Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.
Wednesday, September 13, 2017
TAX REFORM: WHAT THE TAX CODE SHOULD NOT BE USED FOR
blogger Kelly Phillips Erb, aka TaxGirl, put out a call for guest posts on the
subject of tax reform for FORBES.COM’s “Tax Reform Week”.I sent her one.
heard from KPE, who emailed me –
“Unfortunately my timeline only allowed me to
choose a few and I was not able to include your post. I tried to choose posts
that represented a range of interests, backgrounds, and perspectives.”
So it shouldn’t
go to waste, here is the guest post I sent KPE -
45-year veteran tax preparer I know too well that the current US Tax Code is a
complicated “mucking fess”.It should be
shredded and rewritten from scratch.
The one and
only purpose of the Tax Code is to raise the money necessary to fund the
government.It should not be used for social engineering, to
redistribute income or wealth, or to deliver social welfare and other
One of the
biggest problem with the current system, and responsible for a large amount of
its complexity and most cases of tax fraud, is the use of the Code, and the
1040, to deliver government benefits, especially through the use of
“refundable” credits.The Internal Revenue
Service, and the tax preparer community, should not be required to act as Social Workers and administer and verify
government benefit payments.
It is not
saying that the government shouldn’t provide financial assistance to the
working poor and college students, provide encouragements for purchasing health
insurance, making energy-saving purchases and improvements and other ‘worthy’
actions,”But such assistance and
encouragements should not be
distributed via Form 1040.
benefits provided by the Earned Income Tax Credit and the refundable Child Tax
Credit should be distributed via existing federal welfare programs for Aid to
Families with Dependent Children. The benefits provided by the education tax
credits and deduction for tuition and fees should be distributed via existing
federal programs for providing direct student financial aid. The benefits
provided by the Premium Tax Credit, the energy credits, and other such personal
and business credits should be distributed via direct discount payments to the
appropriate insurance companies and vendors, similar to the successful Cash for
Clunkers program of a few years ago, funded by the budget of the appropriate
the benefits thIs way is much “more better” than the current method for many
1. It would
be easier for the government to verify that the recipient of the subsidy,
discount or rebate actually qualified for the money, greatly reducing fraud.
And tax preparers, and the IRS, would no longer need to take on the added
responsibility of having to verify that a person qualifies for government
qualifying individuals would get the money at the “point of purchase,” when it
is really needed, and not have to go “out of pocket” up front and wait to be
reimbursed when they file their tax return.
3. We would
be able to calculate the true income tax burden of individuals. Many of the
current “47 percent” would still be receiving government benefits, but it would
not be done through the income tax system, so they would actually be paying
federal income tax.
4. We could
measure the true cost of education, housing, health, energy and welfare
programs in the federal budget because benefit payments would be properly
allocated to the appropriate departments.
honest I do not expect Congress to stop this inappropriate practice.Congress rarely does what should be done.