Slashdot Mirror
Our Low-Tech Tax Code
theodp writes "After establishing that nothing can excuse Joe Stack's murderous intentional plane crash into an IRS office, a NY Times Op-Ed explains the reference in Stack's suicide note to an obscure federal tax law — Section 1706 of the 1986 tax act — which the software engineer claimed declared him a 'criminal and non-citizen slave' and ruined his career. Interestingly, a decade-old NY Times article on Section 1706 pretty much agreed: 'The immediate effect of these [Section 1706] audits is to force individual programmers ... to abandon their dreams of getting rich off their high-technology skills.' Section 1706, the NYT Op-Ed concludes, 'is an example of how Congress enacted a discriminatory law that hurt thousands of technology consultants, their staffing firms and customers. And despite strong bipartisan efforts and unbiased studies supporting that law's repeal, it remains on the books.'"
I remember when this law was passed. At the time, many large companies were switching to having huge numbers of contractors instead of regular employees. Uniformly, these companies denied any benefits, like health insurance. Job security was also lower. I personally did a lot of contract work at the time. After the law passed, the big companies were forced to hire most of those contractors, with benefits. I think this improved things generally all around. For some reason, full employment creates a bond of loyalty from the employee, and sometimes from the company, which is never there as a contractor. More programmers got health care. It was a good thing.
As a contractor, I was not personally effected, because I was an actual contractor, with multiple clients, self-employment taxes, and all. All you need to not be effected by the law is to be an actual contractor.
Celebrate failure, and then learn from it - Nolan Bushnell
Do you mean 'criminal and non-citizen slave'?
Or 'is an example of how Congress enacted a discriminatory law that hurt thousands of technology consultants, their staffing firms and customers. And despite strong bipartisan efforts and unbiased studies supporting that law's repeal, it remains on the books.'?
The gist of it is that the 1986 law withdrew a special exemption for high tech workers, along with a whole bunch of other tax shelters (the law is most hostile to individuals that work full time using resources provided by a company and with supervision from an employee of the company, while claiming that they are a corporation doing contract work for the company).
Nerd rage is the funniest rage.
From TFA: In an earlier interview, Tom Burger, the director of employment taxes for the I.R.S., said one of the agency's difficulties ''is that, and I need to pick my words carefully, Congress passes laws, often without asking us about them, and then tells us to enforce them.''
Translation: Politicians make laws without knowing jack about the consequences and not even bothering to ask those that could tell them what kind of can of worms they are about to open. And then they're too pussy to admit they blundered.
Sounds familiar? A law gets passed that should cure some problem with the economy and the only thing it accomplishes is to cause troubles where there were none before while the problem continues to exist.
If I get that right, the law aimed at eliminating the "fake freelancing", where companies pretty much forced programmers into freelancing instead of hiring them, resulting in cheaper labour for them and shifting the risk and insurance burden on their not-quite-really-employee. Now, that still exists, with programmers now being passed about like slaves by temp agencies where they enjoy little less risk or much more insurance while at the same time losing their freedom entirely, while those companies still get the cheap programming labour they wanted, and at the same time the whole deal also keeps those programmers that are good and sought after enough to actually be (really) self employed and successful at it from actually being this.
Sounds very familiar...
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Substitue "Mohammed al-Mohammed" for "Joe Stack" and "Section 1706 of the 1986 tax act" with "United Nations General Assembly Resolution 46/86" and you'll see what you folks are all doing - you're making up excuses for a terrorist because he happens to share your political views. This guy was a fundamentalist libertarian terrorist.
but it is rather apparent that to be noticed by government
Speaking of which, I notice an uncanny lack of reporting over this incident. It exploded across the internet, but not really through the formal news channels. CNN, which covered the plane crash of a fighter jet into a residential neighborhood for DAYS with live footage, etc, only mentioned the crash briefly in their reports and on their website had only one small link that took you to the story.
But oh God, Tiger Woods just farted so let's dedicate a good 25% of each hour to THAT.
