7 ms·

I would argue that having to file taxes through a 3rd party accountant or service is not only forced commerce but also broken glass economics. Looks like it hel

I would argue that having to file taxes through a 3rd party accountant or service is not only forced commerce but also broken glass economics. Looks like it helps the economy by creating jobs but the job is redundant and does not create anything of value. Where are crimes more likely to occur, a city with 10,000 or 1 million? Where are financial crimes more likely to occur, people that make $10,000 a year or people that make $1 million or more a year. I rather have these accounts move into forensic work and go after the wealthy tax evaders. IRS is an enforcement agency that specializes in tax collection and fraud. People that are clamoring for reduced IRS staffing are ultimately support of defending the police. I rather have a well staff IRS going after those that evade paying their taxes, probability speaking the wealthy.

dzhiurgis 2y ago
Who steals more? 10,000 people evading 100k or 1million people evading 1k?
- kevingadd 2y ago
  Rich tax evaders are evading way more than 100k
yndoendo 2y ago
Since I cannot respond to everyone that broke of this binary tree and I take you for the view points. Let say you won the lottery, now you can buy that dream house. Do you get a mortgage or pay off the sum in the cash on hand so you are not losing moneys in interest payments? Why waste money on interest and save in the long run? Which is it, take a mortgage or pay interest? Take the mortgage and the tax deduction. First open a trust or a shell company. Move $1,000,000 into it to back the house purchase as Lender X. Take a loan against Lender X, which is yourself. Now on the tax deduction, state the amount of interest you paid to yourself as mortgage interest on your house, since you could / didn't pay in cash. Use this to place yourself into a lower tax bracket and put some of those tax dollars into your account. Creative account is legal and can be exploited by the rich. Even more when you use money to maximize the legal loop holes by paying others to find and construct other legal loop holes. Now try to remove that tax loop hole. Near impossible, this would remove that the tax loop hole that allows others not paying a mortgage to themselves, but to a Lender Y, a actual bank or credit union. This tax deduction is near impossible to remove because it cuts out the middle class and poor ability to buy a house. Where is crime most likely to happen, in a city of 10,000 (A) or 1 million (B)? 10,000 is 1/100 of 1 million. Now where would you bet single (1) crime will happen, city A or B? City B 100 times more people to commit a crime than city A. Lets rephrase, you have the ability to take 10,000 (A) lottery different lottery tickets or 1 million (B) lottery tickets? Which would you take tickets A or B to maximize your winnings? Cash based business that don't declare income in hospitality industry as tips. How many of those individuals make 10,000 or 1 million a year? How many people tip in cash versus in credit or debit card? More people have been using credit cards to make purchases versus paying in cash. When was the last time you payed in cash or be a party member in a pure cash based transaction in a restaurant? How many people use their company business credit card to pay for corporate deduction dinners and how many pay in cash? How do you plug this legal loop hole that places more tax dollars into a rich person's hands? Start by shifting money into a trust or shell company. Pay an artist $5,000 to create a new piece as Company X. Company X now auctions off the art. You, as the hidden supporter of company X, buy the art, and pay yourself at auction, for $50,000. Now you donate that art to a museum or other non-profit that fits the tax deduction bill. I just donated $50,000 because I made the declaration that $5,000 is actually $50,000 as proven by my auction bill, secretly paid to myself. Lets deploy a use tax. A person that drives more should be paying more for the road, repairs and maintenance. How much do you use your vehicle for person versus business? How much of your driving is just to get to work and back home, or driving from work to lunch and back to work? I'm using my car 80% for work driving to and home, and only 20% for personal. My use tax should be 20% of what I own, my employer should be paying 80% of the usage because it is being used to benefit them, but since I am the owner of the vehicle I pay 100% of the use tax. Now I am being taxed 80% to be employed.
deleted 2y ago
[deleted]
llamaimperative 2y ago
Of course that's precisely why "people" (Republicans) want to defund the IRS. Note that it's also totally incompatible with their idea that the government should be run more like a business... so you're going to strangle the one part of it that actually generates revenue?
londons_explore 2y ago
Conventional wisdom is that if one can fund the IRS with one extra dollar, and they use that dollar to collect two dollars more taxes (from evaders), than that was a good way to spend taxpayers money. Many economists don't agree though. If you care about economic success of the country, the goal isn't 'collect as many taxes as possible'. The goal is to make the citizens wealthier in real terms. Effort your citizens put into tax collection is 'dead weight', and doesn't contribute to exports etc. However, effort your citizens put into trade that (for various reasons) ends up under-taxed, usually does add to the economic wellbeing of citizens. Therefore, it's only necessary to collect mostly-correct taxes from most citizens, if doing so let's you redirect labour from tax collection into other work. Is it unfair? Yes. But it's still good economic policy.
- ohashi 2y ago
  I would like to see the citations on this asinine idea.
  - willis936 2y ago
    Nobody needs a first principles argument to justify greed and tax evasion. It just feels right.
- bloppe 2y ago
  > Effort your citizens put into tax collection is 'dead weight', and doesn't contribute to exports etc. Hot take: a lot of tax revenue does contribute to exports etc. The government is spending a lot of money re-digging that shipping channel in Baltimore after the bridge collapsed. Just one recent example, but pretty much every bridge and port and road in the world has a lot to do with taxes. The government is also spending lots of money on social programs people like too much for even the Republicans to try to repeal, yet the government is not taxing enough to cover them. Letting rules slide for certain people means more debt for everyone else, and is what a lot of economists would call "arbitrary redistribution", which is bad.
  - londons_explore 2y ago
gottorf 2y ago
