The Greatest Mass Extinction since the Spanish Flu

My friend Ken the maven of Chapter 13 bankruptcies brings it back to mind:

In mid-April of 1987, our government’s records showed that more than 7,000,000 children mysteriously vanished from the United States.  There was no disease or plague, no terrorist strike and children were not simply running away from their homes in huge numbers.  No, this was because in 1987, the IRS began requiring that all dependents claimed on annual income tax returns had to have their own Social Security Numbers.  Over the years, many tax payers had been claiming dependent deductions for children that did not actually exist; this new requirement on the 1040 forms in 1987 meant that these ‘phantom’ children simply vanished.

I recall hearing it described as one of the most important tax reforms of its time.  And memory tells me it was cooked up by a guy in sleeve garters behind a Steelcase desk. Hope he has some more good ideas.

It's Dobermann! Swallow the Cash!

I remember reading years ago how the aristocrats among tax evaders were the sheep farmers.  They lived in the crummiest houses, maybe up on concrete blocks, and in the front yard you could see some kind of  mean-looking pooch, on a chain that looked like it might not be too tightly tethered  to the planet.  And they had the greasiest hats.

Comes now Taxmom to remind us that in her line of  work, this sort of thing may work both ways.   As it happens, clan Taxmom just lately acquired a pooch of its own: a cheerful if somewhat puppy-like terrier.   But here is Taxmom's frequent human companion to suggest that they may have missed an opportunity.  As evidence he offers an account of the origin of the Doberman Pinscher:

 Doberman Pinschers were first bred in the town of Apolda, in the German state of Thuringia around 1890, following the Franco-Prussian War by Karl Friedrich Louis Dobermann. Dobermann served in the dangerous role of local tax collector, and ran the Apolda dog pound. With access to dogs of many breeds, he aimed to create a breed that would be ideal for protecting him during his collections, which took him through many bandit-infested areas. He set out to breed a new type of dog that, in his opinion, would be the perfect combination of strength, speed, endurance, loyalty, intelligence, and ferocity.

 Ah.  Well, I'm sure we'd all agree that nobody beats a German tax collector for strength, speed, endurance, loyalty, intelligence and ferocity.   But I seem to have been misled about the identity of the inventor: I had always assumed it was Mildred Pinscher, Apolda's bankruptcy trustee.  Also said to be Dobermann's very close friend  if you get my meaning, heh heh.   I'll have to concede about the dog, but I do believe she still gets credit for inventing the chain-link fence.

BTW Taxmom's pooch tweets.  Follow him at @Gandalfterrier.

More on the Lottery and Taxes [Hint: Dying is Not a Good Strategy]

The Wichita Bureau reminds us of what we overlooked in the lottery/tax inquiry:

The real reason an 84 year old takes the lump sum payment is that if she took the ‘annuity’, on her pending demise (what’s her life expectancy, 90?), her estate will have to pay federal estate tax on the present value of the annuity – which can be huge and more than she’s collected in annuity. As it is, she can give away as much as possible (although no where near the whole amount) and what’s left will be available to pay the fed estate tax. 

...[A]s it is, the fed taxes the lump sum at about 35% (Florida has a wealth tax but no income tax) - and then lies in wait for the real hit: the estate tax ... .*  So the lottery is a real tax break for the feds – who end up in this case with more than the family. 

 And an undocumented extra:

Have you ever wondered what you would do with the net? Say $300 million? At my age, my imagination runs the gamut from A to C ... [A] wheelchair van isn’t terribly sexy or speedy. Hmm, maybe the gamut runs from A to B.

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*Which is not what it used to be.  See link, and HT Joel.

Double Taxation and the Lottery

This is probably old stuff to tax pros, but I just noticed a curious inconsistency in the way we treat lottery winnings for tax purposes. 

Here's the deal: I'm thinking of Gloria Mackenzie of Zephyrhills, Florida, who rode home on a 175-million-to-one longshot to take what is being described as the largest lottery jackpot ever.  Link.  Like most lottery winners, Ms. Mackenzie had her choice: she could take a lump sum now, or a stream of payments.  The payment stream is billed as $590 million; the lump sum as just $370 million.  No surprise that there is a discount for present payment, but I am surprised to learn how they compute it. I had assumed that lottery officials keep those lump-sum payouts artificially low, so as to discourage winners from taking all the money now.  Apparently no: discount the payment stream in the Mackenzie case and you come up with an internal rate of return of about three percent which is just bout as low a return as you can imagine, and which yields a correspondingly generous present value.

