IRS has budget of $160 Million???
Tom Gross
>> Looks like tax reform is cruising through the senate. Great idea to
>> lower the marginal tax rate, makes it seem really attractive to
>> just about everybody, BUT aren't we OBVIOUSLY going to have to raise
>> taxes sooner or later to pay for the deficit? Aren't we really
>> looking at a top marginal rate of maybe 40% but with no capital
>> gains exclusion, IRAs, interest deductions, and all the other nice
>> little things that have made 42% or 50% easier to live with?
>>
>> Tom Gross
>
>Actually, no. One of the problems with the current tax system is that
>the cost of auditing all of those "personal deductions" even by computer
>is now so expensive, that even the IRS can't afford it. The IRS, by the
>way, has the third largest budget after "entitlements" and Defence.
It's taking me a while to decipher your comment, but what I THINK
you are saying is that tax reform will be make tax collection so much
cheaper that it will eliminate the deficit! Is this the sort of
logic that people use when they vote for Ronald Reagan? Why don't
we just adopt a "free-market" tax collection system, and count on
the honesty of the american people? Think of how cheap it would
be to collect everybody's money if it were completely voluntary!
Unfortunately, the IRS does NOT have the 3rd largest chunk of the
federal budget; the TREASURY DEPARTMENT DOES! In their budget
there are two items (according to my 1986 almanac, these figures
are the latest available: 1984): the IRS has a budget of
$6 Million, the other "big ticket item" for the treasury department
is something called "interest on the public debt" which for
1984 was about $154 Million.
Here in Massachusetts the state government has found that it
actually PAYS to go after delinquent taxes! What a concept!
Tom Gross
Apollo Computer, Inc.
Chelmsford, MA
Clayton Cramer
> you are saying is that tax reform will be make tax collection so much
> cheaper that it will eliminate the deficit! Is this the sort of
> logic that people use when they vote for Ronald Reagan? Why don't
1. Tax reform can make tax collection considerably cheaper -- maybe not
enough to eliminate the deficit, but certainly to make some progress.
First of all, the current tax system is so complicated that it is not
practical to check every tax return -- the most they can do is check the
arithmetic. Reduce the number of special tax credits and deductions,
and it's practical to audit more tax returns because it takes less time
to check the supporting paperwork BECAUSE THERE'S LESS PAPERWORK.
2. If marginal tax rates decline, the incentive to engage in questionable
tax avoidance schemes (legal and illegal) declines. Why take a chance on
getting audited if you only save $500? If you save $1400, it makes the
risk of being caught and paying penalties more acceptable.
3. Similarly true for people not reporting income -- reducing the
marginal tax rate reduces the advantage of not reporting income. Also,
spreading the brackets farther apart (or even taxing all income at the
same rate) takes away reason to take questionable deductions so that
you can get below a particular tax rate. (I know: I spent an hour once
adding up the state utility tax on my electricity bills to get seven
dollars more deduction to drop below a taxable income level to save
more than $7 in taxes.)
> we just adopt a "free-market" tax collection system, and count on
> the honesty of the american people? Think of how cheap it would
> be to collect everybody's money if it were completely voluntary!
>
> Tom Gross
> Apollo Computer, Inc.
> Chelmsford, MA
It would save a lot of money all right -- we would find out how much
government people really want -- and I assure you it would be a lot
less. (Of course, special interest groups would suffer horribly without
access to the public purse.)
Clayton E. Cramer
J.HALLE
>3. Similarly true for people not reporting income -- reducing the
>marginal tax rate reduces the advantage of not reporting income. Also,
>spreading the brackets farther apart (or even taxing all income at the
>same rate) takes away reason to take questionable deductions so that
>you can get below a particular tax rate. (I know: I spent an hour once
>adding up the state utility tax on my electricity bills to get seven
>dollars more deduction to drop below a taxable income level to save
>more than $7 in taxes.)
bracket is ridiculous. Remember, it's a MARGINAL rate, not an overall rate.
An example. 38% bracket. An additional $500 deduction will drop you to
the 33% bracket. $500 deduction saves $190 in taxes. $600 deduction saves
$223. Now suppose you are $1500 from the 33% point. $500 and $600 save
you $190 and $228 respectively.
The only way that the effect you gave ($7 yields $7) can occur is near a
range in the tables. Since the tables are in $50 brackets and the taxes
are computed for a midpoint of the range, dropping down can have such an
effect. But who cares. The best you can do is to find an extra dollar to
save about 20. No one at IRS will waste their time looking for that.
