Monday, October 10, 2011
MORE ON THE EARNED INCOME CREDIT
The IRS notice I referenced in my recent post “The Earned Income Credit and Tax Fraud” included the following statement (highlight is mine) -
“We estimate 24 to 29 percent of all EITC claims have some type of mistake which costs the government $13 billion to $16 billion each year. Some errors are caused by misinterpreting the law; some are because the preparer accepted client-provided information at face value and others are out and out fraud.”
Trish McIntire in her post “Stoning Glass Houses” at OUR TAXING TIMES correctly tells us that we should not blame the 47% of Americans who pay absolutely no federal income tax by claiming a combination of the Earned Income Credit, the Child Tax Credit, the Making Work Pay Credit, and other benefits in the Tax Code.
For the most part these 47% “tax non-payers” did nothing wrong (obviously there are varying levels of tax cheats in the 47%, just as there are in the 53% who paid taxes). They merely took full advantage of the many completely legal tax loopholes available to them.
While I do not believe the Earned Income Credit, and many other “tax expenditures”, should be in the Tax Code, I have no problem with claiming them on my clients’ returns if the client legitimately qualifies.
Let us remember the famous quote from Judge Learned Hand -
“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”
Don’t blame the player, blame the game. Or rather, in this case, those who write the rules for the game.
If there is anyone to blame it is the idiots in Congress. Running social programs through the Tax Code is cheap (although not so cheap when you consider the resulting excessive tax fraud) and easy. And we all know that the idiots in Congress will always react by choosing the quickest and easiest way rather than respond by resorting to actual serious thought.
I expect the only way to get true tax reform is to replace the current idiots in Congress with individuals who have intelligence, integrity, and backbone.