It's hard to avoid thinking that the government somehow "asked" the press to downplay this, and the press is complying. Just like you never really hear about the WARS anymore... This is the New World Order. Hell if it wasn't for the internet, all the news we'd get would be about Angelina, Brad and Tiger.
Seven puppies were harmed during the making of this post.
If it was part of this nutjob's manifesto, now if Congress repeals the law it will look like the government can be swayed by terrorism. Since the government never ever wants to appear to be that way, this law will now have to remain on the books forever.
Way to go.
Weaselmancer
rediculous.
I remember when this law was passed. At the time, many large companies were switching to having huge numbers of contractors instead of regular employees. Uniformly, these companies denied any benefits, like health insurance. Job security was also lower. I personally did a lot of contract work at the time. After the law passed, the big companies were forced to hire most of those contractors, with benefits.
I remember that too. That was during The Bubble.
And then after the bubble? Why most of those people were laid off. Only instead of being able to get by with smaller amounts of work the way mot people do, they spent years unemployed because they couldn't contract anymore and they couldn't find permanent work either.
I don't know why on earth you would say "job security was lower" because contractors at least always had a defined term of work and only in the most extreme circumstances would you be able to get rid of them even if you as an employee thought they sucked. Meanwhile at any moment Hammer Of Rightsizing could come down on you as an employee.
As for healthcare, there are a lot of people with spouses also working that can cover the health angle or you can opt to go with the catastrophic coverage (still pretty cheap) along with the tactic of setting aside something more than the $2-$3k deductible in a medical savings plan. Then you are covered for the big things but also can do the small stuff too if you want.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Basically, it's a duck law. If it looks like a duck, quacks like a duck, and walks like a duck it is a duck.
If you work for one company long term, doing what is essentially a full time position, then you are an employee whether you want to be or not and are entitled to things like health care and you employer is required to pay payroll taxes. It doesn't matter if you call yourself a consultant or work out of some sort of shonky staffing agency, and more importantly it doesn't matter if your employer calls you a consultant and hires you through some shonky staffing agency.
In theory it's to protect the rights of workers so they get all the benefits of full time employees if that's what they are, however in reality it's to close a tax loophole. Ya see the thing is generally speaking capital gains tax is less than income and payroll tax. Consultants running their own companies generally pay capital gains on most of their income whereas employees pay income tax and their employers pay payroll tax, which generates more revenue for the government. The extra benefits for employees are nice too, but that isn't really the goal.
Now the thing about this law is that if you actually are a consultant(you know, changing clients regularly, working for multiple clients, or doing work that isn't standard 9-5 work) none of this affects you, you're still a consultant and you still get the pluses and minuses of that arrangement. If you're not really a consultant(more than a year at the same place, no additional clients, doing what would normally be a salaried position) then your employer has to treat you as an employee. This means paying payroll tax, health benefits, 401k if applicable, which is of course expensive. Generally speaking if this happens a company decides to either get a real consultant or get a real employee. If they make you a real employee it generally means a pay cut(since they're paying all those benefits) and essentially the end of the little consulting business you had going.
Now none of this is in and of itself a problem, people who were being exploited got their proper benefits, the tax man got his money, and real consultants weren't affected. The problem is that some people are either stupid or lying to themselves. They want all the stability and routine of a salaried position with the higher salary, lower taxes, and theoretical freedom of a consultant. Essentially they want to be consultants without incurring any risk. This, of course, doesn't work because the loser in this relationship is the government who gets fewer tax dollars, and everyone who does the right thing since they're paying extra tax to make up for you dodging yours.
There were a few problems because of people who really couldn't face doing either real consulting or real employment(which this guy seems to be one of with the whole slave thing) or who invested a lot of money and time into their business shell even though they weren't actually using it. All in all it's a fair law though, real consultants stay consultants, real employees stay employees, people who are in the wrong category get moved to the right one. Everyone pays the taxes they owe.
