Thursday, March 28, 2024

The IRS Is Coming For You

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Washington, D.C. – For a long time, and his buddies have been preaching the need for the wealthiest among us to pay “their fair share” of the federal tax burden.

That's as deceptive as it is misleading. As a theory of , it's got more in common with Karl Marx, who famously talked about “from each according to his number to each according to his need” than it does with anything said or written by Adam Smith or Milton Friedman.

The name of the game is redistribution, which is played by having the take from those who have and, after taking a chunk for itself, parceling it out in the form of transfer payments and services to those who do not.

It's a nifty scheme until, as Margaret Thatcher once said, “you run out of other people's money.”

That's what's happened to the American liberal welfare state. Expenses have outstripped revenues so much that there's not enough coming in to pay for it all. Some progressives, like the people who follow Joe Biden, say that's been true since Reagan, adding it was his tax cuts and deficits that created the mess we're in now.

Biden believes that but, sad to say, he's wrong.

The Reagan policies produced record economic growth, something neither of the administrations in which Biden served managed to do in any appreciable way. He and his colleagues either can't or won't admit a basic and obvious truth: bigger economies produce more revenue at lower rates than small economies at high rates.

That's the power of incentives. Make it possible for people to keep more of what they earn and they will try to earn more. It's economic magic that has the added virtue of being morally defensible. Unlike forced economic redistribution.

Now, the numbers don't add up, especially under Biden's latest budget. Policymakers concerned with revenue collection have started talking seriously about taxing total wealth above a certain amount (a constitutionally dubious idea) and taxing unrealized gains on financial holdings such as stocks, bonds, real estate and other long-term investments of the kind you might find in an average American's 401(k) or IRA account.

To do that, they'd have to have an annual accounting of everything you own, not just what you made. It would be made mandatory by the same people who say tax avoidance – the practice of structuring your finances to legally minimize the amount you owe each year – is the same thing as tax evasion, which is failing to pay what you owe.

Does that make you feel any better? It shouldn't because the really rich people – the ones who have accounts and lawyers and managers to look after their money – already know what's coming and have planned accordingly.

The people who don't realize what's at stake in the current tax debate are the working Americans who do all right but don't consider themselves rich. Maybe they've got an accountant to do their books and fill out their tax forms but they're more worried about saving for retirement than shielding assets from the taxman.

That's who Joe Biden's is coming for, and that's why the Democrats were so intent on giving the agency $80 billion in new dollars to hire additional auditors and agents. Despite official promises to the country from Treasury Secretary and others, these folks are going to be coming after the middle class because that's where the money is.

What people don't understand, probably because no one bothers to explain it very well, is that you can't run the government of the United States on what you can take from the super-wealthy in taxes, even if the top rate was boosted back near 90%. It's the middle class that has the money and why, as the House Committee on Ways & Means warned in a Tuesday release, “taxpayers will soon face a tsunami of complex paperwork requirements that will open them up to further scrutiny from the IRS, according to new guidance released last week by the tax agency.”

“Under the IRS's surveillance scheme imposed by the Democrats' so-called American Rescue Plan, all Americans who use apps like Venmo or PayPal to sell a used couch, guitar, or concert tickets will now receive tax forms they may not expect from those companies if they receive more than $600 over the course of a year,” Ways & Means Committee Chairman , R-Mo., said in a release.

Smith further criticized the new requirement as something that goes after “hairdressers and your neighbor's kid, not billionaires, and will create a digital trail for IRS agents to monitor more Americans regardless of whether these individuals actually owe any taxes on the payments they received.”

Smith did concede congressional opposition had forced the to delay the implementation of its plan, but just for a year, allegedly so that the finer points could be worked out which, the chairman said, has just added even more confusion and worry.”

The committee warned the IRS will now require the retention of certain records beyond the traditional seven-year standard. That would include purchase receipts, no matter how old an item might be, since you might be required in an audit to demonstrate whether an item you eventually sold produced a profit or a loss. The new regulation, whenever it goes into effect, leaves taxpayers vulnerable to over- and under-reporting of their income, the latter subject to possible fines, interest and additional penalties.

The estimates over 90% of this new burden will fall on middle-class families and gig workers. Previously, platforms like Venmo, PayPal and others would report to the IRS only when users had more than 200 commercial transactions and made more than $20,000 in payments during a single year. Under the new rules, payments totaling more than $600 will trigger a 1099-K that will be reported to the IRS regardless of the number of transactions. Supporters of the enhanced reporting requirements, mostly Democrats, say this only applies to commercial transactions yet cannot explain how the platforms or the IRS are expected to distinguish between a commercial transaction and a private one.

Affected taxpayers would also, the committee said, soon need to turn over sensitive personal information to private companies so that it can be relayed to the IRS. The new rules require businesses to collect social security numbers to fulfill reporting requirements. All this is what goes into what Democrats like Biden mean when they talk about “people paying their fair share.”

Eventually, they want the government to be able to track what you buy, what you sell, what you are paid and by whom so they can collect their percentage. It's an ugly way to do business, but until the taxpayers decide they've had enough and vote for change, the number of hands involved in grabbing the lucre will grow as the government sector gets bigger and more expensive compared to the private .

The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.

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Peter Roff
Peter Roff
Peter Roff is a longtime political columnist currently affiliated with several Washington, D.C.-based public policy organizations. You can reach him by email at [email protected]. Follow him on Twitter @TheRoffDraft.

3 COMMENTS

  1. So much for President Fredrick D Roosevelts great society because that iniative created the worst welfare state in our country. They created the Food Stamp program as a dependency for life on the government instead of us paying into the system such as SSI and Medicare. Now, we are being setup for not only the IRS (unconstitutional) but a Digital Currency that will target social welfare recipients, ESG and now the recent news that Panera Bread are going to go palm scanning with Amazon One customers Cashless system is the result of the so called great society. Congress needs to repeal the 1914 Income Tax Act or defund the IRS.

    • …Franklin Delano Roosevelt. But WILL they repeal the Income Tax? No, now that they are used to (and corrupted by) the POWER they exercise.

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