To Tax or Not to Tax - This is the Question
To tax or not to tax - this question could have never been asked twenty years ago.
Historically, income tax is a novel invention. Still, it became so widespread and so socially accepted that no one dared challenge it seriously. In the lunatic fringes there were those who refused to pay taxes and served prison sentences as a result. Some of them tried to translate their platforms into political power and established parties, which failed dismally in the polls. But some of what they said made sense.
Originally, taxes were levied to pay for government expenses. But they underwent a malignant transformation. They began to be used to express social preferences. Tax revenues were diverted to pay for urban renewal, to encourage foreign investments through tax breaks and tax incentives, to enhance social equality by evenly redistributing income and so on. As Big Government became more derided - so were taxes perceived to be its instrument and the tide turned. Suddenly, the fashion was to downsize government, minimize its disruptive involvement in the marketplace and reduce the total tax burden as part of the GNP.
Taxes are inherently unjust. They are enforced, using state coercion. They are an infringement of the human age old right to property. Money is transferred from one group of citizens (law abiding taxpayers) - to other groups. The recipients are less savoury: they either do not pay taxes legally (low income populations, children, the elderly) - or avoid paying taxes illegally. But there is no way of preventing a tax evader from enjoying tax money paid by others.
Research demonstrated that most tax money benefited the middle classes and the rich, in short: those who need it least. Moreover, these strata of society were most likely to use tax planning to minimize their tax payments. They could afford to pay professionals to help them to pay less taxes because their income was augmented by transfers of tax money paid by the less affluent and by the less fortunate. The poor subsidized the tax planning of the rich, so that they could pay less taxes. No wonder that tax planning is regarded as the rich man's shot at tax evasion. The irony is that taxes were intended to lessen social polarity and friction - but they achieved exactly the opposite.
In economies where taxes gobble up to 60% of the GDP (France, Germany, to name a few) - taxes became THE major economic disincentive. Why work for the taxman? Why finance the lavish lifestyle of numerous politicians and bloated bureaucracies through tax money? Why be a sucker when the rich and mighty play it safe?
The results were socially and morally devastating: an avalanche of illegal activities, all intended to avoid paying taxes. Monstrous black economies were formed by entrepreneuring souls. These economic activities went unreported and totally deformed the processes of macroeconomic decision making, supposedly based on complete economic data. This apparent lack of macroeconomic control creates a second layer of mistrust between the citizen and his government (on top of the one related to the collection of taxes).
Recent studies clearly indicate that a reverse relationship exists between the growth of the economy and the extent of public spending. Moreover, decades of progressive taxation did not reverse the trend of a growing gap between the rich and the poor. Income distribution has remained inequitable (ever more so all the time) - despite gigantic unilateral transfers of money from the state to the poorer socio - economic strata of society.
Taxes are largely considered to be responsible for the following:
Thousands of laws, tax loopholes, breaks and incentives and seemingly arbitrary decision making, not open to judicial scrutiny eroded the trust that a member of the community should have in its institutions. This lack of transparency and even-handedness led to the frequent eruption of scandals which unseated governments more often than not.
All these very dear prices might have been acceptable if taxes were to achieve their primary stated goals. That they failed to do so is what sparked the latest rebellious thinking.
At first, the governments of the world tried a few simple recipes:
They tried to widen the tax base by better collection, processing, amalgamation and crossing of information. This way, more tax payers were supposed to be caught in "the net". This failed dismally. People found ways around this relatively unsophisticated approach and frequent and successive tax campaigns were to no avail.
So, governments tried the next trick in their bag: they shifted from progressive taxes to regressive ones. This was really a shift from taxes on income to taxes on consumption. This proved to be a much more efficient measure - albeit with grave social consequences. The same pattern was repeated: the powerful few were provided with legal loopholes. VAT rules around the world allow businesses to offset VAT that they paid from VAT that they were supposed to pay to the authorities. Many of them ended up receiving VAT funds paid the poorer population, to which these tax breaks were, obviously, not available.
Moreover, VAT and other direct taxes on consumption were almost immediately reflected in higher inflation figures. As economic theory goes, inflation is a tax. It indirectly affects the purchasing power of those not knowledgeable enough, devoid of political clout, or not rich enough to protect themselves. The salaries of the lower strata of society are eroded by inflation and this has the exact same effect as a tax would. This is why inflation is called the poor man's tax.