The moral of the story is that consultants get higher pay and lower taxes because they incur higher risk(a consultant/contractor may or may not have work at any given time and has pretty much zero protections) and you can't get rid of the risk and still retain the other benefits.
Those...few thousand of contractor filings vs. a few dozen business filings. Surely that was enough to drive this law, right? After all, when the IRS is handling 140 Million taxpayer submissions, those few thousand documents were breaking them.
I think you are trying too hard to make this about the big bad IRS. Seems that this special condition for contractors was repealed to prevent corporations from skating on health care and to foster company loyalty. After all, too much employment thrashing is bad for the economy's efficiency.
Yeah this poor guy could only afford a nice house and a plane. Just imagine, without that terrible law, he could have been able to afford a two engine plane and a slightly nicer house!
Well, let's face it - Stack was a white American, so you can't drum up the "damn Islamic foreigners" angle.
Plus, he's demonstrated quite nicely just how pointless most airport security is these days. I'm pretty sure he didn't have to go through a full-body scanner, and yet once again a terrorist has managed to crash a plane into an office building.
Some random Arab kid screws up even *trying* to crash a plane, and it's news for weeks, with subsequent major overhauls of government practices and even the President getting involved. Some random white American SUCCESSFULLY crashes a plane, into a civilian target, and we get a brief mention one night. Double standards, what are those?
I was also disappointed that Slashdot didn't post anything at the time (at least, this is the first story I've seen). Guy was a computer programmer, so there's the nerd angle. Plus, this site has been obsessed with any story hinting of this since 9/11.
Endless arguments over trivial contradictions in books written by ignorant savages to explain thunder in the dark.
Awesome, we can basically make sure rich people pay practically no taxes at all.
Are you super rich or dumb?
IIRC, I avoided the law by forming a two person corporation with multiple billing streams.
After reading the idiot pilot's letter several times as well as the links provided, the solution to this tax situation is exactly what you did: create a partnership/hire another person, and have multiple concurrent projects.
For all the tax-avoiding mental gymnastics many of the antitax crowd employ, and with how smart they think they are, you'd think a simple, straightforward solution such as what you did would be obvious. Some people just don't want to pay taxes.
As the son of the IRS employee who was killed in this incident said, "if he [Stack] has a house and a plane he can pay his taxes." (Austin American-Statesman, 2/21/2010).
Because the organization that makes sure _every_ _single_ _retail_ _item_ has had its tax paid, necessitating intrusive monitoring ... won't have the name "IRS"?
Information theory is life. The rest is just the KL divergence.
I don't see any reason to pay taxes - they already TAKE TAX out of my check before I ever get it. Fuck paying them anything extra.
You are aware exactly how all that works, right? The amount taken from your paycheck has absolutely no effect on the total you have to pay for the year.
He blamed 'politicians, the Catholic Church, the "unthinkable atrocities" committed by big business and the government bailouts' for his own failures to reach his goals. This is classic schizophrenic behavior, it is delusions of grandeur. With delusions of grandeur, you are convinced you are the most amazing person in the world and you should be able to succeed at anything. When you don't succeed, you start finding reasons as to why. And since you're convinced you are the best, you start at the top, because clearly it takes powerful forces to keep a great man like you down.
So you blame any powerful group. The government, big religion and big business.
My uncle had the same symptoms. He had all his genius ideas written down and the government was trying to steal them (physically!). He wrote to Kofi Annan (the head of the UN) to tell him that George Tenet (the head of the CIA) was in the building across the street spying on him. This is how these delusions work. Not only is the government out to get you, but the important people in the government are involved!
So what makes these guys? Well, primarily their own mental illness. The media has a role (previously lore did) in helping them choose the bad guys who they are going to list as out to get them. But the media doesn't create them, they'd just select other enemies if the media changed their tune.
http://lkml.org/lkml/2005/8/20/95
For all the tax-avoiding mental gymnastics many of the antitax crowd employ, and with how smart they think they are, you'd think a simple, straightforward solution such as what you did would be obvious. Some people just don't want to pay taxes.
