We will become a nation of tax cheats

by Rocket Finance

boston-tea-party

I read a theory once that stated if a certain percentage of the population starts to break a particular law, then that law can no longer be enforced. I don’t recall the exact percentage, but I would make an educated guess that it lies somewhere between five and fifteen percent. It really would not take much more than that to plunge us into anarchy. If ten or twenty percent of the population decided to run every stoplight, shoplift every time they were in a store or shoot animals in their backyard, our law enforcement officials would be helpless to enforce the law.

Civil society depends on willing subjection to the law by the majority of the populace. Cheating on taxes has been around for years, but I believe that we are about to enter a period where even the most honest among us are going to look at each other and ask, “So why exactly am I filing taxes again?” Here are the reasons why the United States is close to tax law anarchy:

Sheer number

Just look at the number of taxes that we pay! Not the amount, but the constant drip, drip of taxes here, there and everywhere is becoming a gradual pounding like Chinese water torture. Gas tax, water tax, property tax, car tax, sales tax, toll tax, communications tax, transportation tax, social security tax, income tax, Medicare/Medicaid tax, export tax, import tax, luxury tax, inheritance tax, capital gains tax and those are just the taxes off the top of my head. The frustration level of the citizens of this democratic republic is reaching a critical point. One of the seminal moments of American history involved taxes – remember “no taxation without representation” and the Boston Tea Party? The last government that tried to tax Americans unfairly ended up sailing back across the Atlantic Ocean with its tail between it’s legs.

Amount

United States tax receipts are currently close to 30% of our Gross Domestic Product. Take a minute to total up the amount of money you send to Washington D.C. or your state capitol annually. Include all of the above taxes in your total. Then imagine if you were a high wage earner (maybe you are). The rich have more money confiscated by the government than anybody else and they are the people doing the most employing and non-profit donating on top of their taxes. Eventually, they will move all of their assets out of this country or just quit paying taxes period.

Government Waste

No person or company wastes money quite like our federal government. All of you can readily access examples of government waste. The government spends money on things like STD prevention and pays farmers not to grow crops. Seriously, what successful company invests in something like public school education or Amtrak, finds out that neither endeavor balances the books or produces a decent product, and then decides to give both entities more money?! Taxpayers are sick of paying for failing schools, trains they don’t want, a retirement program that is bankrupt and research into the greatest hoax ever invented: man-made global warming. Furthermore, the American Recovery and Investment Act is not merely the straw that broke the camel’s back, but rather the 600 pound gorilla.

Complexity of the Tax Code

Need I say more?

Obama’s Cabinet

At least four of President Obama’s cabinet nominees are accompanied by tax problems. Several have taken their names out of the running, but the stench remains. Furthermore, several of them did not pay the back taxes until confronted with the problem. Tim Geitner, our new Treasury Secretary did not pay all that he owed when audited, just the amount that was still within the statute of limitations – until he was nominated for a dream job, then he quickly paid up.

The Rangel Rule

We also have a United States Representative who committed tax fraud. Charlie Rangel (chairman of the Ways and Means Committee, no less!) “forgot” to pay taxes on rental property that he owns in the Caribbean. He has since paid the back taxes, however he did so without penalty or fee. As of this writing, he faces no investigation or criminal charges.  In a recent op-ed in the New York Post, Congressman John Carter proposes a new law called the “Rangel Rule”. This law would allow tax payers who are caught in a misstep to pay the tax owed, but without penalty or interest.

And now we see the beginning of the end.

Obviously, if the law proposed by Congressman Carter is passed, we are going to see a huge increase in tax cheating. The primary deterrent to cheating on one’s taxes is not an audit (although audits are not fun), but rather it is the penalty and interest charged if a mistake is found. Imagine if 50 or 60 percent of tax returns contained major errors and/or just plain fraud. First of all, the IRS could never keep up with the investigations. There is already little chance of getting caught . . . and now we might have a situation where no apprehended offenders are punished.

