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Sunday, May 12, 2013

AARP is a reliable source of financial advice & evidence based public policy.

Once again, lest there be any doubt, the title of this post is a MYTH.  Current case in point is the recent AARP "BULLETIN" titled "Now's the Time for Tax Reform", written by Nina E. Olson, "National Taxpayer Advocate".  Not.  That is, if this is our advocate, who needs an adversary?
The upshot of Ms. Olson's article is that we have met the enemy of tax reform. And it is us.  Because we average Americans greedily cling to our "special interest" deductions such as mortgage interest and medical expenses.  She opines we must be willing to give up these deductions in exchange for "comprehensive simplification"of  the tax code.  The underlying presumption is that the complexity of the tax code causes "high" tax rates and simplification will cause our taxes to go down.
This is of course total nonsense.  And it is embarrassing (but not surprising) to read it in a massive marketing organization's (that's what AARP is) newspaper.  Here's why:

  1. The problem is not complexity.  That may have been the case before computers were invented.  They can handle it now.  Complexity is simply a symptom of the real problem.  The most powerful interests keep slipping abusive provisions into the tax code, which our few remaining ethical lawmakers then attempt to fix.  Which lobbyists then try to undo.  And so on.  This vicious cycle is responsible for the malignant growth of the tax code.  Ms. Olson cites required minimum distribution rules and Social Security taxation as examples of how  tax complexity baffles seniors.  But just about anyone can figure them out.
  2. The problem is inequity, that is, those who benefit most from government expenditures contribute the least to the Treasury, measured as a percent of their income.  No, I'm not talking about welfare cheats or those naughty seniors who keep whining for their meds so they can stay alive.
  3. The cheaters, the "winners" in the tax game are:
    a. Those wealthy individuals who are hiding $11.5 trillion off shore, strictly to avoid Federal, State and local taxes.  See
    b. Corporations are more difficult to assess.  Nobody seems to know the exact total trillions offshored by them.  It seems reasonable to guess that the total of individual and corporate tax dodging exceeds the entire GDP of the United States.
Want to eliminate the national debt in one fell swoop?  Make an offer to everyone with offshore income & assets:  Bring that money home this year, pay full taxes on it, and you will not go to prison.  And if you are an artificial person (corporation) you will be allowed to keep your corporate charter(s) and continue operation.

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