Tax Roundup, 4/26/2013: The Earned Income Credit elephant in the room.

April 26th, 2013 by Joe Kristan
The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

Christopher Bergin, Dilemma – The Earned Income Tax Credit (Tax.com).  An excellent summary of the problems with the tax law’s biggest welfare program:

Our politicians have tried to do too much through the tax law. And that has created a complicated mess of winners and losers that makes the task of trying to reform it, even to some level of sensible, a daunting one.The poster child for this mess is the Earned Income Tax Credit. Like it or not, the EITC is welfare administered through the tax system. Do we really want our tax system to do that?

The tax law works best if it is seen solely as a tool to finance the government.  Much of its hideous complexity comes from using it is the Swiss Army Knife of public policy.  As you add more gadgets it becomes less useful at being a knife.

Mr. Bergin isn’t afraid to mention the elephant in the room:

And there is another huge problem. The EITC program leaks like a sieve. More bluntly and honestly stated, well-intentioned as it may be, the EITC has been corrupted. Don’t take my word for it. Recently, the Treasury Inspector General for Tax Administration released a report stating that up to one-quarter of EITC payments made in fiscal 2012 were improper. How much does that represent? Try $13.6 billion. In one year. Using a ten-year budget window, that’s $136 billion, and that’s just the tainted stuff.

Supporters say the EITC is a program that “works.”  Can you say that something “works” when it sprays billions to thieves every year?

Read the whole thing.

 

Fairness:

 But the compliance costs imposed by the Marketplace Fairness Act would place smaller upstarts at a distinct disadvantage, which is, I suspect, one reason that market incumbents such as Amazon support the tax. The real cost of taxes is not the revenue out the door to the taxman; it’s the revenue out to the door to the taxman plus all of the costs involved in complying with the tax code.

Kevin Williamson, via Instapundit

 

Megan McArdle draws  Lessons from Curt Schilling’s Failed Business.  I would add one more: states shouldn’t finance private businesses.  Iowa hasn’t gotten the memo.

Peter Reilly,  How 38 Studios LLC Turned A CPA Into A Warrior

 

Paul Neiffer,  What About Those 1099s?!

Kay Bell,  Sony deal could help singer Lauryn Hill pay delinquent tax bill

Me: But how can we slap money launderers on the wrist if we don’t throw the book at widows?

Phil Hodgen,  How to Compute Net Tax Liability for Form 8854

Patrick Temple-West,  UK’s Cameron fights tax evasion, and more

TaxGrrrl,  H&R Block Offers Apology, Cash To Make Up For Filing Snafu

Howard Gleckman,  Will the Retirement of Max Baucus Open the Door to Tax Reform?

 

Jim Maule, When Taxes Are Cheaper:

And perhaps the short-sightedness and narrow-mindedness is compounded by  the “freedom” mentality that has taken such a hold in modern culture

Yes, let’s all get on board with the new hip “docile submission” mentality.  Because the government knows best!

David Cay Johnston,  Taxpayers Subsidize Rich Anti-Taxers (Tax.com).  Speaking up against the ALEC bogeyman.

 

It’s Friday, you aren’t being productive anyway.  Let’s Play a Game of Accountant/Not an Accountant! (Going Concern)

 

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