Cue Laughter!

You know, it’s humiliating when you really think about the esteem you are held in by the powers that be.

After all the t-crossing and i-dotting I did at the IRS office a month ago to get into “compliance,” and agreeing that I would try to start paying (come December) $50 a month toward the $45,000 they want to collect from me, I got a letter in the mail from the IRS stating that they want me to pay over $6,000 immediately for my 2010 taxes.  Talk about a buzzkill.  Here I was, looking forward to the holidays, remembering how difficult it was to go through them last year in Kuwait – away from my boys.  But this year, I’ll be putting up the tree early and leaving it up late, happily scraping together what I can to light up the boys’ faces when they look under said tree in late December, and thoroughly soaking up the holiday glow as much as I possibly can.

But the powers that be, first of all, don’t have to look over their shoulders at past tax liabilities – many of them have none, because they had no liability to begin with.  We who would “soak the rich” via the income tax are laughed at.  As a reminder:

New York Times, June, 2011: “There are 78,000 tax filers with incomes of $211,000 to $533,000 who will pay no federal income taxes this year. Even more amazingly, there are 24,000 households with incomes of $533,000 to $2.2 million with zero income tax liability, and 3,000 tax filers with incomes above $2.2 million with the same federal income tax liability as most of those with incomes barely above the poverty level.”

There are over 100,000 wealthy people who could look at my tax liability and just laugh it away.  “Ain’t my problem!  Sucks to be Kurt Henning!”  And that’s all it would be to them.

But it’s a lot more than that for me.  For me, it’s the year after my deployment where I get to try to rebuild my business.  It’s the first holiday season back where my business is pulling in about half of my monthly living expenses and I still must draw on whatever savings I brought back from my service overseas – savings that will dry up in about three months if business doesn’t improve soon.  But Uncle Sam is serious about what I earned in 2010, and the debt I incurred for earning it.  “We’ve got to have that six thousand bucks, Henning!  We mean it!  We’re depending on you, you American patriot, you!”

Fuck that.  Fuck the whole income tax system.  I didn’t fall into “compliance” out of a sense of patriotic duty.  I’m not complying so little Timmy will have a school to go to and little Sally’s mommy will have a nice road to drive on.  We had all that shit before we had an income tax.  I’m in “compliance” because I don’t want to have to try raising my children from a prison cell, and I don’t want to give the IRS the “right” to pull everything I have out of my own bank account.  It’s called compulsion, coercion, extortion.  It’s just the legal kind, which makes me a legal victim – and that makes it all better.  But legal and legitimate are not always the same thing.

So, I’ll march back over to the IRS office and show them the letter, and I’m sure they’ll say something like, “That letter was automatically generated.  You’ll probably get one for each year you just filed for.  Don’t worry.  We’ll just start your payment plan in December like we talked about.”

There are over 100,000 very wealthy people who never have to worry about such letters, who never have to worry about rebuilding their business after a deployment, who never have to worry about fulfilling the holiday wishes of their children.  And, somehow, Uncle gets along without their income tax money.  No letters, no liability, no worries, no threats.  Must be nice.

And the galling thing is that the difference is this: those people in Congress who literally write the tax code and send it off to the government printing press, they hold those wealthy folks in higher esteem than they do me.  I’m easy to look down upon.  I am easy to disrespect.  I am easy to exploit.  Because I am not one of the wealthy class who can scratch the backs of the “representatives of the People” [laugh track], I am just one of the Many who can be milked.  “And they have to let us squeeze their hardworking teats, or we’ll throw them in prison!”  They laugh.

Can you hear them laughing?  You signed a W-4 for your job, right?  They’re laughing at you, too, sucker.

