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Intuit Still Fighting Government Tax Software
Back in January we discussed Intuit's opposition to California's free, convenient software to file tax returns. TechDirt noticed a recent article in the LA Times about Intuit's continued lobbying efforts to get rid of those programs. Quoting:
"Most importantly, Intuit is offering nothing that California doesn't already have. The state has arranged with other tax software providers to do exactly what Intuit proposes: Help low-income folks fill in and file state and federal returns for free — although Intuit refuses to participate. It apparently only wants in on this deal if the state knocks out its free programs, thereby creating a larger potential paying customer base for TurboTax. Not surprisingly, Intuit has been greasing the wheels in order to try to sell its scheme in California. Since 2005, public filings indicate that Intuit has spent $1.25 million on lobbyists in the state. Over the same period, it contributed an additional $2.12 million to statewide campaigns, including more than $1 million to state Sen. Tony Strickland (R-Thousand Oaks), a ReadyReturn foe who is running for state controller. In all, Intuit has doled out cash to nearly 120 politicians. The impact has been clear, even if Intuit hasn't gotten its way — yet. As documented in The Times, in 2009 California Republican legislators held back their votes on 20 bills in an attempt to do the corporation's bidding and force the abolition of ReadyReturn and CalFile. They didn't succeed in killing the tax programs, but they did kill funding for domestic violence shelters, police and fire departments, and prevention of swine flu outbreaks."
Virginia used to have a web-based filing program, iFile. After successfully running the program for four or five years, the legislature voted to do away with it this year, even though I'm sure it had paid for itself and was generating significant cost savings for the state. The sad part to me is that most Virginians seemed to have been unaware of it, as I haven't found anyone else who is even remotely bothered by it. They already pay for Tax Cut or something like that. <sigh>
"Who controls the past controls the future. Who controls the present controls the past." -- George Orwell
So, let me get this right. A tax code is so confusing and complicated - in part because of lobbyists and politicians carving out special exceptions for each other and special punishment for their enemies - that even cash-strapped California sees the need to assist its citizens with compliance? And the result is *more* lobbying from a company that's (frankly) had a windfall for years because of the degree of difficulty of that compliance, to convince the state ... to help the company *make money* from its constituents instead of helping those constituents? Unbelievable.
I have long thought that it is a scam that you have to pay a third party to do electronic preparation and filing like the usual services (TurboTax, etc.) provide.
The government made the convoluted tax system - they should make the web-based application to navigate it.
A work that expires before its copyright never enters the public domain and thus enjoys eternal copyright protection.
They didn't succeed in killing the tax programs, but they did kill funding for domestic violence shelters, police and fire departments, and prevention of swine flu outbreaks.
What were these doing in a bill about tax software in the first place?
No, "Fair Tax" won't pass because it is anything but fair.
Stuff like this is why a program like the "Fair Tax" won't ever pass.
No, a program like "Fair" Tax won't pass because it's ultimately regressive with respect to percentage of disposable income retained by low-income participants after payment of this tax and would only be used as a stalking horse for reducing the percentage paid by upper-bracket individuals while still allowing many deductions available to said upper-bracket individuals (unless you can tell me with a straight face that the government will give up all tax-related financial engineering via the tax code). People who really believe that the "Fair" Tax would really be fair are the same folks who could believe that a Libertarian government is more realistic than a Communist one, i.e., simplistic minds with simplistic solutions which lead to horrific consequences. But go for it. Destroying our government and devolving into anarchy should be on everyone's short list of things to do (and, yes, I'm being sarcastic about this last part - note added for the simplistic minded).
That is all.
The United States is not even close being as corrupt as a 3rd world dictatorship. According to: World Audit, the United States is 16th in the world in terms of being free from corruption. All the countries above it in the rankings are first world democracies (although I admit some people would debate Singapore).
I know it is the fashion to insult the US government at the moment, and there *is* a hell of a lot of room for improvement. However, hyperbole and fighting words (comparing the US government to that of a third world dictatorship) just shuts down debate and, frankly, damages your credibility. Let's keep this civil and factual, OK?
Flat tax sounds like a good idea. You have two people, one makes $200,000 a month and one makes $1000 a month. Both should be taxed at a flat rate - let say 10% - so the first pays $20,000 in taxes while the other pays $100 in taxes. Fair, right?