But I want to consider the fax consequences.  Underbelly's crack tax department hits the high points. Apparently Ms. Mackenzie has opted for immediate payout, and will liable for a tax right now.  If she had gone for the payment stream, then (so I am told) she would have been liable for tax on each payment as it came due.

But here's the funny thing.  Suppose she takes the payment now and then decides to reinvest. Who knows why: maybe she thinks she can beat three percent.  Or maybe she wants to manage a trust account for her grandchildren.  In any event, apparently she will have to pay tax on any returns from reinvestment.

This struck me as double taxation.  My friend Bruce, whop knows this stuff far better than I, says I'm just thinking like a Republican.  It's no more unfair (says Bruce) then when they tax your salary and then tax any returns your make on reinvesting your salary.

Maybe so.  But now look back at the payment-stream option.  In the case of the payment stream, she would have to pay tax on the individual payments.  But she would not pay any tax on the present value up front.  This strikes me as at lest inconsistent.  If Bruce's pattern is to hold, shouldn't we also tax her on the present value of the payment stream now?. 

The Romney Tax Dump: First Thoughts

My first thought when I saw the story about the Romney tax data drop was "this is going to be huge." Within moments I had clicked through to Daniel Primack at Forbes saying pha, move right along folks, this is a non-event. Primack makes some interesting micropoints, but on close reading his piece begins to sound an awful lot like the special pleading of a guy who didn't run with this story when he came across (part of?) it a few months ago.

For a more temperate view, I moved on to the estimable Daniel Shaviro who, unfortunately, begs off from serious analysis, pleading deadlines. Shaviro does linger long enough, however, to offer one instance of what our weekend might be llke--"the debt-equity swap." Take it away,Dan:

Suppose I think GE stock would be a good investment, but I don't want to own it for tax purposes because the Caymans entity through which I am investing would owe withholding tax on any dividends that GE paid. So I arrange a swap with a bank that has the following terms. One year from today, it will pay me the interest that I would have owed it on a $100 million loan. It will pay me an amount equal to the dividends that I would have derived during the same year had I owned $100 million of GE stock. In addition, it will pay me the amount by which $100 million of GE stock appreciated during the year (or I will pay it a similarly determined amount if GE's stock price goes down).

For those of you who were staring out the window:

The bottom line is that, counter-party credit risk aside, this is economically equivalent to borrowing $100 million at the specified interest rate in order to hold $100 million of GE stock for a year.

So this is what high-end tax work is all about, or did you know? Anyway, first thought: the sheer cheesiness of it all. Recall that this is one of the richest men ever to run for the leadership of the free world. And note what we're fighting for here: not the question of "pay/no-pay," but only the question of when to pay, i.e.,at the very worst, the cost of the lost use of the money if you have to pay early --net, I should add--of the hefty bill that the preparer will present for having structured this baby.

Migawd, you are saying: is that all? All? Mr. Megabucks will go to the mattresses to protect a transparent fraud dodgy and questionable--perhaps disallowable--tax dodge for the few nickel of lost interest on early payment?

Answer: probably yes.  Romney seems to be part of that multitude--let's face it, their numbers are not small--who think that tax evasion is a blood sport, the kind of game in which to leave any nickels on the table is to mark you as a chump and a loser.  As I admit, he is not alone: hell, there are places in this great nation where, when you come back to the country club after serving your time for tax fraud, they give you a party with balloons.