When the social consequences of levying regressive taxes became fully evident, governments went back to the drawing board. Regressive taxes were politically and socially costly. Progressive taxes resembled Swiss cheese: too many loopholes, not enough substances. The natural inclination was to try and plug the holes: disallow allowances, break tax breaks, abolish special preferences, eliminate loopholes, write-offs, reliefs and a host of other, special deductions. This entailed conflicts with special interest groups whose interests were duly reflected in the tax loopholes.
Governments, being political creatures, did a half hearted job. They abolished on the one hand - and gave with the other. They wriggled their way around controversial subjects and the result was that every loophole cutting measure brought in its wake a growing host of others. The situation looked hopeless.
Thus, governments were reduced to using the final, nuclear-like, weapon in their arsenal: the simplification of the tax system.
The idea is aesthetically appealing: all tax concessions and loopholes will be eliminated, on the one hand. On the other, the number of tax rates and the magnitude of each rate will be pared down. Marginal tax rates will go down considerably and so will the number of tax rates. So, people will feel less like cheating and they will spend less resources on the preparation of their tax returns. The government, on its part, will no longer use the tax system to express its (political) preferences. It will propagate a simple, transparent, equitable, fair and non arbitrary system which will generate more income by virtue of these traits.
Governments from Germany to the USA are working along the same lines. They are trying to stem what is in effect a tax rebellion, a major case of civil disobedience. If they fail, the very fabric of societies will be affected. If they succeed, we may all inherit a better world. Knowing the propensities of human beings, the safe bet is that people will still hate to see their money wasted in unaccounted for ways on bizarre, pork barrel, projects. As long as this is the case, the eternal chase of the citizen by his government will continue.
About The Author
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
His web site: http://samvak.tripod.com
Reparations? No. Taxes for reparations? A bigger no Washington Examiner
Pay Now: Final Day to Pay Property Taxes Without Interest is Jan. 5 Mecklenburg County
More on property taxes | Opinion | rockwallheraldbanner.com Rockwall County Herald Banner
Push to Use Downtown Property Taxes to Fund Far South Side Red Line Extension Faces Key Vote - WTTW News
Push to Use Downtown Property Taxes to Fund Far South Side Red Line Extension Faces Key Vote WTTW News
Democrats push for more oil taxes Arkansas Online
2023 may be your last year without a county government tax hike, Delco - The Delaware County Daily Times
2023 may be your last year without a county government tax hike, Delco The Delaware County Daily Times
Orange County cuts property taxes by almost $10M as sales-tax income soars Times Herald-Record
Kanye West's Yeezy Clothing Brand Owes California $600000 in Unpaid Taxes CPAPracticeAdvisor.com
Congo seals Vodacom offices over tax dispute Yahoo Finance
Greg Abbott and Dan Patrick diverge ahead of the legislative session on property taxes, power grid - The Texas Tribune
Greg Abbott and Dan Patrick diverge ahead of the legislative session on property taxes, power grid The Texas Tribune
Weirton Transit hoping to take steps to address unpaid taxes The Steubenville Herald-Star
Can Capital Losses Lower My Income Taxes? Yahoo Finance
Governor Beshear: Higher sales taxes not good for Kentucky LEX 18 News - Lexington, KY
Bay Area home values are falling. Here’s why most homeowners still shouldn’t expect a break on their property tax bill - The Mercury News
Bay Area home values are falling. Here’s why most homeowners still shouldn’t expect a break on their property tax bill The Mercury News
DePhillips says New Jersey needs to lower its corporate tax rate - New Jersey Globe | New Jersey Politics
DePhillips says New Jersey needs to lower its corporate tax rate New Jersey Globe | New Jersey Politics
Lawmakers Seek to Extend Tax Break for “Research” that Corporations Use to Develop Frozen Foods, New Beer Flavors, Casino Games and Tax Avoidance - Just Taxes Blog
Lawmakers Seek to Extend Tax Break for “Research” that Corporations Use to Develop Frozen Foods, New Beer Flavors, Casino Games and Tax Avoidance Just Taxes Blog
Property taxes in South Hadley on the rise; how much depends on which fire district homeowners live in - GazetteNET
Property taxes in South Hadley on the rise; how much depends on which fire district homeowners live in GazetteNET
