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The Tax Gap Myth



 
 
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  #1  
Old January 30th, 2007, 08:45 PM posted to alt.activism.death-penalty,rec.travel.europe,alt.politics.bush
Earl Evleth[_2_]
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Posts: 195
Default The Tax Gap Myth

The 'Tax Gap' Myth
January 30, 2007; Page A16
When something sounds too good to be true, it usually is. So now is an
apt time to deconstruct the much-discussed "tax gap," that mythical
golden goose that the Beltway political class is counting on to fund
its spending agenda.

The "tax gap" is the difference between what the Internal Revenue
Service thinks taxpayers should be paying and what it collects. The
IRS currently estimates this at about $290 billion a year. Ask any
Congressional chairman how he intends to close the deficit, expand the
Medicare drug benefit, reform the Alternative Minimum Tax or subsidize
college education, and the answer is invariably "close the tax gap."

Last year the Senate held some half-dozen hearings in search of this
pot of gold. Senate Finance Chairman Max Baucus has put out a monthly
newsletter on the issue, and last year he blocked a Treasury nominee
until the agency had developed a tax-gap fix. Mr. Baucus and his GOP
sidekick, Charles Grassley, have ordered up a tax-gap report from the
Joint Tax Committee, and they vow to make closing the gap a priority.
We suppose politicians are allowed to dream. But it's worth recalling
that Washington has searched for this revenue Atlantis for decades
without success.

To put the tax gap in perspective, consider that the IRS took in tax
receipts in fiscal 2005 of more than $2.2 trillion and that the
overall U.S. tax compliance rate is about 85%. This isn't perfect, but
it also isn't Italy. It's especially good considering the U.S. tax
system is based on voluntary compliance. Nina Olson, the IRS's
taxpayer advocate, told Congress last year that IRS auditors have
found that an estimated 94% of noncompliance is the result of honest
mistakes by tax filers who simply don't understand the 17,000-page
beast of a tax code.

One obvious answer would be to simplify the code (more on that later).
But this requires political will, so Congress naturally prefers the
easier route of ratcheting up taxpayer regulation and enforcement. One
popular solution is to increase dramatically the information taxpayers
must report to the IRS.

Some potential illustrations: Brokers would have to report securities
sales information to the IRS, the better to monitor capital gains.
Individuals who participate in online auctions such as eBay would have
to file a tax form about their transactions. Americans would be
required to file expanded mortgage interest forms, while mortgage
lenders would have to report loan information. State and local
governments would have to provide their tax data to Washington, the
better to double-check deductions.

Our personal favorite would require that Americans withhold taxes from
any cash payments they make to such individual contractors as
babysitters, gardeners or plumbers. They'll love that one in the
suburbs. Implicit in all these new plans is a much bigger IRS staff to
monitor and chase tax miscreants.

Here's another bad idea: Many doctors and lawyers who are incorporated
under subchapter S will often pay themselves lower wages but higher
dividends, in order to reduce self-employment taxes. The law is vague
on the limits of this practice, and it is undoubtedly abused. But the
Joint Tax Committee's preferred solution is to make all professional
income -- even dividend payments -- subject to self-employment taxes;
this is nothing more than a backdoor tax hike.

All voluntary tax compliance systems have their limits. Under today's
tax code, the only way the feds can raise compliance is to place
extraordinary burdens on taxpayers. Most of those financial and social
costs also end up being borne by those who already dutifully pay their
taxes, in the name of catching the few who evade the law. The tradeoff
for higher tax collection is less liberty, as we learned only a decade
ago when Congress held much-hyped hearings on abusive IRS tactics and
audits.

There is a better way. The more complicated a tax system, the more
likely taxpayers won't understand, or will try to dodge, the rules.
Simple tax regimes, such as a single flat rate, encourage compliance
and efficiency, not to mention economic growth. This has been the
experience of many Eastern European countries after they imposed a
flat tax, and the U.S. had similar jumps in reported tax income from
"the rich" following the 1986 tax reform that cut rates and closed
loopholes.

At least a few "tax-gap" critics in Washington are beginning to
understand all this. Messrs. Baucus and Grassley have started pairing
the "tax gap" problem with the need to eliminate or simplify the
Alternative Minimum Tax -- which is hitting more and more Americans.
House Ways and Means Chairman Charlie Rangel has also said that fixing
the AMT might require "a look at the whole tax code." Could it be that
even Washington is beginning to understand that fixing the tax mess
means starting over?

  #2  
Old January 30th, 2007, 08:58 PM posted to alt.activism.death-penalty,rec.travel.europe,alt.politics.bush
Donna Evleth[_1_]
external usenet poster
 
Posts: 396
Default The Tax Gap Myth



From: "Earl Evleth"
Organization: http://groups.google.com
Newsgroups: alt.activism.death-penalty,rec.travel.europe,alt.politics.bush
Date: 30 Jan 2007 11:45:24 -0800
Subject: The Tax Gap Myth

The 'Tax Gap' Myth
January 30, 2007; Page A16


Forged post. Again. I won't even bother to name the forger, everybody
already knows.

Donna Evleth

  #3  
Old January 31st, 2007, 10:08 PM posted to alt.activism.death-penalty,rec.travel.europe,alt.politics.bush
Runge
external usenet poster
 
Posts: 2,243
Default evleth crap again

No one cares

"Donna Evleth" a écrit dans le message de news:
...


From: "Earl Evleth"
Organization: http://groups.google.com
Newsgroups:
alt.activism.death-penalty,rec.travel.europe,alt.politics.bush
Date: 30 Jan 2007 11:45:24 -0800
Subject: The Tax Gap Myth

The 'Tax Gap' Myth
January 30, 2007; Page A16


Forged post. Again. I won't even bother to name the forger, everybody
already knows.

Donna Evleth



 




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