The thing ig was not always thus, and in some quarters, may not be thus now.  There was a time when to be born to a life of privilege was  a privilege and accepted as such by those who enjoyed it.  If by chance you garnered the extra accolade of an invitation to public service, you took it with humility or awe; the possibility that you might leave a few pennies on the table for the roughnecks down at the IRS was just not seen as so big as a deal.   Clearly not a common attitude.  Clearly not Romney's attitude, not ever, not now.
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Footnote on charity: reviewing some recent news clips I see that Romney is also saying, "hey, I give to charity" (details pending, I guess).  I actually feel conflicted on this one.  There is much to be aid for keeping charitable donations secret--Maimonides said that the only true charity was anonymous charity because it was the only kind bestowed without ulterior motive.   I suppose I might be willing to waive the Maimonides rule if it turned out that Rommney's charitable giving was all focused on, say, the Dressage Federation.  For the moment, we don't know.  Still, I don't see why he ought to have both ways.  Seems to me that if he really wants to honor him for his charitable spirit, we have to know a lot more about where and when.

Now They Tell Us....

Taxation of Income Impractical


The tax would fall with its full weight upon men of integrity, while the millionaire of “easy virtue” would well nigh escape it altogether. It would, in fact, be a tax on honesty, and a bounty on perjury and fraud; and, if carried to any considerable height—to such a height as to render it a prominent source of income—it would undoubtedly generate the most barefaced prostitution of principle, and would do much to obliterate that nice sense of honour which is the very foundation of national probity and virtue.

Link  (last letter; scroll down to Sundt).

The Second-Best Tax Book of the Year

Martin Sullivan, author of Corporate Tax Reform, can be excused if he feels like the folks who make the Samsung tablet computer.   He's got a fine product out there, a lot to be proud of.  But he has the misfortune to have published the second-most successful tax book of the year, behind Bruce Bartlett's The Benefit and the Burden.  Which is not at all to suggest that Sullivan's is an inferior book, nor that Samsung's is an inferior tablet (nor, for that matter, that Bartlett has achieved wealth equivalent to the gross domestic product of Slovenia).  No surprise that Amazon brackets for cut-price sale, even though Sullivan weighs in at about 106,000th in the league tables while Bartlett  stands just now at 650th (sic--off by two orders of magnitude; and I see that Amazon offers me in the "also bought" list, Jacob Hacker's Winner-Take All Politics--heh). 

More than, the two books are in some ways hard to tell apart.  Both do an admirable job of explaining an impenetrable subject in a manner that the slow learner can handle.   Sullivan's writing has perhaps a tad more personality which may or may not be a a virtue but it certainly is a detail.  Both, so far as I can tell, end up pretty much at the same point on the policy agenda: against our own, they'd prefer  tax system that unburdened by incoherent but politically attractive inefficiencies.  They aren't crazy about taxing capital but they know that consumption taxes impose unacceptable burdens on the poor.  It may be that Bartlett leans more strongly towards a value-added tax but that is just a guess.

The problem with Sullivan's book (if there is one) is structural.  Coming out of the chute, his remit is narrower: the corporate tax as distinct from tax reform as a whole.  This does set him up for a presentation of issues in the corporate tax more searching than you'd get from Bartlett. But you'd really have to love the topic of the corporate tax to follow him all the way through the intricacies of transfer pricing and pass-through entities (I skimmed a bit). Yet ironically, his remit isn't that much after all.  Considering alternatives to the corporate income tax leads him to a review of VAT; also the "flat tax" and the "fair tax" (heh!) just as you would find in Bartlett.

Obviously if you were looking for an overview of the tax system as a whole, the choice would be Bartlett.  But you'd be short-changing yourself if you didn't lay your hands on both.  At least the first few chapters of Sullivan are clear value-added and put important meat on the bones of Bartlett's outline.

Aside: curses on Bartlett's publisher for sending him out with such an anodyne title.  I'm piling up more and more policy books on my Kindle with titles so meaningless that I simply can't remember which is about what.  On this count at least, Sullivan is a hands-down winner (note to blurb writers: please do not quote "Sullivan is a hands-down winner").  

Bartlett on Taxes: Two and a Half Footnotes

I join the general chorus of enthusiasm for Bruce Bartlett's new tour d'horizon  of the American tax system.   It's the kind of book in which most who read will enjoy the gratifying intuition that it tells them stuff they already knew.  They will be wrong: Bartlett is a master of his brief and he writes with a kind of Mozartian ease that deludes one into believing that everything is simpler or more obvious than one knew.Which is not to say he is simplistic: he just doe a grand job of seeming to simplify what is, after all, almost irredeemably complex.  But for the moment, let me follow up on just two (well: maybe two and a half) issues.

