We have met the taxpayers, and they are us.

What better time to take a shot at Big Business for "paying no taxes" than when we're struggling to complete our own income tax returns?

Big Business in this case is General Electric, which made a worldwide profit of $14.2 billion, of which $5.1 billion came from U.S. operations. Trumpeted a New York Times story: "Its American tax bill? None. In fact, GE claimed a tax benefit of $3.2 billion."

This news, discoverable by reading the company's public disclosures, ignited a conflagration of criticism that implied that the company had done something unseemly, if not illegal or immoral. One MoveOn.org voice, reliably serving up demagoguery, said the company's tax avoidance, along with other sins of omission and commission, "represents all that is wrong with corporate America and their (sic) influence inWashington."

GE's public relations explainers don't need my help to answer the charges. In detailed postings on its website, GE called the reports grossly simplified, particularly distorted and misleading. You'll have to read the responses yourself, because I can't explain them.

And that's the problem: Who can explain any of it? Who can understand the U.S. tax code? Who can say who is paying his fair share?


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It's not just that the U.S. government milks trillions of dollars of taxes every year, but it's also the nation's most gluttonous time thief. I spend days getting my personal and corporate tax records in order just to send them to an accountant who spends even more time (and more of my money) coming up with calculations and conclusions that I have to trust. Maybe there should be a line on the return recording how much of your time was confiscated.

I don't blame the IRS. It's only doing the job that Congress has given it by enacting a tax code that runs into the thousands of pages. It's long and incomprehensible because some Americans thought it was a good idea to use tax policy as an instrument of public and social policy, to equalize opportunity, encourage investment and research, and so on.

For individuals, there are breaks for mortgage interest, medical expenses, charitable giving, health savings accounts, energy efficient windows, casualty and theft losses, IRA contributions, student loan interest, moving expenses and alimony payments. Breaks flow in torrents to businesses to encourage research and development, development of electric cars and, in GE's case, green energy. Municipal-bond holders don't pay taxes on their dividends to help cities and states reduce the cost of their borrowings. All because government officials said that it was in the national interest. Some of these favors could make sense, if they were just a handful of easily understood, widely supported and critically important breaks.

Instead, the code runs to 3.8 million words, triple the 2001 number. The government annually confiscates 6 billion hours of Americans' own time futilely trying to comply with this prodigious, absurd assignment, according to IRS ombudsman Nina E. Olson. Pleading for a sweeping revision, she told Congress: "The dirty little secret is that the largest special interests are us -- the vast majority of U.S. taxpayers. Virtually all of us benefit from certain exclusions from income, deductions from income or tax credits."

So, we hand over our incomprehensible returns to experts, to scrounge through the tax code for passages that make our case. As individuals, we look for our special exceptions and deductions with the same aggressiveness (and legality) as does GE.

We can fight over the wisdom of each of these breaks, but taking them all together has created a trove of deductions, exemptions, credits and refunds of titanic proportions, leading the National Commission on Fiscal Responsibility and Reform to call the tax code broken. The commission said such "tax earmarks" amount to $1.1 trillion a year.

Significantly, even big businesses, including GE, want a reformed system. Individual taxpayers also deserve one. While government can suck money out of your checking account, it shouldn't be able to condemn you to a type of indentured servitude, requiring you to spend hour after hour, day after day, trying to fathom and accurately file your return.

Filed under: Uncategorized

Tags: government, taxation

Comments

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  • At least you got the reprint from the right company. Despite what I normally would say, no one can understand it. Thus, I've said that the tax law is an accountant's and attorney's relief act, and I suppose one could add a ThomsonReuters RIA and Wolters Kluwer CCH relief act too.

    Regan was the only one who came close to tax reform. However, there are always offsets, such as Al D'amato (a machine Republican) pleading for the state income tax deduction, because New York had high state income taxes.

    On the corporate tax side, both state and federal, I don't bleed too much for them, because they use stuff like off shore intellectual property subsidiaries (ever wondered why packages say "trademark used under license") to send income earned here offshore in the guise of license payments.

    Getting back to the accountant's and attorney's relief act, I'm surprised that Congress, in reinstating the estate tax, did away with one of their favorite estate planning tricks, by saying that one spouse's exemption carried over to the other if it is not fully used (at least according to some mutual fund's explanation of the 2010 lame duck law).

    Finally, the Paperwork Reduction Act requires that the tax form say how much time it takes to complete. Personally, I put my faith into Turbo Tax.

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