

But it won't stop me and my evil friends from getting together, paying taxes, building a big army and wiping you off the face of the earth while keeping all of your things.

Ok, but how much would that cost YOU?

[John]

Not as much as the stuff of yours I will steal. And even if it does cost me, so what? The pleasure of killing the unbeliever and enslaving his women is worth the price.

It is a tough world. If you can't live by the sword, you will die b it.

[robc]

But it won't stop me and my evil friends from getting together, paying taxes, building a big army and wiping you off the face of the earth while keeping all of your things.

That says everything we need to know about you.

Nice that you are so honest about it.

[John]

Gee Rob, I wasn't aware rhetorical devices were so above you. It is not that "I" personally would do that. It is that someone undoubtedly would. And that is the reality that we live in. Most people in this world have no interest in anyone's welfare outside of their own family or tribe. And they would gladly, conquer you and enslave you given the chance. History is pretty much a long litany of just that.

[robc]

I wasn't aware rhetorical devices were so above you.

Clearly you dont get them either.

And when "you" come to enslave "me", I will shoot "you" in the face.

[John]

Sure you will. But I won't come alone. I will come with tanks and crew serve weapons, and airplanes and combined arms. It is going to suck for you.

[robc]

In reason to assume I wont have the same things?

And remember, I have a NukE degree. Who is to say I wont make it a pyrrhic victory for you?

[John]

The nation state is a fearsome thing rob. It has been crushing outsiders, tribalists and loaners for millenniums. I am betting on the nation.

[fried wylie]

loners. The Nation State LOVES loaners.

[Peter L]

There is only one country who has actually used the greatest Weapon of Mass Destruction ever made, the atomic bomb. They also have a long history of invading other countries.

Who are the real terrorists?

[Old Mexican]

I used H&R Block's software, made my tax return by applying the standard deduction and the per-child credits; I paid only $19.99 for the software and I ended up owing the Fed $126.00, which makes sense since I set up an FSA in 2011 which I used up totally and also indicated 9 deductions in my W4, so I was happy to know I did not lend the Fed any money at zero interest 😉

[Proprietist]

I really hate to point this out, but if Obama and the Democrats were not stupid, they could have increased income taxes on all tax brackets by 2.5% and offered a 2.5% writeoff if you purchase health insurance - to avoid the "mandate" argument.

Wondering why they didn't do this to begin with instead of the unprecedented, constitutionally doubtful course they took.

[Auric Demonocles]

Overconfidence.

[Auric Demonocles]

Overconfidence.

[Auric Demonocles]

Overconfidence.

Some random characters so the squirrels don't think this is spam (good work Reason).

[fried wylie]

I seriously doubt anyone at Reason wrote the spam filtering code. Someone picked it out, sure, but it was probably the best option that was still compatible with the other parts of the site framework.

[Rasilio]

They didn't do it because if they did they knew they would be facing the election cries that they created the largest tax increase in history.

Sure the majority of that tax would never be paid but that is irrelivant when it comes to election ads.

[Proprietist]

But...the end result is exactly the same. It's still the largest tax increase in history, and the Republicans will call it that regardless. The only difference is that one structure falls outside any Constitutional powers while the other falls within the power of government to levy taxes.

[protefeed]

They thought they could avoid the "biggest tax increase in history" hit pieces and come up with something that would get at least 5 SCOTUS justices to sign off on.

Legislation that had the massive explicit tax increase wouldn't have gotten 60 votes in the Senate -- at least one or two D votes would have peeled off over that, maybe more -- so that didn't happen.

We'll know in June if that gamble paid off for the Ds.

[R C Dean]

Wondering why they didn't do this to begin

Optics and politics. They didn't want to have to argue about pushing through a big tax increase.

[sloopyinca]

Too bad our government has already adopted the Sweethaven Tax Structure

[GlenchristLaw]

Stein's lying.

It is not the responsibility of a tax preparer to assign a value to a charitable donation of personal property, and no preparer has any reason -- selfish or selfless -- to do so.

The odds that four different preparers would do something that no preparers ever do is somewhere between zero and nil.

If he can't provide detailed line-by-line examples of the alleged discrepancies, then he's just an autism-vaccine charlatan.

[Raymond Luxury Yach-t]

Answer please he who knows. Our money has no intrinsic worth. It is just a medium of exchange, a way to keep score. The Fed Reserve creates more money when they feel the need to. If the Fed did their job right they would print enough money to keep the economy growing without inflation. But who gets that new money? I think it is the big banks who can borrow from the Fed at low interests. Why should big banks get the new money? Why not give it to the government and allow citizens to keep more income? Why wouldn't that work?

[Tony Clifton]

"It's Tax Time"

Is that anything like Vader Time?