You've made a mistake here. The anti-tax crowd aren't against paying their taxes. They don't want to have to go through any kind of "straightforward" gymnastics to avoid taxes. They just want the taxes to not be in the way to avoid.
Because of the complexity of the tax laws, we now have a new activity which somehow is frowned upon by everyone (and committed by nearly as many.). An activity which is not only perfectly legal, but also presumably encouraged. You've even advocated that activity right here, but for some reason there are people decrying "Tax Avoision."
Why not just not have that complexity. Have a tax code that's short enough for a single person to read completely through in less than 2000 hours of reading (leaving two weeks for actual work). Every section you can't read is a section you can't be sure doesn't apply to you. If you're on the hook for criminal liability for failing to adhere to "must" sections, then you must be able to read them. And that's not even counting the money you lose by not having time to find "may" sections.
Can you be Even More Awesome?!
But they don't. See the thing is once you have so much money you basically can't spend it all. Add to that they will be paying less tax as a percentage of income and it gets really unfair. Heck, they also tend to spend lots of money on things that are not property so more money they spend without paying taxes on.
The only real fair tax would be, no tax on first X dollars made and Y% on every dollar made after. With no difference between money made via honest labor or capital gains, or dividends.
(a) Not a civilian target. He hit the IRS, a despised Federal Agency.
Civilian means non-military.
And I can't blame him for his choice.
I can. Because I'm not a sociopath.
Ok, let us carry your argument to its logical conclusion: your original dollar passes through your hands, your plumber's hands, the local hardware store's hands, etc, getting taxed at 25% at each point. Eventually, all the money goes back to the government in taxes. Wow, we have a 100% tax rate!
Maybe you want to reexamine your model?
The horror! Obviously, the economy is broken. Oh, except you got your pipes fixed, the plumber made a profit and bought more stuff, the hardware store owner got to buy food for dinner, etc. And somehow, the government wound up with $1 to spend on fixing the roads, hiring a policeman, or whatever.
The point isn't about economic security. (Although there's really very little more as an employee than as a contractor.)
The point is that the IRS has singled out - for persecution, one might argue - small (both one-man and slightly larger) technology companies to investigate this issue.
The preferred solution is to not have a problem.
The only people who don't are those who want to avoid paying their proper share.
And people who understand the time value of money, which you obviously don't.
It's not enough to bash in heads, you've got to bash in minds. - Captain Hammer
If you're living below poverty then you don't have the perspective of those of us living well above it. They aren't taking what they want. They're taking what you told them to take.
My only income isn't my job. It's the lion's share, but I have investments, too.
My withholding is set - by me - so that the monies that come out of my paycheck cover my expected investment income too.
Just how do you expect to the IRS to manage that trick?
By the way, why wouldn't you file taxes for every tax year you can if they owe you? A 1040-EZ is, well, easy. Back when I owned a business I helped a number of my employees do them rather than pay the H&R Block bastards. If you can do basic math it takes about 20 minutes.
If you're living on that little money, I'd think an extra few hundred or thousand would be most welcome.
The preferred solution is to not have a problem.
This amounts to you giving the government an interest free loan. Keep the money and make interest on it yourself. (of course you get taxed on that interest too. grr)
No, it'll never be 100%, because (for one thing) you actually get the work and service you requested as part of the transaction. For another, every time that dollar changes hands, it provides more goods and services, although less and less as it works its way downstream.
You didn't understand what I wrote. I suggest you go back and read it again, as many times as necessary, until you do. You are correct in that taxation further downstream detrimentally affects how much you pay for things; you are very much incorrect to assume it reaches 100%. As it goes downstream, the effect diminishes considerably. First order effects are the main load. The fact is, your real tax rate specifically determines what goods and services you get for your dollar. That means taxes applied to your purchases - no matter what they are called - reduce the ability of your dollar to function on your behalf.
