by Linda Beale
Another Right Wing Propaganda Tank Piles On Tax Complexity Bandwagon
As noted in my last post, part of the fanaticism that is surging in the current obstructionist Congress relates to taxes (quel surprise...). The JEC ran a hearing on Wednesday targeting “complexity” in the tax code as a source of humongous problems. The clear intent of the GOP in control is, and has been for some time, to pile in on the “blame the IRS” and “get rid of the government beast” bandwagon in order to keep money rolling in to the hands of the rich and prevent any action on public or human capital infrastructure, climate change, or any other reasonable programs that our government should be developing to deal with the many problems in today’s world.
But as I also noted in that post, holding up “simplicity” as a reasonable goal for tax policy is intended to deceive. Simplicity is generally important only for tax provisions that are most likely to impact the poor or near poor; it is for all practical purposes an unimportant target for thinking about the appropriate tax provisions for the wealthy and corporate/business elite. That is because (as I said in that post):
The simpler you make the code, the more loopholes you create. The more you cut funding for the IRS and tax enforcement generally, the harder you make it for the government to discover the loopholes or catch those who exploit them on audit. The reason the tax provisions of most concern to big businesses and those with international investments and those with multiple types of investments (CDOs, hedge funds, private equity, partnerships of one kind or another, S Corporations, etc.) are complex is that new, detailed, specific language has to be developed to counter the loophole exploitation by those who apply hyperliteralism and avoid contextual meaning and purpose of the laws in order to have an arguable defense for a tax planning transaction designed to exploit loopholes.
But just as the Walton and other rich families’ money has been spent for years to make ordinary Americans believe that family farms are threatened by the federal estate tax (a fallacious myth); so too has considerable money from wealthy families, spent through the conduit of various propaganda tanks, been used to convince ordinary Americans that it is government, the IRS, and a complex tax code that form the core of their problems in making a decent living in today’s society. That, too, is a fallacious myth. It is the wealthy families and owners of corporate stock, who have garnered all the benefit of workers’ productivity over the last few decades and have allowed wages to stagnate so they can grab their “rentier” profits, who carry most of the blame for the precarious situation of America’s middle class. It is the greed-above-societal-good policies practiced by so many of the wealthy owners and managers of American businesses and lobbied for in Congress, and so easily bought into by those in the majority in today’s House and Senate (most of whom belong to the same elite).
Piling onto the complexity bandwagon today (April 23) was another right-wing group: the National Taxpayers Union Foundation. Like so many other right-wing propaganda tanks, the NTUF claims that it is “a nonpartisan research and educational organization dedicated to helping Americans of all ages understand how taxes, government spending, and regulations affect them.” (quoting from the language in the identifying box at the bottom of the NTUF push-out email). Balderdash. It is a propaganda tank with an ideological agenda that is dedicated to supporting ideas like Laffer’s fantasytaxcutland where every tax cut leads to thousands of new middle class jobs or Mitt Romney’s silverspoonland where those born with a silver spoon in their mouths are the “makers” and ordinary Americans working for stagnant wages in dead-end jobs to make the bosses of silverspoonland even richer are just “takers”.
But guess what–the NTUF has come out with a new “study” on “Tax Complexity 2016: The Increasing Compliance Burdens of the Tax Code“. It repeats the garbage about 6.1 billion hours “complying with the tax code”. Of course, anytime you get a paycheck or anytime you maintain a record of your expenditures and revenues if you run a sole proprietorship or if you are just keeping personal records, you are also spending time “complying with the tax code”, and if you take a population of 350 million people many of whom get a paycheck every 2 weeks and spend money on transactions that may be deductible on a weekly basis, that alone amounts to a substantially large amount of time, but being able to count something doesn’t mean that what you are counting is significant. So what, should be the response to the “estimates” of 6.1 billion hours spent complying with the tax code. But of course all these propaganda tanks also add a dollar sign to that time–coming up with $234 billion (based on average salaries and benefits for private sector workers–which would include all those multimillions paid to CEOs for their 35-hour weeks)–again, a MEANINGLESS figure. These kinds of aggregated numbers from “averages” that are picked out of thin air should not be relied on to tell us anything other than somebody is trying to impress us with big numbers that may or may not be realistic (and probably aren’t). So they admit that the IRS estimate is of an AVERAGE of 13 hours for preparing federal income tax forms. I spent about 8 hours this year since I keep books fairly carefully on my activities through my checking account, etc. And I probably have more complex taxes than many, since I have rental property in New York State and royalties from textbooks I’ve written and some consulting fees occasionally. The 13 hour “AVERAGE” includes the time that it would take to gather records and prepare information for a multimillionaire businessperson with various businesses and investments and travels –i.e., the Bill Gates, Warren Buffetts, and Mitt Romney’s of the world. The AVERAGE is meaningless. Multiplying that average by the number of taxpayers–as NTUF does, to come up with 1.9 billion hours–results in an impressively big number, but that number is also meaningless. It is a guess, it is a mix of people who spend 30 minutes with people who spend 40 hours or more, and it says absolutely nothing worthwhile about whether there is a “problem” of complexity with the tax code.