The moral is not to worry about tax brackets when filing. Just find the
deduction. The bracket is immaterial. Worry about it when doing tax
PLANNING. Now the net effect can influence decisions.
A Figura
While explaining the various benefits of simplifying the tax code,
Clayton Cramer says:
> same rate) takes away reason to take questionable deductions so that
> you can get below a particular tax rate. (I know: I spent an hour once
> adding up the state utility tax on my electricity bills to get seven
> dollars more deduction to drop below a taxable income level to save
> more than $7 in taxes.)
While I agree that a simplified tax law will reduce the incentive for
questionable deductions (and rightly so), I'm afraid that your
referenced deduction is a little worse than questionable - it's probably
a non-allowed deduction. I believe that the taxes on your utility
bills (electric, phone, etc.) are considered excise taxes, and not
sales taxes; excise taxes are not deductible. I hope the IRA will
overlook the $7, but it looks like your hour was spent in vain :-).
(On the other hand, I may be wrong; I wonder if I'll draw undue attention
to myself if I file an amended return for my $7! :-)
Daniel G. Winkowski
An editorial, "Don't Tempt the IRS Into Bounty Hunting", by David Keating
(July 8th) in the Wall Street Journal may be of interest to this discussion.
Briefly, it states that the Senate's tax-reform bill provides for the removal
of the IRS budget from the appropriations process. Instead the IRS budget would
be bassed on a commission of the penalties and interest it collects from
taxpayers, thereby creating an incentive to assess penalties. A cap on the
commissions would be imposed to limit spending on what the IRS collects.
--------------
Dan Winkowski @ SUNY Buffalo Computer Science (716-636-2193)
UUCP: ..![bbncca,decvax,dual,rocksanne,watmath]!sunybcs!lazarus
CSNET: laz...@Buffalo.CSNET ARPA: lazarus%buffalo@CSNET-RELAY
[=]
Today we live in the future,
Tomorrow we'll live for the moment,
But, pray we never live in the past.
Edward C. Kwok
>
>An editorial, "Don't Tempt the IRS Into Bounty Hunting", by David Keating
>(July 8th) in the Wall Street Journal may be of interest to this discussion.
>
>Briefly, it states that the Senate's tax-reform bill provides for the removal
>of the IRS budget from the appropriations process. Instead the IRS budget would
>be bassed on a commission of the penalties and interest it collects from
>taxpayers, thereby creating an incentive to assess penalties. A cap on the
>commissions would be imposed to limit spending on what the IRS collects.
>--------------
This is very scary. Imagine the IRS does the same to its agents - your
salary is a percentage of your take. It may make it into a pyramid scheme
with hundreds of over-zealous agents bugging your phones or use medieval
methods of torture. Somebody should be doing some heavyweight lobbying
to stop these guys.
--
Barry Shein
Whatever the exact budget of the IRS, there are lots and
lots of other costs not accounted for in the current system.
One among them is the IRS taking people to court (this incurs
governmental costs for the court system, the IRS doesn't rent
the courts and judges etc.) Also, lost revenue involved in things
like selling off re-possessed properties (if it were worth the
tax bill why didn't the owner just sell it?)
Not to mention how many people take April 14th off every year...:-)
-Barry Shein, Boston University
Do I think the new tax system is a good thing? Not sure, could provide
some interesting action in the stock market December and then January
which is more interesting to think out loud about in net.invest...(ie.
if you don't like paying taxes, don't make money...)
cra...@kontron.uucp
The tax form said, "Other state & local taxes", and at least the year
in question, the instructions didn't prohibit deducting state excise
taxes (if in fact that's what they are).
Clayton E. Cramer
mil...@nlm-mcs.uucp
> While explaining the various benefits of simplifying the tax code,
> Clayton Cramer says:
>
> > same rate) takes away reason to take questionable deductions so that
> > you can get below a particular tax rate. (I know: I spent an hour once
> > adding up the state utility tax on my electricity bills to get seven
> > dollars more deduction to drop below a taxable income level to save
> > more than $7 in taxes.)
>
> bills (electric, phone, etc.) are considered excise taxes, and not
> sales taxes; excise taxes are not deductible. I hope the IRA will
> overlook the $7, but it looks like your hour was spent in vain :-).
>
automobile title, may be deducted.
--
__ __
Nancy Miller <> <>
|
mil...@nlm-mcs.arpa `-'
j...@ulysses.uucp
This is not correct. The IRS has very specific (and narrow) rules as to
what state taxes may be deducted. Most excise taxes are NOT deductible.
The specific guidelines can be found in any thorough tax guide (like Lasser's).
Jeff David