Obviously, nearly all the people talking about whether the income tax is fair enough — or not — do not have a clue as to what they are talking about.
Just ask anyone of them if they ever even held the U.S. income tax code in their hands. Now that I am thinking about it, have you?
This basic fact of life includes all those politicians, strategists, and spokespersons who tell us that the income tax code can be "reformed." That particular piece of delusion I have heard, and so have you, for a long time.
You do not have to be a tax expert to understand two things:
First, a tax system devised in the early 1900s will not and does not work in the 21st century.
Second, that the government — Congress, the various presidents and their respective Treasury, and the courts — have the game rigged so even if a taxpayer can win on the law, he can still lose on the procedure.
In this political season, like all the others in the past, we are inundated with speeches, policy papers, and promises of tax reform so the system will be “fair” — whatever that means.
Except for the proponents of revoking income tax altogether and replacing it with a consumption tax, the rest are all lying about reform.
One of the key reasons that income tax does not work is the way the income tax system works procedurally.
This is not a criticism of the IRS. They, like the taxpayer's, are working under pressure from the professional politicians in Congress who pass the tax laws which establish the rules of the road — and garners for themselves both campaign money and constituent votes.
The IRS is trying to cope, just like the taxpayers, in a system that Dante could have used as one of the levels of Hell.
At the insistence or at least with the permission of Congress, the IRS created its own set of procedural rules that it follows. It's all kind of understandable if you are a tax lawyer or a bureaucrat.
These procedural rules, like the tax law itself, are so convoluted as to be not understandable unless you become one of the truly committed tax aficionados.
Even if the taxpayer is right on the law, the IRS is allowed to use its procedural rules to wear down a taxpayer financially and emotionally. Thereby, in the end, defeating all but those taxpayers who are the most motivated and have very deep pockets.
Published in "Tax Analysts" recently was a letter from an Associate Chief Counsel at the IRS in response to a letter by a senator on behalf of a constituent.
Very respectfully, the Associate Chief Counsel explained that although the Senator's constituent had won its court case against the IRS, the IRS was still not going to pay the refund due.
The reason given is straightforward enough. The IRS doesn't agree with the decision. And it is going to continue to litigate this issue. In tax parlance this is known as a non-acquiescence.
The IRS does point out that the taxpayer can bring another lawsuit against the Treasury after six months if the taxpayer choose to try and get paid the refund the court said was due. Effectively, the taxpayer will have to litigate the issue(s) all over again.
We will hear ad-nauseum from the Presidential candidates, the Republicans and Democrats, and the President himself about how they are going to make the income tax system better, or fairer, or whatever appeals to their voting constituencies and campaign contributors.
As in the case of the taxpayer who successfully won his battle in court but may still lose the victory because of procedural obstacles, the same is true for everyone subject to the income tax system.
Want to reform the income tax system? Do you want to make it fair? Do you want to make it efficient? Do you want it to be voluntary so you don't have to fear the tax authorities?
Then the only reform that will work is to revoke the 1913 income tax law and replace it with a 21st century consumption tax.
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