NeoNote — Taxes, spying, deductions, and economies
❝❝Did I ever mention how the income tax isn't designed to produce revenue, but to spy as needed on American citizens?NeoNotes are the selected comments that I made on other boards, in email, or in response to articles where I could not respond directly.
Yep.
You can start with how the IRS is the "go to" agency whenever someone does something the Federal government doesn't like.
You can continue with the fact that your employer and any financial institution you do business with are required "under penalty of law" to report any transactions on demand. There's a reporting threshold for "as they happen," but the IRS still has the (questionable) power to demand any and all going back for years.
Speaking of penalty of law, have you read that bit on the 1040? In fact, take a close look at the entire form. It doesn't say you are required to report your income, it just says that it must be accurate reported on the form before you sign.
No one, including the IRS understands the tax code. It can be manipulated and interpreted as needed. And remember, the first few levels of the tax courts are administrative courts run by the IRS with their own rules of evidence. The presumption of innocence doesn't apply. You have to prove the IRS wrong, and then you might get your seized money back.
By definition, a "standard" deduction means taxes are too high.
What, you wanted it stated in the authorizing law?
Everything I said was drawn from truth.
From Al Capone on, the IRS has been used against those the Federal government doesn't approve of. Or occasionally found politically inconvenient. Any other uncovered crimes are just a bonus.
Reporting financial transactions have proven so useful in so many cases that it has become literally the reason the IRS exists.
The 1040 form is unusually and carefully worded.
Since at least the 1970s, IRS agents and supervisors have been shown to have a very focused knowledge of the tax code and an appalling ignorance about the rest.
The IRS does have it's own court system with it's own rules of evidence. And you are not presumed innocent until proven guilty.
More importantly, look at how Presidents have used the tax code against their enemies.
Al Capone went to jail for tax evasion because they couldn't get anything else to stick.
You tell me, if you were a prosecutor and you knew you had a guilty man and you had the evidence, would you want to charge them with murder or tax evasion?
Prove me wrong instead of labeling it conjecture and innuendo. It's right there, I showed you were to look.
Remember, it took amending the Constitution to make a Federal income tax legal.
Going after him for tax evasion wasn't even part of the plan.
Pay attention, because that is a critical point.
Did you know that the IRS was used to enforce Prohibition?
That was a critical point too.
I understand your confusion. Many assume that Government is a Good Thing. It's not commonly acknowledged that taxes can be some of the worst abuses of government authority. Might I suggest Adams' For Good and Evil: The Impact of Taxes on the Course of Civilization as a starting point?
No I am not.
I'm stating that law is not good in and of itself, and that law is more likely to be abused than not.
For example, people are usually taught that the progressive income tax in particular is a way to get the rich to pay "their fair share." That's not true and it never has been. We know that wholehistoriesindustries have grown up to help people use tax loopholes. What's more, we know that politicos and technocrats benefit from selectively applying the law.
Which returns to my comment, that the income tax as designed is intended to spy on American citizens. It's not uniformly applied. It's subject to change and political influence. And the majority of the public is locked out of changes. And for what? A mala prohibita law. Not paying taxes is does not harm someone, it's just bad because government has declared it to be bad.
The graduated income tax has done more harm and destroyed more freedom than any other law in American history. "Innocent under proven guilty" stopped because of the income tax and no longer applies in American law.
I should have warned you. Never argue taxes with a libertarian.
Yeppers.
That standard deductions line makes people think. And it should.
That's usually when I point out that if they are getting a refund, they just gave the government an interest free loan.
Oh my, that's just so adorable!
Look at it this way.
Taxable income = 100 dollars
Standard deduction = 17 dollars
"Taxed" income = 83 dollars
You are still paying taxes. It's only on paper that there is a difference. They messed with the rate, not with the tax.
They lie.
Don't even get me started on itemized deductions.
ETA: I'm the one with the line of "by definition, a standard deduction means taxes are too high." I'm proud of it, so I want credit.
Yep, and the claim stands.
The politicos and technocrats are playing word games to convince people that the IRS is looking out for the little guy.
They don't reduce the tax, they tell you that there is a standard deduction.
Speaking of which, let's look at that word standard. As in, everyone gets it. If it were really about "giving something" to someone with lower income, you'd think the deduction would be less for higher incomes. But then it wouldn't be a standard deduction.
Nope, we give everyone a standard deduction.
And that certainly looks like taxes are too high.
The fact is that the government hides to actual tax rate to make people think they are getting something for nothing.
The tax rate is too high, so they play word games.
The graduated tax is another issue.
The point is, the mere existence of a standard deduction means that the standard is to deduct. Hence, by definition and the admission of the government, taxes are too high.
That's the same form that is worded to hide the fact that they don't care about you paying your taxes as much as they don't want you to lie about it and make sure that it is correct, right?
The whole thing is deceptive from the payroll deduction to the falsity that a progressive tax that impacts higher tax brackets more to which deductions may be allowed this year if you are lucky enough to know about them.
Not to mention the undeclared interest free loan that many make to the government every year without realizing it.
If it were really just about the income, the whole thing could be done on half a postcard.
Including the instructions.
But this US doesn't do it simply. The code is created to distract, to obfuscate, to hide what government wants.
It's not about the revenue.
It's about tracking the flow of money. Something which isn't authorized by the Constitution.
The whole business of a "standard deduction" is just another way to confuse citizens and convince them that they are getting something for nothing.
It's three card monte by government regulation. You aren't supposed to look close.
