THE FAULT, DEAR READER, IS NOT IN OURSELVES, BUT IN OUR CONGRESS

On Tuesday I "talked" about the 47% of Americans who either pay absolutely no federal income tax or actually make a profit by filing a Form 1040 (get back more than they paid in).

I indicated that this fact is a serious problem that should be addressed.

On the same day Trish McIntire posted “Stoning Glass Houses – Again” at OUR TAXING TIMES, in which she says -

“And in order to fuel the anti-tax fire and win elections, the anger has been shifted from the tax code to pointing fingers at classes and types of people. ‘He didn't pay any taxes!’ That's not fair! Get a rope! ‘Those People’ should be stoned!”

As the Tricky One was famous for saying – Let me make this perfectly clear.  I am not “throwing stones”.  I am not faulting the 47% who pay no federal income taxes, or make a profit by filing a tax return, for doing so.  They have done nothing wrong. 

It is the legal right of every American to take full advantage of the various deductions, credits and loopholes in the US Tax Code to pay as little tax as possible.

Judge Learned Hand is famous for pointing this out in court decisions –

“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.”  {Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934)}

And -

“Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”  {Commissioner v. Newman, 159 F.2d 848, 851 (2d Cir. 1947) - dissenting opinion}

I firmly believe in this concept – and as a tax professional I prepare the 1040s of my clients with this as my bottom line. 

Thanks to the Tax Code, several of my clients over the years have either paid no federal or state income tax or gotten back more than they paid in from their “Uncles”.  To be perfectly honest, there have been years in the past where I have legally either paid no federal income tax or gotten back more than I paid in.

Let’s face it – if a government official came up to you and handed you a check for $1,000 because it is Thursday and you have brown eyes would you turn it down?

The fault, dear reader, is not in ourselves but in our Congress.  The fact that the current US Tax Code is a mucking fess is because of the idiots in Congress, who write the damned thing.

And I am not saying that certain individuals are not entitled to welfare or that the government should not encourage those on welfare to work (Earned Income Credit), or that the government should not encourage higher education or the conservation of energy or other worthy activities via partial subsidy (tuition deductions and credits and energy credits). 

I am saying that the purpose of the Tax Code is to raise money to run the government – period.  It is certainly not to “redistribute income or wealth” (which should not be a function of the government at all). 

If the government wants to provide subsidies to encourage certain actions which will benefit the country as a whole then it should provide these benefits as direct financial aid, grants, discounts, rebates, or subsidies, whenever possible at the “point of purchase” or before the subsidized expense occurs, from the budget of the appropriate cabinet department (i.e. Department of Education, Health and Human Services, Energy, etc), where the proper safeguards can be observed – and not wash it through the Tax Code.

FYI - I do believe that there are some deductions, credits, and loopholes that are inappropriate regardless of how distributed, and that some “encouragements” (charitable contributions, retirement plan deductions, and reduced taxes on capital gains for example) may be appropriate as a part of the 1040.

I hope I have made myself clear.

TTFN