> Where are crimes more likely to occur, a city with 10,000 or 1 million? A city of 10,000 may very well have a higher rate of crime. In terms of your analogy, consider my lawn man, who only takes cash for his services. I know he's not taking in millions of dollars a year (or even hundreds of thousands), but I also strongly suspect that he does not report all of his income. Same goes for every cash-only business I know. > I rather have a well staff IRS going after those that evade paying their taxes, probability speaking the wealthy. I'd rather the tax code be simplified so that nobody has access to loopholes, not just the wealthy. Not much you can do to hide, for example, a land value tax.
- davemp 2y ago
  > Not much you can do to hide, for example, a land value tax. Unfortunately I’m not sure this is entirely true: https://www.nytimes.com/2021/04/03/opinion/sunday/property-taxes-housing-assessment-inequality.html https://www.nytimes.com/2021/04/03/opinion/sunday/property-t...
  - gottorf 2y ago
    I mean a Georgist land value tax, where you are only taxed on the value of the land underneath any improvements, and not on the improvements themselves. Of course, that doesn't prevent the kind of valuation mistakes that your article points out, but they are orthogonal.
giantg2 2y ago
"I would argue that having to file taxes through a 3rd party accountant or service is not only forced commerce but also broken glass economics" Where are people being forced to use a 3rd party? My understanding is that direct file is optional, hiring someone is optional, and using tax software is optional. Isn't it still possible to file with paper on your own?
- gamblor956 2y ago
  Not only is it still possible to paper file, almost half of taxpayers still paper-file their returns, and a lot of them filled out the returns manually (by hand) on a paper copy of the return.
- randerson 2y ago
  Anyone with company stock grants, investments, or unusual scenarios is going to find it difficult to file their tax correctly without an accountant or software. The US tax code is too complex for a regular person.
  - giantg2 2y ago
    I choose to use software to make it easy. I don't feel like it's being forced since I could use paper if I wanted to. Indo understand that the tax prep lobby generally doesn't want simpler taxes or simpler filing, but it still feels way less coercive than many other areas of legal life.
  - plorkyeran 2y ago
    I personally used TurboTax the first few years I had RSU and ESPP income to report (and ran the end result by an accountant) but eventually switched to filling out the forms manually because I found it easier than entering the same information into TurboTax. Tax prep software is great for when your taxable circumstances change and you don't even know which forms you need to fill out, but I didn't find that it let me skip understanding the relevant parts of the tax code and I got to the point where I was having to generate preview pdfs look over exactly what it was generating to make sure I'd entered numbers into the correct spot in the software.
whimsicalism 2y ago
I think this has been studied and low-to-medium income filers are more likely to actually commit tax fraud so you get better returns as the IRS by focusing on these filers
- wredcoll 2y ago
  This is contrary to every article I've seen on the subject. Are you perhaps thinking of when IRS said they couldn't afford to go after wealth tax evaders because they were underfunded?
- vladgur 2y ago
  probably because high-wealth individuals have a lot more wealth preservation instruments available to them and paying a $300/hr to professionals that help them navigate these tax reduction techniques makes very little sense when youre income is less than $100k
- jerlam 2y ago
  Heard mostly it's the opposite: By mapping audit costs and returns across the income spectrum, he continued, “We saw very clear evidence that the return from audits at the top of the income distribution really exceeded by quite a bit the returns at the bottom of the income distribution.” With the top 10 percent of earners, they found, audits have the potential to return more than $12 for each $1 spent. https://www.news.harvard.edu/gazette/story/2023/07/turns-out-irs-audits-of-wealthy-offer-terrific-return-on-investment-for-taxpayers/ https://www.news.harvard.edu/gazette/story/2023/07/turns-out...
  - whimsicalism 2y ago
    thank you for sharing! i'm having trouble finding it but the explanation i gave i believe was one given by the IRS commissioner in some hearing which i took at face value, but this seems like a much more thorough analysis
- refurb 2y ago
  That's exactly it. The earned income tax credit (EITC) is a direct transfer of money from the government to tax payers that only low income households are eligible for. Most of the low income audits are related to the EITC, because people tend to fudge checking a box to get more money.
randerson 2y ago
I keep hearing that its mostly the wealthy who evade tax, but I don't understand it. Service workers love being tipped in cash because its easy to not report. OTOH the wealthy have more to lose if they're caught, and can afford to pay their taxes and accountants.
- tombert 2y ago
  Even if that's true, the number of dollars being evaded is substantially lower. Not reporting $2000 a year in tips isn't exactly going to have the same effect of a billionaire not reporting $100,000,000 of their income. There are plenty of legal ways to evade (or at least not pay) taxes as well, though. An easy way, for example, is to store wealth in the form of stock; generally you don't pay taxes until you sell, so increased value is ignored until then, but once you have that many assets you can borrow money using the stock as collateral, and in some cases I believe you can even write off the interest. All of this is perfectly legal, and I'm not sure if it can or should be "fixed", but a lot of cash that might otherwise be taxed simply isn't. For that matter, they could also buy a piece of art for a million dollars, a year later get it appraised as worth $40 million, donate it, and then write off $39 million. Again, as far as I know this isn't strictly illegal, but it can be used to evade taxes.
  - blackhawkC17 2y ago
    > For that matter, they could also buy a piece of art for a million dollars, a year later get it appraised as worth $40 million, donate it, and then write off $39 million. Again, as far as I know this isn't strictly illegal, but it can be used to evade taxes. This is so wrong it hurts my brain. The IRS requires using a qualified appraiser, and none of them will suddenly appraise an artwork for 40x its last sold value. The IRS aren't fools-- they'll quickly clamp down on such an anomaly. Even if this amateur scheme were true, the individual wouldn't write off $39 million. They'll deduct the tax rate (%) of $39 million.
    - tombert 2y ago
      I doubt every "qualified appraiser" is above being bribed. I thought it was implied that writing off $39 million didn't mean a $39 million dollar reduction in taxes.