One: "tax expenditures."    If I tax you a dollar and then give you back the dollar as a benefit, I've done the sort of thing that governments do.  If I simply skipped the tax altogether I might achieved the same result. Welcome to the world of  "tax expenditures," first thrown into scrutiny a generation ago by the great Stanley Surrey.  Bartlett does a fine job of surveying the lush landscape of tax expenditures and making, along the way, the point that if (as we should) we count "tax expenditures" as "taxes," then we are actually taxed a whole lot more heavily than we suppose we are.

En route, he spotlights an absurd quotation from Utah Senator Orrin Hatch arguing that that money is really ours and don't even think of calling it a tax.    But Bartlett does not stop savor the irony here.  That is: you'd think a rugged, hairy-chested anti-Washington free marketeer  like Orrin Hatch would want to magnify, not minimize, the size of our tax bill ("worse than Denmark"--now there is a rallying cry).

Actually, though again Bartlett doesn't pursue it, I think there is a reason why Hatch doesn't follow his own logic.  That is: if we did pick any particular "tax expenditure" and turn it into a tax, there is just no way we would distribute the revenue the same way we took  it in (Surrey understood this in the 70s).  Take the mortgage interest deduction.  Suppose we decided we wanted to increase the subsidy for housing (good luck!); suppose we fund it by cancelling the interest deduction.  In order to mimic the deduction, we'd have to turn around and pay it to (a) mortgagors, (b) in exact proportion to what we had taken away, (c) i.e. most to the richest taxpayers with the biggest mortgages.   I don't think even a McConnell-Boehner Congress could sell that one. The point is that--even if we stuck with housing, we'd find some other way to redistribute the money.  So also with health care tax subsidies, with IRAs--indeed, with any tax expenditure you can imagine.

So in this sense, Hatch is on to something. If he tells us it's "our money" and he doesn't "the government" to get its hands on it, he means he is just fine with a policy that subvenes the prosperous and the highly leveraged. 

Second point: I know it is a bit rich to ask more from a book that covers so much but I wish he'd said more about tax incidence--who "ultimately" pays a tax: to who, and how (if at all) is it passed on. He does mention incidence when he suggests that the corporate income tax may be freighted forward to the workers. And he talks at length about the closely related issue of incentives--whether, to what extent and how taxpayers are motivated by rate change.  Maybe the defense is that incidence is just to squishy a subject: one on which everybody can spin out an argument and nobody's can be disproved.  Still, I'd love at least to know how much he believes that last statement of mine to be true.

A final half-point, perhaps little more than a cheap shot: I still don't think Bartlett has quite come to terms with his supply-side past.   He does quote derisively Tim Pawlenty and Mitch McConnell mouthing the supply-side mantra that tax cuts don't matter because the energetic and enterprising will just be motivated to work harder to as to make up the lost revenue (for a simple hypo showing why this is deeply implausible, go here).  He goes on to summarize the overwhelming evidence that tax cuts emphatically do nor pay for themselves (although taxpayer incentives very often do serve to recapture some of the "lost" revenue).  Bartlett says "this is not surprising given that no one in the Reagan administration ever claimed that his 1981 tax cut would pay for itself"--he calls it an "oft-repeated myth." On the narrow point, I suppose he has to be right; he's a careful and responsible writer and he wouldn't think about making stuff up here.

But the "myth" certainly endures (hello, governor P and senator M), and it didn't spring forth full blown like Athena from the brow of Zeus.   If i wasn't the administration itself, there certainly was a pack of running dogs around the administration who were perfectly happy to fuel the myth, and I really don't recall anybody inside the administration ever taking a podium to say "you know that supply side stuff? All bullshit.  Forget it."

But that's ancient history; I should give it a rest. This remains a superb book which amply deserves the attention it is getting.

