The Real Class Warfare

Good to know that the IRS is always there to kick you when you're down. Great David Cay Johnston article in the NYT. I wonder if I should add Perfectly Legal to the old reading list. Anybody with feedback on that book?:

Tax refunds sought by hundreds of thousands of poor Americans have been frozen and their returns labeled fraudulent, blocking refunds for years to come, the Internal Revenue Service's taxpayer advocate told Congress today.

The taxpayers, whose average income was $13,000, were not told that they were suspected of fraud, the advocate said in her annual report to Congress. The advocate, Nina Olson, said her staff sampled suspected returns and found that, at most, one in five was questionable.

A computer program selected the returns as part of the questionable refund program run by the criminal investigation division of the Internal Revenue Service. In some cases, the criminal division ordered that taxpayers be given no hint that they were suspected of fraud, the report said.

Can you imagine if they took this approach to tax-fraud for the rich and superrich? "Hey there, I don't really know if you're guilty of tax evasion, but our computer thingymajig say you might be. Therefore we're going to be holding onto a big chunk of your income until we all get it sorted out whenever, m'kay?"

I have a feeling that wouldn't fly.

Nina Olson, the taxpayer's advocate in question, also had some interesting things to say about tax simplification, usually the favorite talking points of the flat-taxers. But she takes the criticism of complexity of our tax system from the point of view of ordinary tax payers.

Ms. Olson, whose job Congress created eight years ago to argue for the interests of taxpayers, also said the top priority for the tax system must be simplification. She said the tax system is so complex that millions of people have difficulty complying and can get in trouble for subtle mistakes, while those with aggressive advisers can manipulate the system to escape paying taxes they owe.

Makes a lot of sense, actually. Having different brackets for income tax rates is just about the most trivial piece of "complexity" in our tax system. You figure out how much you make in a year, find your bracket and figure out your rate. The real complexity comes in the byzantine system of deductions and loopholes that the wealthy and their lawyers are remarkably silent on.