dzhiurgis 2y ago

Who steals more? 10,000 people evading 100k or 1million people evading 1k?

kevingadd 2y ago
Rich tax evaders are evading way more than 100k

yndoendo 2y ago

Since I cannot respond to everyone that broke of this binary tree and I take you for the view points. Let say you won the lottery, now you can buy that dream house. Do you get a mortgage or pay off the sum in the cash on hand so you are not losing moneys in interest payments? Why waste money on interest and save in the long run? Which is it, take a mortgage or pay interest? Take the mortgage and the tax deduction. First open a trust or a shell company. Move $1,000,000 into it to back the house purchase as Lender X. Take a loan against Lender X, which is yourself. Now on the tax deduction, state the amount of interest you paid to yourself as mortgage interest on your house, since you could / didn't pay in cash. Use this to place yourself into a lower tax bracket and put some of those tax dollars into your account. Creative account is legal and can be exploited by the rich. Even more when you use money to maximize the legal loop holes by paying others to find and construct other legal loop holes. Now try to remove that tax loop hole. Near impossible, this would remove that the tax loop hole that allows others not paying a mortgage to themselves, but to a Lender Y, a actual bank or credit union. This tax deduction is near impossible to remove because it cuts out the middle class and poor ability to buy a house. Where is crime most likely to happen, in a city of 10,000 (A) or 1 million (B)? 10,000 is 1/100 of 1 million. Now where would you bet single (1) crime will happen, city A or B? City B 100 times more people to commit a crime than city A. Lets rephrase, you have the ability to take 10,000 (A) lottery different lottery tickets or 1 million (B) lottery tickets? Which would you take tickets A or B to maximize your winnings? Cash based business that don't declare income in hospitality industry as tips. How many of those individuals make 10,000 or 1 million a year? How many people tip in cash versus in credit or debit card? More people have been using credit cards to make purchases versus paying in cash. When was the last time you payed in cash or be a party member in a pure cash based transaction in a restaurant? How many people use their company business credit card to pay for corporate deduction dinners and how many pay in cash? How do you plug this legal loop hole that places more tax dollars into a rich person's hands? Start by shifting money into a trust or shell company. Pay an artist $5,000 to create a new piece as Company X. Company X now auctions off the art. You, as the hidden supporter of company X, buy the art, and pay yourself at auction, for $50,000. Now you donate that art to a museum or other non-profit that fits the tax deduction bill. I just donated $50,000 because I made the declaration that $5,000 is actually $50,000 as proven by my auction bill, secretly paid to myself. Lets deploy a use tax. A person that drives more should be paying more for the road, repairs and maintenance. How much do you use your vehicle for person versus business? How much of your driving is just to get to work and back home, or driving from work to lunch and back to work? I'm using my car 80% for work driving to and home, and only 20% for personal. My use tax should be 20% of what I own, my employer should be paying 80% of the usage because it is being used to benefit them, but since I am the owner of the vehicle I pay 100% of the use tax. Now I am being taxed 80% to be employed.