Meanwhile there is a surveillance system that is the envy of tyrants all over the world. And Americans accept it even as they complain about it.
Tax income, but not track money.
The 16th was a product of the time, and NO ONE at the time expected it to be used against the poor and the (emerging) middle class. It was sold as a way to make the rich pay "their fair share." I'm pretty sure that if people knew then what the income tax would become, there would have been another revolution.
The graduated income tax was intended to foster class envy. At that point, the upper class did not have the political clout to protect themselves.
Don't you find it interesting that a sales tax doesn't require nearly the administration that an income tax does?
Don't you find it even more interesting that no one understands the tax code and just accepts that is how it is supposed to be?
And then there is the fact that in the name of "protecting" the poor, they still have to declare their income under penalty of law.
As I said and have shown, the American income tax system is more about spying on the American people than producing income.
All you are doing is saying that the system is necessary.
One of the things I quickly learned as a Corporate Clone is that the budget expands to consume the sales income. It's always easier to spend someone else's money.
Remember I said that taxes are too high.
Still, I stand by my point. The spying on the American public is more important than the revenues.
If you state a tax rate and then give everyone a "standard deduction," then taxes are too high.
Taxes are too high for many other reasons, but I agree that distracts from this argument.
A standard deduction goes to everyone, not someone on a graduated scale.
Deductions have nothing to do with a graduated tax, especially since most deductions go to the middle and high end income groups.
It's not a reduction of tax on graduated income, it's deliberately confusing what the rate is.
Which isn't necessary for the higher ends of the income scale who can afford to have someone do their taxes. On the very high end, that means hiring a professional accountant to minimize tax liability.
Deductions are not intended to help the poor. Even if they are standard.
Of course the easiest thing of all would be actually lowering the tax without deductions.
Not true.
The modern version of the income tax started as a class tax. It was not expanded to a mass tax until WWII. Even then (in 1944), the "standard deduction" started as ten percent of taxable income. When the standard deduction was changed to a flat fee, that fee deliberately wasn't linked to the rate of inflation. Which means that over time, people on the lower end of the income scale paid more. But that wasn't the justification in 1964 when the deduction was changed from a percentage to a fee.
Because the fee amount wasn't linked to inflation, inevitably people started falling through the cracks. Meanwhile the income tax provided an unprecedented (and expanding) monitoring of cash flow (not the economy). That monitoring power could not be sacrificed.
And that is where the Earned Income Tax Credit came from. A direct payment from government that did not interfere in the existing tax structure or the government's ability to monitor cash flow. If anything, it expanded the latter.
And if you lower taxes, you don't have to lie about deductions to convince people that they are getting something that they are not. The actuality is that it's easier to manipulate a fee than a percentage all while hiding that people are paying more and getting less while being told what a Good Thing it is.
Reagan signed the expansion of the EIC, but it was originally created in 1975. It's also constitutionally questionable.
And if you eliminate the standard deduction and lower the tax rate to 8%, they pay less.
Manipulating the process is not the answer.
Um,yes.
Because now we are going to talk about the unintentional side effects of a graduated tax system.
Higher taxes aren't just absorbed by businesses and those with more income. The higher costs are passed on. In the case of a business, that means higher prices. In the case of an individual, that means they will buy less, which means few jobs creating or selling.
All this results in lower economic opportunity overall, but especially on the margins. That in turn means that those trying to increase their income will be most affected, especially if they are on the lower end of the income scale.
These are well known second order effects. Look them up.
Simply put, modifications and exceptions to the rules usually benefit those most able to influence the system. Or, as I like to put it, government authority tends to be used against those least likely to resist.
The more complex and convoluted a law is (any law), the bigger negative impact it has on the lower levels of income.
Extra rent and utilities due to displaced costs $50 per month or $600 per year.
Extra costs of food $15 per month or $180 per year.
Extra costs of clothing and miscellaneous $60 per year.
Company downsizing and freezing salary, adjusted for inflation $200 per year.
Just for the stuff I've listed, $1040 additional costs per year due progressive and distributed taxes.
Taxes are costs. They certainly aren't revenues to the people who are paying them.
The costs I provided were approximately middling. See, it's not just the amount of the tax that is shifted. It's also the cost of collecting and administering the taxes. Not to mention all the other costs of government, from the salary of Congressional pages to the paperclip allowance in the Department of the Interior.
Economies are based on the movement of value, we usually talk cash flow as a shorthand. The movement of value acts a lot like water. You can block it off, you can divert it, you can tap it, and you can channel it. Every change influences the whole system, you can't isolate one bit from the other without removing the cash flow. Think water pressure and you're close to the mark. The more you mess with the pluming, the more unstable the system becomes.
Governments tend to use the myth that the economy can be managed and controlled. But it is a myth. The only reason some governments can get away with it is because the cash flow is usually high enough to compensate for the really stupid things.
But if the goal is more money and not lower taxes, then the people with the lowest cash flow (i.e. water pressure) will be most impacted by any changes.
That's why lower taxes alone is a false and misleading measurement.
If you reduce taxes and costs go up, then there is no benefit to a "standard deduction"
Manipulating the system at a higher cost is going to hurt the people the deduction is supposed to help. The government sells a line, "We're going to reduce your taxes." But the politicos never admit the obvious, it's going to cost more.
Revenues are not neutral, that is another lie. There is an increased cost to administer the system. Any changes in process will increase this cost. And government has no incentive to reduce this extra cost.
So in the name of compassion, the system screws the people least likely to resist.❞❞
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