WILLIAMS: Clearing up confusion about cars and taxes Mcalester News Capital
Baxter City Council approves 7.3% tax levy increase Brainerd Dispatch
Josh Webb: Lawmakers should lower state taxes across the board – Indianapolis Business Journal - Indianapolis Business Journal
Josh Webb: Lawmakers should lower state taxes across the board – Indianapolis Business Journal Indianapolis Business Journal
FlyFin Introduces New Tax Tips and Strategies Just in Time for Tax Filers to Adhere to New IRS Reporting Rule for $600 Threshold on Payment Apps - Yahoo Finance
FlyFin Introduces New Tax Tips and Strategies Just in Time for Tax Filers to Adhere to New IRS Reporting Rule for $600 Threshold on Payment Apps Yahoo Finance
TABLE-Russia sets grain export taxes for Dec 14-20 Successful Farming
Billionaires had an extra $1 trillion to influence the midterm elections. Save American democracy by taxing extreme wealth - Fortune
Billionaires had an extra $1 trillion to influence the midterm elections. Save American democracy by taxing extreme wealth Fortune
IASB proposes narrow-scope amendments to income taxes standard; EU directive addresses board diversity - FM | Financial Management
IASB proposes narrow-scope amendments to income taxes standard; EU directive addresses board diversity FM | Financial Management
Detroit homeowners may be eligible for tax assistance and not even know it - WXYZ 7 Action News Detroit
Detroit homeowners may be eligible for tax assistance and not even know it WXYZ 7 Action News Detroit
County leaders holding the line on taxes Sunbury Daily Item
Chile's Tax Reform Heads in the Wrong Direction Tax Foundation
New Jersey Electronics Businessman Pleads Guilty to Filing False Tax Return Department of Justice
How will the rise in Middletown property values affect taxes? Middletown Press
DFL lawmakers split over whether to exclude Social Security from Minnesota taxes - FOX 9 Minneapolis-St. Paul
DFL lawmakers split over whether to exclude Social Security from Minnesota taxes FOX 9 Minneapolis-St. Paul
CPS: High tax demands, low enrollment CBS Chicago
Clarendon Hills trustees approve tax levy with 2% increase Chicago Tribune
Gas tax suspended again, Gov. Kemp says Georgians could expect tax refund next year - 11Alive.com WXIA
Gas tax suspended again, Gov. Kemp says Georgians could expect tax refund next year 11Alive.com WXIA
How Indiana compares to Kentucky on taxes and real estate development The Business Journals
Galesburg considers raising sales tax amid adamant opposition Galesburg Register-Mail
Burgum presents 2023-25 executive budget proposal that cuts income taxes, addresses workforce and invests in education, infrastructure and other priorities - North Dakota Office of the Governor
Burgum presents 2023-25 executive budget proposal that cuts income taxes, addresses workforce and invests in education, infrastructure and other priorities North Dakota Office of the Governor
Top 10 U.S. Small Business Tax Deductions All Entrepreneurs Should Know About - Atlanta Small Business Network
Top 10 U.S. Small Business Tax Deductions All Entrepreneurs Should Know About Atlanta Small Business Network
Biden's pick for IRS commissioner would face backlog of tax returns while gearing up for next filing season - CNN
Biden's pick for IRS commissioner would face backlog of tax returns while gearing up for next filing season CNN
2023 Tax Outlook Pt. 1: Lame Duck Session, Split Congress Expectations - Thomson Reuters Tax & Accounting
2023 Tax Outlook Pt. 1: Lame Duck Session, Split Congress Expectations Thomson Reuters Tax & Accounting
Some council members question Pittsburgh's plans for parks tax Pittsburgh Post-Gazette
Retirees Can Still Reduce Taxes in Retirement Kiplinger's Personal Finance
'Difficult decisions': Britain announces higher taxes and spending cuts in warning sign for other governments - CNN
'Difficult decisions': Britain announces higher taxes and spending cuts in warning sign for other governments CNN
Tax Filing Websites Have Been Sending Users' Financial Information to Facebook – The Markup - The Markup
Tax Filing Websites Have Been Sending Users' Financial Information to Facebook – The Markup The Markup
Comparing Income Tax Systems in Europe, 2022 Tax Foundation
Will Taxing the Windfall Profits of Oil Giants Fix Countries’ Economies? The New York Times
Utah lawmakers propose income tax cut, constitutional amendment on property taxes - FOX 13 News Utah
Tax Deductions Investopedia
Taxing Overseas Firms for SOX Compliance
The Sarbanes-Oxley Act, also called the Public Company Accounting Reform and Investor Protection Act of 2002 was signed into law on July 30, 2002 by President Bush. In the aftermath of Enron, Arthur Andersen, Global Crossing, and WorldCom, SOX promises greater corporate accountability and transparency.