No. I earned $133; I was enabled to apply $75 to engage services or purchase goods; the government got $58 with which it then generally spends servicing a huge debt it should never, ever have gotten into, with the remainder mostly paying for services I do not consider useful, much less necessary, notable exceptions being roads, education, and the like.
My hope for you is that someday you actually understand what is being done to you.
I've fallen off your lawn, and I can't get up.
"As the son of the IRS employee who was killed in this incident said, "if he [Stack] has a house and a plane he can pay his taxes." (Austin American-Statesman, 2/21/2010)."
This may well be true, but it is not a given. There are millions of people in this country living in houses who have not paid their mortgage in months, but the bank has not foreclosed on them for a variety of reasons. Living in a nice house these days doesn't tell you anything about the occupier's finances.
There is no such thing as financial security short of having a trust fund in your name. The main difference between self employment and general employment is how many tax forms you fill out.
Otherwise freedom is an illusion. In a job your boss tells you when to wake up and what to work on. If you're self-employed, your customers do.
Right, you get stuff, pay the provider, and pay some tax.
But, you claim we must also include the tax the plumber pays as part of your effective tax rate. What is your reason for claiming that? The plumber is a tax-free entity? The plumber is the final consumer of dollars? Dollars are backed by plumbing supplies? Plumbers are tax-exempt?
Your argument makes very little sense, unless:
Ah, the "I was born, raised, and educated in the USA, now I'm paying taxes, I have the moral right to decide what I should be paying for. Oh, and I repudiate the national debt: sure it helped pay for my education, provided roads, sanitation, a safe place to grow up in, but I didn't vote for it, so no obligation here."
I know you think you are a god whose word should be blindly taken by the bowing and scraping masses, but I it's not true.
Some evidence is required to back up your otherwise-specious claim.
Infuriate left and right
and why are consultants not even easier to outsource overseas?
Actually a fair number of my customers are overseas, so it cuts both ways.
LedgerSMB: Open source Accounting/ERP
Don't be idiotic.
However much I despise the politics involved in the UK's rough equivalent, "IR35", that would not grant me one iota of dispensation to kill and maim civil servants just carrying out their jobs, however annoyingly (and I have some top annoying-tax-inspector stories of my own I can assure you). These are average Jo(e)s with families and what have you, not snarling special army corps with their bodies and minds pumped full of evil setting out to eat babies every morning.
I've just tonight sent another angry letter to our Prime Minister (responsible for IR35 when he was Chancellor) and the head of the opposition (who is quite likely to be PM in a very few weeks) with the link to the NYT item pointing out that IR35 remains oppressive *and* ineffective at raising more taxes, hoping that there is a chance that they'll think again. Do you think that maiming innocent third parties would be more effective in *any* way?
Rgds
Damon
http://m.earth.org.uk/
Last time I checked, paper money was wealth. Actually, I just used some "paper money" to buy a bottle of nice scotch and a few beers. Amazing how convenient that stuff is when you want to buy something. I could even use the $300 left to "buy" something like lunch and dinner. Gosh, it really sucks to have 4 billion people agree that an easy-to-carry bit of paper is a commodity that can be exchanged for stuff without the need for weighing scales or barter.
Your second paragraph sounds like my 7 year old when she is told to go to bed: lots of complainty noise, little coherence.
Rich people spend a way, way smaller percentage of their income on retail goods than the poor.
So? They still spend more, meaning they will be taxed more. Can you show me where in The Constitution where it says that those who have more, must pay a higher percentage in taxes?
They also have the means at their disposal to easily avoid such a tax, assuming the government doesn't try to tax goods purchased overseas and never brought in to the 'States.
Huh? If you buy a house, you pay taxes. Rich people buy houses. If you buy furniture for that house, it is taxed. Rich people buy furniture. If you buy a boat, car, ceiling fan, computer, whatever... it is taxed. Rich people buy such things. Those items will be taxed. If a rich person bought a surfboard in Haiti... why do you care? When they bring it stateside, it will be taxed.