David Cay Johnston Does Not Know the Meaning of Fear

I didn't realize anyone had the stomach to tackle this one any more: here's David Cay Johnston, "Three Big Tax Lies," reviewing in Bruce Bartlett , The Benefit and the Burden and Martin A. Sullivan,   Corporate Tax Reform:

Sullivan, like Bartlett, operates from an unstated assumption: that tax and shareholder accounting should remain separate. Each author touches lightly on distortions caused by a 1954 federal law that lets companies depreciate new plant and equipment faster for tax purposes than for reporting to shareholders. But Robert Solow showed in 1956 that this law was based on false economic reasoning because accelerated depreciation did not, in fact, increase long-term growth. It was an insight for which Solow later won his Nobel Prize in economics. The intellectual father of accelerated depreciation, Evsey Domar, acknowledged in 1957 that Solow was right, yet this law still bedevils. While Republicans denounce Obama as an anti-business socialist, on his watch corporations got to write off immediately either more than half or all new investment, a capitalist dream come true.

Neither Bartlett nor Sullivan challenges the 1954 law’s requirement that companies keep two sets of books, an offense to simplicity and transparency. The authors also ignore how the corporate income tax enriches utility--holding companies by forcing customers to pay income taxes embedded in rates for electricity and other monopoly services, allowing the holding companies to then permanently pocket some or all of that money.

Here is a simpler solution: Keep one set of books. If companies were taxed on profits they report to shareholders, the line for corporate income taxes that appears in financial statements would match the taxes paid. We could even hang on to the tax credit companies get to claim for research to develop and refine processes and products, as both authors favor. All that retaining the research credit would take is adding one line to financial statements, under the tax line. 

For publicly traded companies, this would align the interests of taxpayers and business, because both seek maximum revenue. Tax revenues could be expected to rise, while compliance costs would fall dramatically. For capital-intensive companies, which spend heavily on machinery rather than workers, the change would bring in more immediate revenue as deferrals finally end.

--David Cay Johnston, "Three Big Tax Lies," reviewing in Bruce Bartlett , The Benefit and the Burden and Martin A. Sullivan , in The American Prospect.   

The Nightmare of A World Without Taxpayers

I note the reappearance of the story that half of all Americans pay no taxes--what Kevin Drum calls "the zombie lie."  It is clearly, to put it most charitably, a falsehood, in the respect that even the most abjectly poor will get nailed for the occasional sales tax, while lots of the slightly less poor will find themselves paying a bit of property tax.  And then there's all that stuff about Social Security: you may think of it as an "investment," but just try not paying and you will learn the full meaning of "tax."

It is, of course, true that something around half of Americans pay no Federal income tax, and Donald Marron provides a useful analytical account of who does not pay.  Saving you the strain of a link, just believe that it's not a pretty sight.  Does it follow that we should pile on those poor wretches whose overstretched lives would be made more overstretched if we added an income tax to their burden?  It does not follow, and I'm agin' it.  But here is a corollary that most commentators appear to have overloooked this time around: paying tax can be an advantage insofar as it gives you leverage over the government. Just ask Charles I--no, no point in askikng him becaue he lost his head at the climax of a long, sanguinary brawl with Parliament over who would cough up what to sustain his comfortable lifestyle.  Or ask the Saudis who can do just about anything they please with "their people" because the Saudis have the money and don't even have to answer the people's phone calls.

In short, a world where everybody has to share in the tax burden is likely to be a steadier, more durable, surely more democratic place.  Of course, a necessary predicate of such a world is that  a person without an MBA have a decent shot at a day's pay for a day's work, giving them the means and the incentive to howl bloody murder about how the government spends their money.

Somebody Drop a Dime on This Guy

I've written before about our friend Lester, the world's greatest handyman and inter alia, the proprietor of the guerrilla redwood forest in Palookaville's fine urban park.

If anybody is his own man, Lester is. He's an independent contractor with a vengeance, working for whom and under such circumstances as he sees fit. He sends bills in his own meticulous block handwriting, on forms that bear the inscription "I sell labor!" A keen sense of self-worth; he is also a bit of an obsessive, which may not be a vice in a handyman. He'll work until doomsday--well, sundown--to get something right. More than once I've expected the veins in his temples to explode.

