Tags: Packer | institutional | evil | IRS

The Infinite Tax Rate and Institutional Evil

Tuesday, 18 September 2012 07:42 AM Current | Bio | Archive

Last week, I received a letter so hilariously out of touch with reality that I had to laugh. You see, I’m currently facing an infinite tax rate.

Let me explain. A few years back, a friend and I had a business idea. We started undertaking the steps to implement it, including the formation of a limited liability corporation (LLC).

Soon after that, things slowed down. Our existing jobs kept both of us too busy to move forward. But we wanted to keep our options open. So we continued paying the LLC fees with the state, and filed federal tax returns.

So you can appreciate my bemusement when I read a letter from the Internal Revenue Service stating that this LLC had failed to pay taxes in 2011.

Now, I know the government is spending far more money than it brings in, but trying to impose any tax on a business with no actual assets, sales or earnings yet makes the tax rate infinite.

This situation is the perfect example of what I call “institutional evil.” It’s when an organization becomes so large and steeped in protocol that common sense goes right out the window.

We’ve seen it in the private sector, too. Some major banks have had a public relations nightmare for foreclosing on homes that they didn’t own the underlying mortgage on or for foreclosing on homes that had no mortgage whatsoever.

How hard would it be for someone to actually verify that they owned the mortgage? Not very. But that’s not part of the protocol.

The problem with institutional evil is that of accountability. Because those who commit these acts fall back on the old Nuremberg defense that they were only following orders, there’s no sense of wrongdoing.

In the private sector, someone might get fired, but they’re most likely transferred out of sight.

A government employee who screws up might not get a big promotion, but you never hear about unelected bureaucrats being fired for incompetence.

In fact, a recent study found that over 700 teachers in New York City were being paid not to work. They were pulled from classroom duty due to complaints ranging from insubordination to sexual misconduct with students. That $30 million in wasted salaries could be spent in so many better ways.

So, the government is taxing companies that don’t make any money to pay for teachers who don’t teach. What a waste.

Multiply that economic drag out across the entire economy and just think of how much better off we could all be without this evil.

Like many communications from the government, my IRS letter is light on the carrot and heavy on the stick. It presumes guilt, even though the rule of law is to assume innocence. It provides no explanation for their reasoning or rationale. Just pay up, or bad things will happen.

The worst the IRS can do is to try and levy the assets of a company that has none. But instead of sending a check, I’m going to send a thoughtful response instead.

Why? Because if none of us stand up to institutional evil, we’re part of the problem.

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The government is taxing companies that don’t make any money to pay for teachers who don’t teach. What a waste.
Tuesday, 18 September 2012 07:42 AM
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