Okay, let say the cost of living (minimal housing, basic food staples for cooking, basic transportation because in the USA there are very few total basic services walking communities, etc) comes out to about 20% of income with a minimum cost of living of $950. Thus the first individual he pays the greater of $40,000 or $950, while the second pays the greater of $200 or $950.
Thus, the first individual has a net income of $140,000 a month while the second has a net income of -$50 a month. This means something has to give - don't eat, don't have basic shelter, or don't have transportation for work. In other words, a flat tax is a detriment to those who are in poverty - and to say that those below a certain income threshold do not need to pay income tax is merely implementing a very simple progressive tax (0% up to the poverty line, 10% above the poverty line).
This is not some theoretical discussion either. When growing up my mother was our sole source of income, and as such she constantly had to make the decision between paying the rent, buying basic food staples, or having transportation to work. Even after she finally divorced my father and was able to cut out his useless spending she still faced this decision all the time. Pardon my graphic description but even with a slipped disk she would opt to walk what should have been a 30 minute bus commute because she wanted feed and shelter her children - despite the pain being so great that she'd soil herself and have her s**t running down by the time she'd get to work. Her friends said she could work miracles with flour, and I still remember going and picking wild berries and living off them for a week. Until she was divorced, evictions were a semi-annual to annual event because she needed to feed us.
However, despite our poverty, I realize we were far from the bottom of the heap. My mom still worked hard despite all the pain to feed and shelter us, so we never had to be exposed to the dangerous winter lows that caused her so much hardship or go without food for more than a couple of days at a time.
So, no, a simple percentage based tax income is something beyond silly - is is criminally inhumane
Do you know what proportion of the population payed the federal income tax when it was reintroduced in 1913? Or a couple of years after that? It has moderated a lot over the years, early on only the very rich had to pay the tax.
In fact, when it was first passed they didn't even consider having everyone pay the same rate (or pay at all). One of the more extreme senators I could find (quickly) who supported your position (having everyone pay) would only go this far:
(Senator) Lodge did not attack the essential idea of the income tax. Such a tax, he said, was well fitted to distribute equally the burdens of Government upon those best able to bear them. The viciousness of the Democratic bill, he said, lay in its exemptions from all burdens of the great middle class. Instead of exempting all incomes of less than $4,000, he said, he would rather see an impost like that suggested by Mr. McCumber of North Dakota, which proposed a tax of one-tenth of 1 per cent. on incomes of $1,000, with gradual increases of rates as the income increased. In that way, said Mr. Lodge, practically every citizen would feel that he had a share in the Government, as well as a personal interest in its economic administration.
That was in August, 1913 (from http://query.nytimes.com/gst/abstract.html?res=9A02E7DC113CE633A2575AC2A96E9C946296D6CF&scp=3&sq=income+tax&st=p). At that time the average annual income rate was a little over $700 (in 1913 dollars, which is obviously what he was referring to in the quote). So even this senator was only proposing to include the middle class rather than relying solely on the rich, and only adding a very slight tax on the middle class. He didn't even consider levying the tax on the poor.
It occurs to me that a simple percentage based income tax would not require anything more complicated than your W-2 form and a calculator to figure out.
The reason you are wrong is because you first have to define "income" and doing that is actually quite complicated. Seriously - it's not easy. Especially if you don't want any loopholes. Just define income as W2 earnings and every taxpayer will magically make no money on their W2's the following year and all of them will be compensated some other way that isn't taxable. I'd be perfectly happy to be compensated in stock grants or in bullion instead of fiat currency if my compensation wasn't taxable. If a loophole is available people will take advantage of it and while we dislike taxes, they are actually necessary for the efficient functioning of society.
It is true that some of the social engineering has made our tax code more complicated, but MOST of the complication is simply due to the difficulty of defining what income is (and what it is not). The social engineering bits add a little to the complication but they aren't what keeps your friendly neighborhood CPA employed. The actual payment calculations are pretty simple even now. For what it is worth, if your financial picture is very simple you probably actually can do your taxes with just a 1040, a W2 and your calculator. This describes more people than you might think.
Disclosure: I'm a certified accountant.