Something I didn't know, though it should hardly surprise me: Lester also keeps meticulous personal. Rccords. He says he has "spreadsheets" (but not on a computer--Lester has not the least curiosity about computers)--spreadsheets on which he records every penny that he spends, at work or on his own. He can compare month to month, year to year, for all I know day to day.

Apparently it is a family tradition. Lester gleefully recounts the story of the time when his mother was called in for a tax audit. The auditor admitted defeat and accepted her accounts down to the penny. If ever he gets audited, Lester said, he is ready.

I hadn't the heart to tell Lester that I don't think the IRS does audits in quite that way any more, but it did occur to me: nothing would please Lester more than a good tax audit. Then and only then could he prove he was really his mother's son. So, somebody drop a dime on this guy. Make his day.  

Must-Read: Runciman on Offshore

I don't know how much can be credited to the reviewer, how much to the  book under review, but please make time for David Runciman's London Review of Books item on Nicholas Shaxson's Offshore.  In a way it is a replay of a recurrent theme: Christopher Lasch's deracinated elite, Martha Nussbaum's cosmopolitanism, blah blah.  But Shaxson makes it operational through the clearest filter of all: the healing power of money.  Runciman explains:

This is the world of ‘offshore’. Shaxson doesn’t limit the term to its technical meaning, as a simple description of the particular jurisdictions that enable people to eliminate their tax bills. He applies it to people as well as places, and to a way of life along with a state of mind. Seen like this, it turns out to be a very useful word. ...The essence of offshore is the need to keep up a solid appearance of respectability, while allowing money in and out with as little fuss as possible. Tax avoidance (unlike tax evasion) is not a clandestine activity, and tax havens don’t exist just to enable people to squirrel their money away from the authorities. The money needs to be accessible, and it needs to be liquid. For that reason, people prefer tax havens where they can conduct their business relatively openly, and the most successful offshore jurisdictions are the ones that ask no questions but also tell no lies. Shaxson’s memorable phrase for this is ‘theatre of probity’

Turns out the Brits are particularly good at this sort of thing:

It is because offshore is the offshoot of an empire in decline. It perfectly suited a country with the appearance of grandeur and traditionally high standards, but underneath it all a reek of desperation and the pressing need for more cash.  ...

 And not just the Brits per se.  Runciman points out that so many other great offshore havens are in the detritus of the old British Empire  Jersey.  The Caymans (where the national anthem is still "God Save the Queen").  He might have added my own favorite: the Cook Islands, a heap of bat guano 2,000 miles off New Zealand, which remains as the world's most effective haven for fraudulent transfers.  Oh, and Hong Kong.  Have we all noticed how the Beijing Commies, very far from destroying Hong Kong, have turned it into an offshore haven of their own?

Runciman brackets his review of Shaxson with another for Winner -Take-All Politics
 by Jacob Hacker and Paul Pierson. Runciman thought both books "brilliant." Maybe, but I must say I thought Hacker's last was rather a disapointment. Shaxson, in any event is on Kindle pre-order.  I'd be reading it today if I had a copy.

 Fun Fact:  I see that Shaxson  lives in Zurich.  No fool he.   

Fond Memory:  I'm recalling a jibe my friend Scott hurled at me one day 30 years ago.  "You don't want a family," he said.  "You just want a safe place to park."  I take no view of whether he was right then or would be right now, but it's a pretty good description of Shaxson's new class.

Third World Watch

Oh, for pity sakes.  Somebody needs to construct a "Third-World Index," to measure just how close the United States is coming to represent, say, Rwanda or Uzbekistan.  We could put Simon Johnson in charge of banana republic finance issues.    Rick Perlstein ought to be available to track the decaying infrastructure.  And now we can deploy T. W. Farnam of the Washington Post  to track the great  Taxes-are-for-little-people E;pidemic. Jeez Louise, forget about knowing how to play the game--isn't anybody even trying to play the game any more?  In Kentucky it used to be (maybe it still is) a condition of public office that you swear that you had not fought a duel.  Dueling is, perhaps, a mere private matter, but for enjoying public benefaction, couldn't we make a rule that you at least show that you have paid your bills? 