But it won’t stop there. Once conscientious tax payers realize that over half of the American population is blatantly flouting tax law, they will also cross over to the dark side. Even IRS agents will start to ask themselves, “So, why am I paying taxes, again?” That is if they are currently paying anyway . . .

Our tax base is already close the precipice of simply saying, “I’m not going to pay”. Employing known tax cheats at the highest levels of our government could push everything over the edge.

Picture credit: bostonist

  1. 5 Responses to “We will become a nation of tax cheats”

  2. By Odnal on Feb 11, 2009 | Reply

    I also have been amazed at the tax problems in Obama’s cabinet. Geitner’s nomination just floored me and I can’t believe that it actually got approved by Congress. There is no conceivable way that his tax problems were accidental.

    I don’t know that people will blatantly stop paying taxes, but I do think that the poor examples from from the top will lead us ‘normal’ people to

  3. By fathersez on Feb 16, 2009 | Reply

    I have to disagree with this well written article on one thing.

    My Government wastes far more than your Federal Government.

    Who invented Governments anyway?

    Regards

  4. By rocketc on Feb 16, 2009 | Reply

    fathersez, I’m not too sure about that . . . our government spending obligations are greater than the GDP of the entire world. http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=88851 It takes major league waste to bankrupt the greatest economy the world has ever seen.

  5. By Dana on Feb 24, 2009 | Reply

    The idea that higher tax brackets “punish the wealthy” is a myth. One that survives only because we as a nation do not know the difference between income-statement-affluent and balance-sheet-affluent. The higher tax brackets certainly affect the former–if you can find any, and more on that in a minute. They don’t necessarily affect the latter.

    Haven’t you read The Millionaire Next Door? You should.

    It’s amazing to me that people who make higher income are so bitter about poor people who go on welfare. They’re mad that they have to pay so many taxes to support “deadbeats.” First off, social programs are a drop in the bucket of the federal budget. The military dwarfs social programs on the scale that Sirius dwarfs our sun, give or take. Secondly, if people who made higher incomes spent their money wisely, even being in a higher tax bracket for the upper part of their income wouldn’t hurt them much.

    But so many high-earners DON’T spend their money wisely. They think they have to have all the latest gadgets and project a certain image of prosperity and they think they’ve “earned” all of this. They’re one of the major groups in hock up to their eyeballs with credit card bills. Their real problem isn’t Uncle Sam but Aunt Io. As in, I Owe.

    If you think they should become tax cheats on top of being irresponsible spendthrifts then whatever, I suppose you think the rule of law is important in this country too. But only the laws you support, right?

    I don’t like government waste either. But I can’t remember the last time a so-called fiscal conservative rooted out the actual waste the government’s committing. Instead y’all go after social programs. That’s it. That’s the extent of your creativity. It’s like taking out a $2000 a month loan to buy a Lamborghini and then using grocery coupons to buy name-brand packaged foods and claiming you’re saving money that way.

    As for Obama’s cabinet, it’s interesting that the media focuses on the fact that he tried to appoint these peole, and not on the fact that high earners are so often criminals. We’re throwing people in prison for life for shoplifting three times in the same state but when it comes to a high earner, just about anything goes and it’s the high earner’s prospective boss’s fault that he skipped out on his taxes.

    I weep for my country too, but for different reasons than you do.

  6. By rocketc on Feb 24, 2009 | Reply

    Dana, your point is very unclear.

    You are correct – high taxes for the wealthy do punish the poor and working people.

    Many wealthy people use their money very wisely. That is how they became wealthy.

    The wealthy who throw their money around are not going to stay wealthy for very long and every time they buy something, they help to employ people who are farther down the ladder than they are. Furthermore, it is not your job, nor the governments job to decide who spends what, when and where.

    I in no way endorse cheating on taxes.

    If you can’t come up with examples of conservative’s decrying waste. . . then you have not been paying attention.

    Most conservatives oppose social spending on the basis that it does not work.

    High earners are not often criminals. Seriously, what are you talking about? In fact, I would submit that there is a higher rate of crime in the O cabinet than what exists amongst private company CEO’s.

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