Saturday, April 15, 2006

Tax Season 2006

It is over! Another tax year has passed and it time to reflect on the part of government that most affects average everyday citizens. This year seemed to be an exceptionally good year for many people (which means an exceptionally painful one in regards to taxes.) Although it is a duty of every citizen to pay their fair share of tax, I do not believe that the founding fathers intended that American citizens need suffer the degree of intrusion that is inflicted in the name of civic duty. I don't advocate the positions of many crackpot organizations who believe that taxation isn't constitutional, or that the word "United States" is some covert "federal" corporation that is secretly profiting off of your tax dollars. I'm saying that the system is unfair and I contiue to hope that some day financing freedom can become a little less painful to American citizens. Taxes are necessary, for example, in wartime the government should have a right to require taxes of its citizens, as well as tax dollars for maintaining the national defense and enforcing the law through the Justice Department, and some educational support, are worthy of tax support. However the myriad of extracurricular federal progarms are severely burdening Americans.

To demonstrate how massive government has become financially let's consider the payroll of the IRS (the Federal Government's version of Guido) their workforce at last count I believe is 110,000 employees. Figuing the average salary at 40,000 (some are more and some are less) that would amount to at least 4,400,000,000 dollars in salaries per year alone. Not to mention the inflated salaries of our elected officials in Congress, at last count I remember the average pay per lawmaker was 162,000 dollars for a grand total of 87,156,000 dollars to people who for the most part independantly wealthy.

Our Federal government has strecthed far beyond the original intent of the founding fathers, while repealing taxation is rather unlikely (damn near impossible) there are many things that could make the tax system fairer. In my Utopia the IRS would pay interest on all excess refundable withholdings, the social security tax that is withheld would go into retirement focused investment accounts, and the first 50,000 dollars of income would be exempt. Otherwise, I'd like to see the income tax structure abandoned for a national sales tax, a flat tax (with a 50,000 dollar exemption), or tariffs on imported goods. The most important change to make the income tax structure fair would be to illiminate estate taxes.

Regardless the IRS and state governments will continue to intrude and we taxpayers will continue to pay the price affixed to freedom. This past year a couple of my clients made some very profound observations. The first came from a client who was alittle unprepared for the bad news that he would owe, he said the most sensitive nerves in the human body are the nerves that extend from the heart to the pocket book. The second came from a client who has been facing some severe actions from the IRS for noncompliance, he said, "200+ years ago there was a revolution because of unfair taxation, how many generations until our children have to do the same." May our lawmakers consider more efficient means of financing freedom so that its citizens can breath a little easier in an ever more competitive world.

Tuesday, April 04, 2006

Interesting ...... Utah State Tax Commission Economist Retires......

...because of a memo sent by Palmer Depaulis, Utah tax commissioner. The article in the DesNews quoted the memo as saying, "To avoid any misunderstandings, the staff should only give clear, unbiased and objective data and information while representing the Tax Commission in a public meeting, and that information should be given without subjective nuance or argumentative tone. Therefore, when staff is representing the Tax Commission or acting as an agent of the Tax Commission they are not free to express their own positions, opinions and views. . . . In the future, if this guidance is not followed, disciplinary action may be taken." Palmer Depaulis claims that the letter was not a gag order and had nothing to with the personal income tax reform issue. The economist, Doug MacDonald, had 27 years with the commission and was often called upon my the Legislature to testify regarding tax matters. MacDonald was quoted as his reasoning for retiring as "threats of taking disciplinary action against me for answering" lawmakers' questions combined with HB213, a post-retirement health-care law that took effect Friday, were reasons enough to leave."

My problem with this issue is that in an issue as important as this (one I have written about ad nauseum) should encourage dissenting viewpoints and opinions. My second problem is that the language of the letter almost would forbid this economist fromtestifyingg to the legislature, because the legislature is asking for an opinion to be given. The governor and his "brain trust" are claiming that the reforms into a flatter tax will result in tax cuts almost universally for all Utahn's and those that see increases will see increases of "10 to 20 dollars". That seems incredulous with the information (lacking as it is) while most other evidence leans toward the flat tax resulting in higher taxes. Therefore all expert opinions should be given unimpeded, and valued.

I don't believe that their is any conspiracy to pass the flatter tax, however that memo (especially if it was targeted at this economist as the article leads one to believe) was agrievouss mistake regarding an issue as critical as totally overhauling the state's income tax structure.

Saturday, April 01, 2006

Democrats Trying to Require Mandatory Retirement Plans from Employers

This came from a professional journal I read that does not allow links to the online version so I have quoted a major portion of the text from the EAJournal :

"Baucus introduces retirement savings bill
Senator Max Baucus (D-MT) last week introduced S. 2431, the Savings Competitiveness Act of 2006, which seeks to increase personal retirement savings through a number of different tax provisions. The bill would require employers who do not sponsor retirement plans to set up a payroll deduction system for employees to make automatic deposits into individual retirement accounts (IRAs). Companies with fewer than 25 employees would be eligible for a tax credit up to $250 to offset the costs of starting such a program and would be eligible for the credit for another two years if employees were automatically enrolled in the program. The bill would redesign the saver's credit, making it refundable, and providing for its direct payment into a taxpayer's Roth IRA. Taxpayers would also be able to direct the IRS to deposit their tax refunds straight into their IRAs. Further, the bill would encourage low-income workers to save by prohibiting the inclusion of retirement savings in means testing for federal assistance programs."

This idea sounds vaguely familiar, hmmm kind of like .... SOCIAL SECURITY!!!!! The solution offered by Democrat icon FDR to provide retirement and death benefit security to American citizens -- the one that Democrats in Washington vehemitly deny being broken. Employers are already forced to contribute to a Democrat created "retirement" plan, so why should employers have to be forced to pay into another mandatory retirement plan unless the Democratic party is (underhandedly) admitting that Social Security has gone the way of every other government social plans -- into bureaucracy and abuse.

Social Security private accounts is best solution offered so far, and one of the few really good ideas that GW has come up with. Your Social Security taxes would go into individual accounts (like IRAs) which would be invested in the private market offering a POSITIVE return on your taxes -- currently Soc. Sec. goes into the general fund and pays benefits for current retirees and other government social programs. With private accounts the money that is forcibly paid by you and for you could be properly invested. For example, the average wage earner makes 40,000 dollars a year at a combined employee and employer contribution rate of 12.4% for a combined contribution of 5,000 dollars for one citizen. If that 5,000 dollars (excluding the fact that the same amount would be contributed a year) were placed in a regular bank savings account earning 3% interest annually that original sum would grow to 5,800 dollars in 5 years.

I'm guessing that most Americans would rather that their "retirement" money be invested in a manner that would offer even meager returns. However, here we are Congress refusing to take logical steps to ensure better retirements for Americans opting instead to create more bureaucracy that will make doing business in America less and less affordable and attractive.