deleted 2y ago

[deleted]

llamaimperative 2y ago

Of course that's precisely why "people" (Republicans) want to defund the IRS. Note that it's also totally incompatible with their idea that the government should be run more like a business... so you're going to strangle the one part of it that actually generates revenue?

londons_explore 2y ago

Conventional wisdom is that if one can fund the IRS with one extra dollar, and they use that dollar to collect two dollars more taxes (from evaders), than that was a good way to spend taxpayers money. Many economists don't agree though. If you care about economic success of the country, the goal isn't 'collect as many taxes as possible'. The goal is to make the citizens wealthier in real terms. Effort your citizens put into tax collection is 'dead weight', and doesn't contribute to exports etc. However, effort your citizens put into trade that (for various reasons) ends up under-taxed, usually does add to the economic wellbeing of citizens. Therefore, it's only necessary to collect mostly-correct taxes from most citizens, if doing so let's you redirect labour from tax collection into other work. Is it unfair? Yes. But it's still good economic policy.

ohashi 2y ago
I would like to see the citations on this asinine idea.
- willis936 2y ago
  Nobody needs a first principles argument to justify greed and tax evasion. It just feels right.
bloppe 2y ago
> Effort your citizens put into tax collection is 'dead weight', and doesn't contribute to exports etc. Hot take: a lot of tax revenue does contribute to exports etc. The government is spending a lot of money re-digging that shipping channel in Baltimore after the bridge collapsed. Just one recent example, but pretty much every bridge and port and road in the world has a lot to do with taxes. The government is also spending lots of money on social programs people like too much for even the Republicans to try to repeal, yet the government is not taxing enough to cover them. Letting rules slide for certain people means more debt for everyone else, and is what a lot of economists would call "arbitrary redistribution", which is bad.
- londons_explore 2y ago

gottorf 2y ago

> Where are crimes more likely to occur, a city with 10,000 or 1 million? A city of 10,000 may very well have a higher rate of crime. In terms of your analogy, consider my lawn man, who only takes cash for his services. I know he's not taking in millions of dollars a year (or even hundreds of thousands), but I also strongly suspect that he does not report all of his income. Same goes for every cash-only business I know. > I rather have a well staff IRS going after those that evade paying their taxes, probability speaking the wealthy. I'd rather the tax code be simplified so that nobody has access to loopholes, not just the wealthy. Not much you can do to hide, for example, a land value tax.

davemp 2y ago
> Not much you can do to hide, for example, a land value tax. Unfortunately I’m not sure this is entirely true: https://www.nytimes.com/2021/04/03/opinion/sunday/property-taxes-housing-assessment-inequality.html https://www.nytimes.com/2021/04/03/opinion/sunday/property-t...
- gottorf 2y ago
  I mean a Georgist land value tax, where you are only taxed on the value of the land underneath any improvements, and not on the improvements themselves. Of course, that doesn't prevent the kind of valuation mistakes that your article points out, but they are orthogonal.

giantg2 2y ago

"I would argue that having to file taxes through a 3rd party accountant or service is not only forced commerce but also broken glass economics" Where are people being forced to use a 3rd party? My understanding is that direct file is optional, hiring someone is optional, and using tax software is optional. Isn't it still possible to file with paper on your own?

