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The act of reducing the manpower of the IRS needed to enforce the laws may have a greater effect than all the tax cuts combined. If a business is fairly certain
by berbec 7y ago
The act of reducing the manpower of the IRS needed to enforce the laws may have a greater effect than all the tax cuts combined. If a business is fairly certain an audit isn't coming, their effective tax rate is whatever they want it to be.
- unforeseen9991 7y agoExactly, considering the penalties are just paying whatever is owed anyway, perhaps plus a few minor interest penalties. They make more the fines and interest combined by a long shot just by deploying the saved funds elsewhere.
- __jal 7y agoOh, but it is worse. It teaches members of the class that exploit it that taxes are for everyone else. They spend time on efforts to avoid taxes, which not only "starve the beast", but are frankly non-productive while shifting the burden on to others. It breeds sociopathy among the executive class that doesn't need any help in that department while encouraging nonproductive "investment".
- danenania 7y agoAlso important is what happens to a business that gets caught. If the punishment is 'pay back taxes plus a moderate penalty, and here we'll even set up a convenient payment plan for you', then cheating on taxes is effectively a free roll. You have a 95% chance of saving a ton of money, and 5% chance of paying only a bit more than you would have paid anyway if you followed the laws. That said, the absurd complexity of the tax code is also a problem here, since you don't want the government doling out bankruptcy-inducing penalties on businesses that might just be making an honest mistake. The whole system clearly needs an overhaul. It should be simple enough that when a business severely underpays, it will be very likely that they did so on purpose, and therefore a large, deterrent-worthy penalty can be justified.
- zelon88 7y agoIf your mistake is large enough that the penalty puts you out of business it was probably a pretty serious mistake. Or your business wasn't healthy enough to survive in the first place.
- cptskippy 7y agoThe complexity is by design to make it harder to audit and easier to hide cheating. Given clear and straightforward code/laws, it becomes hard to cheat.
- xadhominemx 7y agoThat is absolutely not true. Much of the complexity of the tax code is present in order to clearly prescribe rules in edge case situations in order to reduce judgement calls that would inevitably tilt in favor of the filer.
- cptskippy 7y agoThe complexity isn't driven by the IRS, they've been pushing for simplification but lobbyist for businesses push for rules changes, and lobbyists for the tax filing industry push for rules to solidify the need for their industry. Just like Healthcare and Gun control, there are industries and 3rd parties with vested interests in keeping the system complicated and hard to track or enforce so they can profit.
- sseveran 7y agoThe complexity is by design because congress for over 100 years has been creating laws one by one to give preferential treatment to various groups that they want to favor at the expense of others. The consequence is that for anything moderately or more complex there is actually no correct answer on what your tax liability is. What is the value of an intangible asset? How do you define novelty for the R&D tax credit? There are thousands of intersecting rules that change your liability and many of those are up to interpretation.
- matwood 7y ago
- chris11 7y agoAnd I'd imagine that auditing high net-worth individuals and large companies takes a lot more people than smaller businesses. Larger companies will be able spend more on expensive legal advice fighting audits, and it will make business sense.