 Read the fine print in Farnam's account and you can infer that this isn't even particularly knew but I don't see any reason not to get infuriated with it anyway.    And what is particularly egregious is anything even remotely resembling a glimmer of shame.  Democrats are likely to tell you they "forgot," probably in the press of doing the people's important business.  Republicans are bound to suggest that they are just serving the public good, liberating some of those tax dollars from the bureaucratic prison out into the free upper air of the markeplace.  Neither view washes; the combined picture is one which standards of civic responsibility no longer seem to work, but where we have an elite class that really doesn't give a rat's patootie whether they work or  not.

Happy Tax Day!

I'm perusing yesterday's USA Today story (I picked it up in a restaurant! Honest!) about tax delinquents. A former treasurer of the United States, oh cool Dick Morris, ha! But hey, politicians are all animals... Anyway, two thoughts:

• My, how times have changed. Used to be that the IRS found a way to roll out some humongous tax penalty against some well-deserving deadbeat, just in time to scare the bejabbers out of all those of us who were thinking of listing our new hot tub as a business expense. Now we are reminded of how cheap and easy it is (or seems to be) for some people. Hey, if Dionne Warwick can stiff the tax collector, why can't I?
  

• But by contrast, I am surprised to find that public humiliation still works. Or so it seems, from a couple of paragraphs about the 15 states which have started publishing the names of tax deadbeats, apparently to some good effect. Maybe it is time to bring back the pillory. Might be a good use for all our surplus rotten vegetables.
  

The Underbelly Tax Simplification Program of 2008

Via TigerHawk, I stumbled on this realization of an idea whose time had to come--liveblogging tax preparation (link). The author is in a suitably poisonous mood; when she gets tired of beating up on the feckless and the vulnerable, she falls back on one of the venerable warhorses of the tax protester set--cancel withholding, make people stump up the whole amount on tax day. Make 'em howl, she says. Make 'em really howl. Then they'll understand.

She's right, it would inflct a lot of pain, but it's not clear that it would succeed in revolutionizing the tax system, as she so dearly hopes. She seems not to have noticed that she herself is already right in the midst of our greatest national migraine--the costs, and inconvenience, and general chazurai of tax preparation itself. Slemrod and Bakija estimate that tax prep costs us something like $135 billion a year which, for comparison, is pretty near twice that package of subsidies the Bush administration voted for farmers a couple of years back.

She says she had to fork over about $11,000 which, she says, is about 23 percent of taxable income, about 30 percent of gross. This is remarkable: it suggests a taxable income in the range of $48,000. Per S&B, the average personal income tax rate is about 8.5 percent overall and for the top one percent of all taxpayers, it is abougt 15.2 percent.* For comparison, I see that I'm paying about 21.73 percent and George W. Bush, about 23.99 percent.

So either I'm missing something, or all three of us are overtaxed. But I would have to say she seems most overtaxed of the three--I can see that I earn more than she does, and I can absolutely assure you that W. earns more than either of us (a lot more).

But it does impel me to my tax bright idea of the moment: how much simpler my life would have been had I been able just to fork over a check for 21.73 percent of my income. Hey, I'd even top it off to 22 percent, to take account of the general reduction of friction. What if I did just send a check? Must I assume they would audit me, or is it possible they'd decide they had other fish to fry, and just let it slide?

I'd love to generalize this idea, but I can see I've got to work some bugs out yet: I concede there is just a teensy bit of an adverse-selection problem, in the respect that the only ones who would do it are the ones who know their real rate would be higher. But $135 billion--hey, for that price, we could buy a couple of more years in Iraq.

Update: "Slemrod and Bakija" is, of course, Joel Slemrod and Jon Bakija, Taxing Ourselves (4th ed. 2008), an admirable tour d'horizon of tax policy. Wish I could find one as good for health care.

*Re the "average" tax payments, I see that this is economic income we are dealing with here, so we have a little Haig-Simons action going on. The numbers still sound too low, though.

Or Just Another Texan?

I must remember to tell my pal Taxmom: coming out of the supermarket parking lot the other night, I pulled in bethind a GMC Yukon, the color of Welch's Grape Juice, with a vanity plate:

TX LADEE

Um, is that "lady," or "laddie?" And does she rent tuxes?