The NTUF makes a big deal about the number of pages of helpful guidance provided by the IRS in terms of instructions. It says it is just awful that “the instructions for the basic 1040 forms and schedules increased by 2 pages to 211. [whereas] in 2000, there were [just] 117 pages of instructions.” In other words, like the “average” number of hours spent filing, the number of pages of instructions is set forth as empirical evidence of what the NTUF sees as awful complexity.
Now, remember, the NTUF is part of that same radical right-wing element that has treated the IRS as evil and pushed Congress to cut its budget. Congress has in fact cut the IRS by about $1 billion over the last five years, including a reduction in staff by about 17,000. And at the same time, Congress has loaded the IRS with more functions (monitoring the Affordable Care Act added huge workloads on overstressed IRS employees). Yet Congress wants the IRS to do more without doing anything that Congress doesn’t like (with the result that Congress has pursued witchhunt “investigations” of the scrutiny of “tea party” and “progressive” titled organizations’ applications for coveted tax-exempt status, for which the law says that NO political activity is permissible); and yet do an even better job at guidance than it is currently doing. The current House passed a bill on Thursday that says no one in the entire IRS can receive a bonus –no matter how hardworking, underpaid, and understaffed IRS employees are–until “customer service is improved”. But the bill doesn’t restore the cut from the IRS budget that has caused it to cut back in services to taxpayers. The bill is just one of six anti-IRS measures passed this week mostly along party lines. See Jackie Calmes, I.R.S. Fights Back Against House Republicans’ Attacks, New York Times (Apr. 21, 2016). As Lawrence Gibbs (a Nixon administration IRS man) says in the article: I just don’t think it’s in our country’s best interest” “to create a disrespect for our tax revenue system.”
Further, remember that very few taxpayers need to look at the majority of items in the instructions. If you don’t run a home office, you needn’t look there. If you don’t have any kind of capital gains income (which most ordinary workers don’t), you don’t need to look there. If you don’t have passive activities, forgeddabout the passive activity loss schedule. If you don’t own your home, you won’t have mortgage interest to worry about (and even if you do, very few of you will need to figure out whether your interest on a $1.1 million loan is all deductible or not). So the instructions are doing exactly what the House has just told the IRS it must do–providing better service to taxpayers for those that need specific guidance on specific items. The fact that the number of pages in the instructions increased from 117 to 211 is neither inherently good nor inherently bad, but it is likely good because it is likely that the instructions provide better guidance for taxpayers than was available in 2000.
The NTUF complains that most filers use a professional or tax prep software. Of course, that’s a good thing. If you can hire a professional and not bother yourself, why not? If you can buy and use tax prep software (which the IRS would have been able to provide for free to filers except that Congress passed a law preventing it from doing so, protecting the megacompanies like TurboTax that profit off converting the statutes to easy-to-use software), why not? That makes it not a burden but a breeze to file your tax returns. So NTUF complains that H&R Block’s “average fee” went up (adjusted for inflation–which they don’t do when it doesn’t help their point) 3X what it cost in 1980. Gee, my cable bill from Comcast has gone up that much in the 9 years I’ve had the service. Sounds like tax prep is much less inflated than most IP-based ‘stuff’ is these days…..
The NTUF complains that the individual mandate penalty for not getting insurance coverage is “growing costlier: this will rise starkly in 2016 to $695 per adult”. Yeah, of course it is. That was the way it was structured in order to ensure that a diverse population was covered, bringing the costs of coverage down for everybody. Another “so what” number. And it has nothing whatsoever to do with complexity–except for the fact that we are doing health coverage through a system that functions like a tax but an odd one, rather than through universal, single-payer, government-provided health care or by expanding Medicare for all, which would be much simpler since there is already a well-established regulatory framework.
Not surprisingly, the NTUF complains (it is, after all, an ideological propaganda tank, so one expects this) that the employer mandate part of the Affordable Care Act “is expected to” force businesses to “shed employees or switch to part-time employees due to this compliance burden.” As usual, the facts don’t support this “expect[ation].” In fact, experience under the ACA has shown that businesses and individuals have on the whole realized that the ACA is better than the health care world before the ACA.
The NTUF complains about taxpayer services–less ability of the IRS to respond to phone calls and to answer written correspondence in a timely manner. This has NOTHING TO DO WITH COMPLEXITY and EVERYTHING TO DO WITH THE RIGHT’S PUSH TO EVISCERATE THE IRS BY CUTTING FUNDING, CUTTING EMPLOYEES, DESTROYING MORALE, AND HAMSTRINGING THE ORGANIZATION TO MAKE TAX COLLECTION AND ENFORCEMENT EVEN HARDER TO DO WELL.
One good thing about this theater-of-the-absurd presidential primary season is that many ordinary Americans seem to be waking up to the fact that the system as run by the elite establishment isn’t set to work for them and that you cannot simply trust what establishment organizations (and propaganda tanks funded by the elite) say. Complexity of the tax code is NOT our major problem. Hopefully this awakening public will recognize this propaganda for what it is–an attempt to mislead ordinary Americans into thinking that they should blame all their ills on government and the tax system, rather than on the right-wing majority in Congress that has worked for four decades to tilt the tax system in favor of the rich.
cross posted with ataxingmatter