For Whom the Bellas Tolls
That is not a typo in the title. It refers to a court case dealing with intricacies of avoiding state taxation and illustrates the second question people invariably ask a tax professional: Why does the government keep raising taxes or cutting services of the people who are already paying a lot? This has nothing to do with my upcoming novel, Knight to King 4: The Fischer-Kasparov Match, except insofar as the economy affects us all.
In any event, the above question cuts to the nub of what politicians from either side of the spectrum fail to recognize: There is a vast untapped revenue source that avoids the cutting services/raising taxes conundrum. Why not go after those who do not meet their tax burden? Reliable studies have shown that the government is forfeiting $600 Billion to the underground economy. Recognizing the implicit truth in Leona Helmsley’s maxim that “only the poor pay taxes,” as well as the concept of “following the money,” a simple five-step program could solve a plethora of the nation’s fiscal woes.
First, close the loopholes. For example, for years NY corporations could avoid a provision reducing deductions attributable to their ownership of subsidiaries simply by inserting a blocker company in their corporate family. A simple stroke of the legislative pen stops large multinational companies from benefitting from this sort of frivolous tax reduction strategy.
Second, change audit strategy. Currently the IRS and state auditors examine income. However if my income has gone underground you will not find it. On the other hand, by auditing wealth, a malfeasant taxpayer has to address how he purchased a new Ferrari if his reported income is negligible.
Third, enlist citizen help. A simple question on the tax form asking if you made cash payments to any vendor, along with said vendor’s name and address should suffice to ferret out the most egregious tax cheats.
Fourth, restore honesty in tax enforcement. There are too many instances of harassment in IRS and tax department enforcement. When stories of this proliferate, it only encourages citizens to go underground. After all, if the tax enforcer is tainted, why should the taxpayer have to be holier than thou?
Fifth, simplify taxes. Make it less costly and burdensome for people to voluntarily prepare their tax returns. I could make the New York personal income tax return as easy as a four-line affair.
For anyone interested, I have a longer version with greater specificity. For those who prefer not to watch paint dry, Knight to King 4 is out now.