What Tax Reform Will Really Look Like, Part 3 (of 3)

So Congress came up with the Tax Reform Act of 1986. How could the public not finally rest assured after hearing their representatives tout this new Act?  Listen to their confident rhetoric:

"This bill adopts a tough, certain, exacting minimum tax. We are not going to see stories about this corporation or this rich fellow or this rich woman earning a major amount of money and paying nothing in taxes...What is at stake here is us demonstrating to the American people that we are willing to make the tough choices, make the tough decisions and give them a tax system that they can count on, that is fair, that will finance this government in the right way." Rep. Byron L. Dorgan, (D) North Dakota

"Ordinary citizens - those people without the use of high-paid lawyers and fancy tax shelters - have had to witness a parade of newspaper headlines heralding the...hundreds of millionaires who paid no federal income taxes. This proposal will make that kind of unfairness a thing of the past." -Sen. John F. Kerry, (D) Massachusetts

"Madam Speaker, the vote today is for fairness and equity. For decades, the Congress has called for tax reform. This is our chance. We have railed against the abuses of a tax code that allows millionaires and the rich to escape tax-free, while the working men and women of this country pay for everything." -Rep. William B. Richardson, (D) New Mexico

"By instituting a tough, inescapable minimum tax, we have assured that no matter what special tax incentives wealthy individuals or profitable corporations use, they will be required to pay a minimum amount of tax." -Sen. John H. Chafee, (R) Rhode Island

"Fairness is the hallmark of this bill. We have strengthened the minimum tax for corporations and individuals. No longer will we hear about those who escape their tax responsibility. Taxpayers and corporations alike will pay their fair share." -Rep. Frank J. Guarini, (D) New Jersey

"It wasn't too long ago that my constituents were outraged because of news stories that detailed how wealthy individuals and corporations were escaping taxation by cleverly manipulating the law. Under the tax bill, this will no longer take place." -Rep. George C. Wortley, (R) New York

"It makes me angry that 250 families earned over $1 million last year and paid no taxes...This bill makes sure that does not happen anymore." -Rep. Richard A. Gephardt, (D) Missouri

"[This bill] includes a strong minimum tax provision that assures that wealthy individuals and profitable corporations will pay at least some taxes." -Sen. Charles Mathias, Jr., (R) Maryland

"Every year, the story is printed in the papers - and I paraphrase - 844 Americans last year made over $1 million and paid no taxes. That, justifiably, galls the average taxpayer who is making $15,000 a year and paying $1,000 in taxes. This bill closes those loopholes." -Sen. Bob Packwood, (R) Oregon

From America: Who Really Pays the Taxes?: "In 1989, the latest year for which statistics are available [and only three years after the above bill became law], the number of persons with incomes above $200,000 who paid not one penny in federal income taxes crossed the 1,000 mark for the first time, reaching 1,081. That was up 64 percent from 1986."

So, reader, if history is any indication, what might we expect when the Buffett Rule (or tax reform by any other name) becomes law? I say, nothing.

(Source: America: Who Really Pays the Taxes?, by Barlett and Steele, 1994)

Now, in case you want more current numbers, this is from the New York Times, June, 2011: "There are 78,000 tax filers with incomes of $211,000 to $533,000 who will pay no federal income taxes this year. Even more amazingly, there are 24,000 households with incomes of $533,000 to $2.2 million with zero income tax liability, and 3,000 tax filers with incomes above $2.2 million with the same federal income tax liability as most of those with incomes barely above the poverty level."  

The question must be asked: Are we paying our politicians to just talk a good game?  This is why when we hear or read of any Democrat or Republican talking about tax reform, our first response must be to recall our tax reform history, roll our eyes, and smile cynically.  What we do beyond that, who can say?  But if history is any indication on that score, we’ll likely just roll over and take it…again.

What Tax Reform Will Really Look Like, Part 2

So Congress came up with the Tax Reform Act of 1976 to fix the problem.

"The conference report also tightens up the minimum income tax provisions substantially, to insure that wealthy individuals will not be able to use tax shelters to get out of paying income taxes entirely." -Rep. Christopher J. Dodd, (D) Connecticut

"...actions taken by the conferees will assure that all taxpayers pay a reasonable amount of taxes as a result of curbing tax shelter devices and expanding the minimum tax." -Sen. Paul J. Fannin, (R) Arizona

"This bill raises the minimum tax paid by high-income persons and eliminates or restricts many tax shelters. These actions are consistent with my firm support of measures designed to close the loopholes and ensure that each taxpayer bears his or her fair share of the overall tax burden." President Gerald R. Ford, signing the bill into law, October 4, 1976.

