Double Thoughts on Taxation

For these days just after April 15, two posts about taxes.

From Jacobin, Undeserving Capital: This Tax Day, make the wealthy pay. You made them rich to begin with. Which makes the strongest form of the "you didn't build that" argument, and takes on the idea that taxes are taking "my" money in the first place:

The capitalist economy is not self-regulating. The first precondition for firms to earn profits is state-enforced property rights, which give some people ownership and control over productive resources while excluding others.

Second, governments have to manage labor markets to help ensure that the skill needs of firms are met. States do this through setting immigration and education policies. All capitalist states also try to mitigate labor market risks, whether it be the risk of labor scarcity for firms or unemployment for workers.

Third, most capitalists want states to enforce anti-trust, contract, criminal, property, and tort laws, as it makes market interactions more predictable and reliable. And finally, the capitalist economy needs a working infrastructure. Even most libertarians argue that state control over the money supply and interest rates is necessary to spur or slow growth when the economy needs it.

All of this is done with taxes. In short, the very notion of pre-tax income or profits is a bookkeeping trick. A person’s income or a corporation’s profits are in part the result of governments collecting taxes and actively creating the conditions under which they were able to make money in the first place.

Add to that the argument for "freedom to," which often requires governments to spend money, not just "freedom from," and the idea that taxation is negative falls away. How the money gets spent by government to provide "freedom to" is another question, of course.

Then, from Salon, by the contrarian personal finance writer Helaine Olen, One reason tax returns are so complicated? Because H&R Block and other preparers like it that way.

In 1998, Congress ordered the Internal Revenue Service to implement by 2008 a “return-free” system for people with easy filings, likely something similar to what’s now common in other countries. Even before the legislation passed, the tax-prep industry went on the offensive. If the IRS doesn’t “stay out of our backyard,” a high-ranking H&R Block executive threatened, “we will take it up in Congress,” Accounting Today reported in 1998. He meant it. Since then, H&R Block and its peers have spent millions lobbying Congress—$28 million between 1998 and 2013—in what’s been a very successful effort to keep our taxes tangled.

Instead of a return-free system, the IRS has signed multiple agreements with tax-prep giants that bar it from putting together such a plan itself. In exchange, the tax-prep companies have provided the muscle for a free online service for low-income filers that only about 3 percent of those eligible use, according to a report issued by Sen. Elizabeth Warren last week.

As with the other personal finance topics Olen writes about, our system is premised on self-help and do-it-yourself, instead of methods that would ensure people do the right thing in the easiest way possible. And — coincidentally — that leaves lots of room for what I would call unscrupulous people to profit along the way.