Now, think about how much money "rich" people make. If I gave you $20,000,000, you would pay pretty hefty taxes on it this year because it's all counted as income. Now, how much money would you make NEXT year? I assume you invest the money somehow, but let's say your investments don't do so well. Let's say you broke even. How much money would you pay in taxes? That's right! $0.00, no matter how well you lived or how much money you spent, you would owe $0.00 to the government because you made $0.00 for the year. Hell, you might even get money back!
Let me tell you "rich" people spend money. I have a cousin that owns his own custom home building business. His company built a house for demo purposes. My cousin lives there. It's a very nice home that they may show to potential customers about once or twice a year. My cousin, of course didn't have to pay taxes on the house. He didn't have to pay any income taxes on the money that bought the house. The business called it an investment and used it as a deduction, meaning that it LOWERED THE TAXES THE COMPANY OWED, and does so every year as the house "depreciates". Of course, the company also has to furnish the house and provide work vehicles for my cousin and his wife. Yard upkeep, home maintenance, vehicle maintenance and all living expenses that are not food or clothing, are paid by the company because the company owns all the stuff.
In years that the business does well, my cousin does well salary wise and pays good taxes on it. In years that the business does not do well, my cousin doesn't do as well and may not pay any taxes at all, even though he is still living like a king.
Now, if you look at various CEO's around the country, they are living well beyond their income levels because many of the things they'd normally have to purchase are provided by the company and counted as expenses when tax time comes. Private planes, nice cars, limo service, even homes are all company owned so that the person using them usually doesn't have to claim them on their taxes. Of course, the company writes it off and doesn't pay taxes on it either.
This is what a sales tax will prevent.
Further, this has the effect of dampening consumer spending, which, despite what the trickle-down dumbasses say, drives the economy. This recession has given proof enough of that, for anyone who couldn't figure it out on their own.
This recession didn't start until Democrats took over Congress. If you read the Constitution, you will find out that CONGRESS CONTROLS THE ECONOMY because CONGRESS WRITES THE BUDGET! It has nothing to do with "trickle-down" economics. But since you brought it up, who do you work for? Is he a wealthy or poor. If he were poor, would he be able to hire you?
You don't have to look too hard to find stories about business owners complaining that loans and tax cuts won't help them much, since they can't hire more people unless they've got the orders to justify it.
Maybe if people like me were not paying so much in taxes, I'd be able to buy more stuff meaning
There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
The fact is, your real tax rate specifically determines what goods and services you get for your dollar. That means taxes applied to your purchases - no matter what they are called - reduce the ability of your dollar to function on your behalf.
You are implying that if that tax rate was lessened, I would somehow have had "more money" to spend on plumbing. But that is not necessarily true because prices are set by the market not by the tax rate. Even if the plumber had to pay $0 in taxes, he would still charge me the same $100 if the market would bear it. The taxes that businesses pay are simply a cost of doing business, which is only one input into price.
My hope for you is that someday you actually understand what is being done to you.
This seems really melodramatic. You said that maybe Stack could not have afforded his house if he had paid his taxes, but I pay my taxes every year and presumably so do most of the businesses where I spend my money. And yet, I have little problem affording my house and many businesses turn profits. Taxes are simply a cost to be managed. It's a very good idea to minimize them--yes--but IMO it's ridiculous the degree to which some people get emotionally involved in the concept of taxation.
Build a man a fire, he's warm for one night. Set him on fire, and he's warm for the rest of his life.
No, he is saying that politicians have been spending money the country doesn't have by borrowing to do things that are not in the purview of the federal government according to the Constitution. You may disagree with what the Constitution authorizes Congress to spend money on, but that doesn't mean he is saying he has no obligation. He is saying that the system is broken and it is past time to fix it.
The truth is that all men having power ought to be mistrusted. James Madison