Again, I was listening to Katie Couric tonight and part of the report on Wells Fargo really intrigued me.
First, Treasury Secretary Henry Paulson quietly issued a document revising the tax code, giving enormous benefits to some banks that buy other banks. For Wells Fargo, it could be worth up to $25 billion.
Is it just me, can the Treasury Secretary change the tax code? I thought the tax code was changed by a vote of congress and signed by the president. Can't this lead to a Treasury Secretary giving great benefits to their friends? I'm not accusing Paulson of anything wrong, but is this something the Treasury Secretary should be capable of doing without checks and balances?
Again, just curious as to your take.
"Life is not measured by the number of breaths we take, but by the moments that take our breath away." ~ George Carlin
The tax code, which is the sum of the laws passed by congress, is actually fairly vague, and since it is acted upon piecemeal, there can be apparent conflicts between sections, and great gaps.
The IRS writes regulations to implement the code and try to resolve conflicts and blank areas. As you can expect, this gives the IRS tremendous power and most people who handle taxes work from the regulations more than the code, although it is not uncommon that someone will go to court arguing that a section of the regulations is not consistent with the underlying code. It is not uncommon that the IRS will lose such a case, and decide to ignore it in practice, as generally the opinion only binds them with regard to the taxpayer who brought the case. So yes, the Secretary can make substantial changes without congressional participation.
Not to defend Obama's cadre of tax underpayers, but some areas are not clear, and some cases brought by the IRS can be wrong.
The people who argue that the income tax is too complicated and we could save a lot of money and get better compliance by switching to something like a sales tax do have a good point.
I think the Couric story calling this a revision may then be a little incorrect. It was more like a clarification or a position on areas that have been vaguely defined or not defined if I understand you. And in this case it definately benefited Wells Fargo.
Of course the IRS does this every day as they make determinations as to how individual situations fit the code. But you are right, some type of flat tax makes much better sense.
"Life is not measured by the number of breaths we take, but by the moments that take our breath away." ~ George Carlin
the book of tax codes keeps getting thicker. The more information and communications technology advances, the thicker the tax codes and law books will get: it gives lawyers and cpas something to do.
A flat tax on what?
profits are taxed. profits are revenue minus expenses. much of the tax code is describing what is revenue and what are expenses. amid other deductions.
CPAs are high tech jobs of the future. they'd be obsolete with a flat tax. Unless the flat tax is most of our existing tax code, applied at a flat rate to all income levels. that adds up to a regressive income tax. Unless you allow a deduction for a minimum personal income. If you follow Ireland's economic growth over the last 20 years, you will see that most income over median earnings is taxed between 40 and 50 percent, minus deductions for things like real estate. Their recent slow down in economic growth corresponds to falling progressive personal income taxes.
You are right. Income is taxed, unless the code provides that a specific piece of income is not to be taxes, and it is not always clear what is and is not income, so a lot of tax people make money on that issue.
I'm not sure a flat tax on income would solve a lot of those problems, and once people find out what percentage their flat tax would be, they usually stop thinking it is a good idea. I give our government credit for hiding the amount of income tax we actually pay, as it is easy to forget the constant witholding. I once sat in an advanced federal income tax class and the instructor asked each of us how much tax we paid. One guy said he paid none; he actually got a refund. One guy new how much he paid. The rest either guessed or cited the amount of the check they had just sent. So even among a highly educated sample, very few knew how much they were actually paying.
In many countries they rely heavily on a value added tax, which is very like a sales tax. Advantages are that it is collected by the merchant, so you don't have to file a return or figure out how to cheat, and many tourists pay it (a tourist can get it refunded in limited situations, but I suspect most don't bother). So it is a tax on consumption, if you don't want to pay it, just don't buy anything. My feeling is that this is an efficient and economical way to tax people, and I think there are few people who just sit on their money without buying anything.
Of course, in this country, the people we elect don't seem to realize the amount of income they lose due to internet sales, nor how to effect collection from many merchants. There is an old court decision barring collection from out of state merchants, but that was based on it being very burdensome for the merchants to figure and collect the tax, so we are supposed to figure and pay it ourselves! I know I find the Ohio sales tax confusing. If you buy food to eat in a restaurant you don't pay; if you buy the same food to eat outside, you pay, or vice versa. Some items appear to be exempt, but who bothers keeping track.
I think technology has overtaken that reasoning, and collection would be very easy now, but apparently the states don't have the gumption to establish a national collection system. But a federal sales tax is very doable and would even be somewhat progressive, as few of us spend as much as the rich.