In December of that year, the Joint Committee on Taxation issued this statement: "The minimum tax was enacted in the Tax Reform Act of 1969 in order to make sure that at least some minimum tax was paid on tax preference items, especially in the case of high-income persons who were not paying their fair share of taxes.  However, the previous minimum tax did not adequately accomplish these goals, so the [1976] Act contains a substantial revision of the minimum tax for individuals to achieve this objective."

And it's a good thing they put in all that rhetoric and work, because by 1986 there were 659 high-income persons who paid no income tax - a 170 percent increase from 1974, and a 325 percent increase from 1969. Were it not for the highly effective Tax Reform Act of 1976, who knows how much higher those numbers might be, right?

(Source: America: Who Really Pays the Taxes?, by Barlett and Steele, 1994)

What Tax Reform Will Really Look Like, Part 1

[This 3-part post was written a few months ago as a facebook Note.  We are bound to hear much talk in the near future about "tax reform," and it is only the awareness of our history that will allow us the advantage of being able to roll our eyes every time a Republican or Democrat brings up the subject.]

Any time there is discussion regarding the Buffett Rule (or any type of tax reform), we will hear references made to "loopholes" in our tax code that allow the wealthy to pay little or no income tax, and this inevitably leads to the phrase "fair share."  Let's take a look back at our country's fairly recent past and see what we might expect once the Buffett Rule becomes law (emphasis in quotes added).

January 17, 1969.  Address to Congress by Joseph Walker Barr, Treasury Secretary: "Our income tax system needs major reforms now, as a matter of importance and urgency.  That system essentially depends on an accurate self-assessment by taxpayers.  This, in turn, depends on widespread confidence that the tax laws and the tax administration are equitable, and that everyone is paying according to his ability to pay.  The middle classes are likely to revolt against income taxes not because of the level or amount of the taxes they must pay, but because certain provisions of the tax laws unfairly lighten the burden of others who can afford to pay."

It was revealed in Barr's address that, in 1966, there were 155 tax returns filed by Americans with incomes above $200,000 "on which no federal income taxes were paid, including 21 with income above $1 million."  Congress responded by introducing the "minimum tax."  This is what lawmakers had to say on the subject:

"Increasingly in recent years, taxpayers with substantial incomes have found ways of gaining tax advantages from the provisions that were placed in the code primarily to aid limited segments of the economy.  In fact, in many cases these taxpayers have found ways to pile one advantage on top of another.  The committee agrees with the House that this is an intolerable situation.  It should not have been possible for 154 individuals with adjusted gross incomes of $200,000 or more to pay no federal income tax."  -Sen. Russell B. Long, (D) Louisiana; Chairman, Senate Finance Committee

"Million dollar incomes without tax liability will become a thing of the past."  -Rep. Wilbur D. Mills, (D) Arkansas; Chairman, House Ways and Means Committee

"It was unconscionable that some 155 very wealthy persons paid no tax at all in prior years; the minimum tax and list of tax preferences should foreclose this opportunity."  -Rep. Ogden R. Reid, (R) New York

"I do want to point out that this bill does represent a real accomplishment in three fundamental areas.  First, it increases tax equity by substantially closing loopholes that have enabled some citizens to avoid paying their fair share of taxes while imposing unduly heavy burdens on other citizens."  -Rep. John W. Byrnes, (R) Wisconsin

"As to those 155 or so individuals who supposedly had incomes in excess of $200,000 a year but, because they paid no federal income taxes thereon, set this whole matter in motion, it might be noted that most, and probably all of them, from now on, will have to start paying at least something again in the way of federal income taxes as a result of this bill's passage."  -Rep. Howard W. Robinson, (R) New York

And when President Nixon signed the bill into law on December 30, 1969, he said: "A large number of high-income persons who have paid little or no federal income taxes will now bear a fairer share of the tax burden through enactment of a minimum income tax comparable to the proposal that I submitted to Congress..."

This was the Tax Reform Act of 1969.  Interesting to note that between 1966 and 1974, there was a 57 percent increase in the number of individuals and families with income over $200,000 who paid little or no income tax - from 155 to 244.

(Source: America: Who Really Pays the Taxes?, by Barlett and Steele, 1994)