Deducting Points On Home Refinances
Deduction of Refinance PointsAny points that you pay in the refinancing of your residence are tax deductible over the length of the loan in question. The deduction is allowable only if the residence is your primary home and the new mortgage replaces a previous one and/or is used to improve the residence.
The Annual Gift Tax Exclusion: Getting The Edge
Whether helping the kids with a down payment on their first home, paying the premiums on a life insurance policy in an irrevocable trust, or moving appreciated assets to a younger generation, annual gifting will touch the lives of millions of Americans. But before the transfer is made, an investor should spend some time looking at the investment and the tax ramifications of the property to be passed.
Car Donation: An Easy Way to Support Your Favorite Charity and Get a Tax Deduction
Most people look forward to getting their tax return, but one of the downsides to filing taxes is that you may find yourself owing the taxman come April 15. What do you do when you realize that you not only owe money, but you owe more than you can pay at the time?The answer is: charitable deductions.
Surprising Truths About Tax Preparers
Choosing the right tax preparer for your business is a decision best not left until April. A former tax preparer and small business mastermind offers insights into the secret world of tax preparers.
Complaince of Tax Return in Electronic Commerce Taxation
Emerging Legal issues of Tax compliance of e-business Self-assessment system relies on taxpayers voluntarily meeting their tax obligations by tax payee. This concept is recognised in all tax statutes, which sets out taxpayers' primary obligations to fill tax return on self-assessment, and clearly spells out that taxpayers are required to determine the amount of tax payable correctly and to pay it on time.
How to Maximize Your Home Business Tax Deductions for 2005
Someone once said, 'the best way to calculate your taxes is?Honestly'. For 2005, add 'Smartly' to that and you'll get to keep more than you make.
Tax Deductions - Mr. C.P.A. Can I Deduct a Pizza? You Too Can Deduct Your Fun By Using Tax Tips
Recently, I stumbled across a concept that could change your financial life. You can call it a paradigm shift or a new perspective or just a different way to look at things.
IRS Reports Tax Gap of $300 Billion
The Internal Revenue Service is reporting that the difference between what U.S.
Tax Time Tune Up
Excerpted from the new book, "How to Do Space Age Work with a Stone Age Brain" TMThe complete article with pictures and sample Auto Log is available at www.organize.
Electronic Commerce Taxation and Pakistan
Assume a buyer in Pakistan downloads software from the Internet for a 30-day trial. If he likes the software, he submits his credit card information and receives an authorization code that allows him unrestricted use of the software.
Furnishing Evidence in E-Tax Compliance
Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This concept is recognised in all tax statutes, which sets out taxpayers' primary obligations, and clearly spells out that taxpayers are required to determine the amount of tax payable correctly and to pay it on time.
Home Business Tax Tips
If you have recently started an Internet or home business, your probably a little intimidated by having to submit a tax return and the possibilities of being audited. Simply follow these guidelines and rest assured that filing your next tax return will go smoothly.
Requirements To Produce Tax Information (Whats Up With That?)
"What we've got here is a failure to communicate." --Strother Martin in Cool Hand Luke Statutory Law Governments pass laws, it's what they do.
Business Tax Loophole: Leasing Assets To Your Corporation
While there are many equally valid reasons to incorporate, saving money on taxes is a consideration that can yield relatively immediate results. Leasing assets to your corporation is a tax strategy you should absolutely consider if you already have a corporation or are thinking about forming one.
Understanding Marketing Tax Deductions
Marketing is a necessary expense in running practically any business and the IRS acknowledges as much. You may run advertisements on or in the Internet, radio, television, magazines, newspapers and other media to sell your products or services.
Are You Overpaying Taxes If You Use Tax Preparation Software?
For many business owners the answer to this quandary is tax preparation software. Fill out a fairly simple interview, click "print" and out comes a completed return that will pass muster with the IRS.
Small Business Tax Credit - Americans with Disabilities Act
Many small businesses complain when confronted with the expense of complying with the Americans with Disabilities Act. Most do not realize that there are a number of tax incentives available to offset the costs.
Are You An Innocent Victim of These Popular Myths?
Misconceptions, misinterpretations and just plain "untruths" are floating about income taxes. Believing them could be costing thousands of tax dollars!Myth: A Professional Tax Preparer knows all there is to know about taxes so you don't have to know anything them.
History Of The Federal Income Tax
The powers of Congress, and the limitations set upon those powers, are set forth in Article I of the United States Constitution. Section 8 specifies both the power to collect, "Taxes, Duties, Imposts and Excises," and the requirement that, "Duties, Imposts and Excises shall be uniform throughout the United States.
|home | site map|