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> The government here (Spain) knows the money I make just as any government knows about its citizens. The problem the IRS is trying to solve is collecting taxe

> The government here (Spain) knows the money I make just as any government knows about its citizens. The problem the IRS is trying to solve is collecting taxes on money they don't know about. For example, if you sell illegal drugs, you should be paying tax on that income. But obviously you don't report to the government the amount of illegal drugs you sell. So they can't just send you a bill for your taxes. It is odd that every American has to suffer for this obscure corner case, but they probably lose a lot of revenue if they stop taxing drug dealers, so here we are.

monocasa 5y ago
Drug dealers aren't stupid enough to be reporting their incomes to the IRS, they're just getting an extra criminal charge when they get caught. It's not the IRS caring about losing revenue, but lobbying from tax firms that's the problem.
- beardog 5y ago
  There's a corner-case to this corner case which is marijuana sales. Legal state vendors are technically violating federal law but the IRS still expects a cut from them, and the ones wanting to stay in good standing are certainly reporting.
  - monocasa 5y ago
    And, staying in context to the discussion, the IRS already knows about all of that from these companies' public state level filings.
labster 5y ago
Are they really trying to solve the problem of unreported income? Does it really solve that problem? We could look at that data from the IRS with a little study, and compare it to the productivity costs of millions of Americans compiling tax returns. The main problem tax returns are trying to solve is that Americans aren’t enraged enough at their taxes to demand lower taxes (on the rich) or a much simpler (and regressive) flat tax. I posit that there is no technical or financial incentive at all, and that the aim of the tax filing regulations is entirely political.
hbrav 5y ago
I'm pretty confident I'm correctly picking up on sarcasm here. But if I understand correctly, that corner case isn't even "real". Suppose you were a drug dealer in a country that automatically handles tax, and most citizens don't need to file a return, e.g. the UK. I'm pretty confident you can still be prosecuted for failure to report the income from your drug dealing, just as you could be for not reporting any other income where the tax wasn't removed from the paycheck.
Fomite 5y ago
Cash tipping can also fall into this, and is hardly an obscure corner case.

monocasa 5y ago

Drug dealers aren't stupid enough to be reporting their incomes to the IRS, they're just getting an extra criminal charge when they get caught. It's not the IRS caring about losing revenue, but lobbying from tax firms that's the problem.

beardog 5y ago
There's a corner-case to this corner case which is marijuana sales. Legal state vendors are technically violating federal law but the IRS still expects a cut from them, and the ones wanting to stay in good standing are certainly reporting.
- monocasa 5y ago
  And, staying in context to the discussion, the IRS already knows about all of that from these companies' public state level filings.

labster 5y ago

Are they really trying to solve the problem of unreported income? Does it really solve that problem? We could look at that data from the IRS with a little study, and compare it to the productivity costs of millions of Americans compiling tax returns. The main problem tax returns are trying to solve is that Americans aren’t enraged enough at their taxes to demand lower taxes (on the rich) or a much simpler (and regressive) flat tax. I posit that there is no technical or financial incentive at all, and that the aim of the tax filing regulations is entirely political.

hbrav 5y ago

I'm pretty confident I'm correctly picking up on sarcasm here. But if I understand correctly, that corner case isn't even "real". Suppose you were a drug dealer in a country that automatically handles tax, and most citizens don't need to file a return, e.g. the UK. I'm pretty confident you can still be prosecuted for failure to report the income from your drug dealing, just as you could be for not reporting any other income where the tax wasn't removed from the paycheck.

Fomite 5y ago

Cash tipping can also fall into this, and is hardly an obscure corner case.