gamblor956 2y ago
Not only is it still possible to paper file, almost half of taxpayers still paper-file their returns, and a lot of them filled out the returns manually (by hand) on a paper copy of the return.
randerson 2y ago
Anyone with company stock grants, investments, or unusual scenarios is going to find it difficult to file their tax correctly without an accountant or software. The US tax code is too complex for a regular person.
- giantg2 2y ago
  I choose to use software to make it easy. I don't feel like it's being forced since I could use paper if I wanted to. Indo understand that the tax prep lobby generally doesn't want simpler taxes or simpler filing, but it still feels way less coercive than many other areas of legal life.
- plorkyeran 2y ago
  I personally used TurboTax the first few years I had RSU and ESPP income to report (and ran the end result by an accountant) but eventually switched to filling out the forms manually because I found it easier than entering the same information into TurboTax. Tax prep software is great for when your taxable circumstances change and you don't even know which forms you need to fill out, but I didn't find that it let me skip understanding the relevant parts of the tax code and I got to the point where I was having to generate preview pdfs look over exactly what it was generating to make sure I'd entered numbers into the correct spot in the software.

whimsicalism 2y ago

I think this has been studied and low-to-medium income filers are more likely to actually commit tax fraud so you get better returns as the IRS by focusing on these filers

wredcoll 2y ago
This is contrary to every article I've seen on the subject. Are you perhaps thinking of when IRS said they couldn't afford to go after wealth tax evaders because they were underfunded?
vladgur 2y ago
probably because high-wealth individuals have a lot more wealth preservation instruments available to them and paying a $300/hr to professionals that help them navigate these tax reduction techniques makes very little sense when youre income is less than $100k
jerlam 2y ago
Heard mostly it's the opposite: By mapping audit costs and returns across the income spectrum, he continued, “We saw very clear evidence that the return from audits at the top of the income distribution really exceeded by quite a bit the returns at the bottom of the income distribution.” With the top 10 percent of earners, they found, audits have the potential to return more than $12 for each $1 spent. https://www.news.harvard.edu/gazette/story/2023/07/turns-out-irs-audits-of-wealthy-offer-terrific-return-on-investment-for-taxpayers/ https://www.news.harvard.edu/gazette/story/2023/07/turns-out...
- whimsicalism 2y ago
  thank you for sharing! i'm having trouble finding it but the explanation i gave i believe was one given by the IRS commissioner in some hearing which i took at face value, but this seems like a much more thorough analysis
refurb 2y ago
That's exactly it. The earned income tax credit (EITC) is a direct transfer of money from the government to tax payers that only low income households are eligible for. Most of the low income audits are related to the EITC, because people tend to fudge checking a box to get more money.

randerson 2y ago

I keep hearing that its mostly the wealthy who evade tax, but I don't understand it. Service workers love being tipped in cash because its easy to not report. OTOH the wealthy have more to lose if they're caught, and can afford to pay their taxes and accountants.

tombert 2y ago
Even if that's true, the number of dollars being evaded is substantially lower. Not reporting $2000 a year in tips isn't exactly going to have the same effect of a billionaire not reporting $100,000,000 of their income. There are plenty of legal ways to evade (or at least not pay) taxes as well, though. An easy way, for example, is to store wealth in the form of stock; generally you don't pay taxes until you sell, so increased value is ignored until then, but once you have that many assets you can borrow money using the stock as collateral, and in some cases I believe you can even write off the interest. All of this is perfectly legal, and I'm not sure if it can or should be "fixed", but a lot of cash that might otherwise be taxed simply isn't. For that matter, they could also buy a piece of art for a million dollars, a year later get it appraised as worth $40 million, donate it, and then write off $39 million. Again, as far as I know this isn't strictly illegal, but it can be used to evade taxes.
- blackhawkC17 2y ago
  > For that matter, they could also buy a piece of art for a million dollars, a year later get it appraised as worth $40 million, donate it, and then write off $39 million. Again, as far as I know this isn't strictly illegal, but it can be used to evade taxes. This is so wrong it hurts my brain. The IRS requires using a qualified appraiser, and none of them will suddenly appraise an artwork for 40x its last sold value. The IRS aren't fools-- they'll quickly clamp down on such an anomaly. Even if this amateur scheme were true, the individual wouldn't write off $39 million. They'll deduct the tax rate (%) of $39 million.
  - tombert 2y ago
    I doubt every "qualified appraiser" is above being bribed. I thought it was implied that writing off $39 million didn't mean a $39 million dollar reduction in taxes.