Tax to Confuse

The Internal Revenue Service is one of the most dreaded, hated, and feared agencies in the United States. Agents work under aliases, experience verbal abuse on a pretty routine basis, and are used to being made the butt of every imaginable joke. Most people in the US spend their lives trying to avoid the IRS, and those who do tangle with the agency have few kind words to describe the encounter; dealing with the IRS can be extremely frustrating, and sometimes heartbreaking, as the agency has a merciless way of steamrollering over taxpayers regardless of their situation.

Taxes in general are loathed in the United States, even among many liberals who agree on principle that higher taxation would create more services and a better society. Many, however, have trouble literally putting their money where their mouth is; and the fact is that given how the taxation and budget system are structured in the US today, higher taxes wouldn’t necessarily provide those needed benefits right now. For the time being, extra funds would likely find their way into the pork barrel, and not into the hands of people who needed them.

No matter what your stance on taxes is, though, you’re going to have to deal with the tax code at some point, and the tax code is one of the most byzantine, bizarre, confusing, almost deliberately obtuse documents on the face of the planet. This is why we have professionals who specialize in dealing with it, not just during tax preparation season but also throughout the year, to help people keep good accounting records and prepare so it will be easier and more straightforward for them to file taxes when it’s time to settle down and get it done.

The thing is, though, that not everyone has access to these professionals. Accounting services can get quite expensive, and while some firms offer free or even low-cost accounting services to low-income people, they can come with hidden catches. Not everyone offering those services is qualified, and not everyone may provide sound financial advice to help people avoid unnecessary financial liability. The fact that low income people have financial liability at all is rather outrageous, and the fact that there are ways to address it but they don’t the information they need to reduce their tax bills is irritating.

If you make a mistake on your taxes that results in an underpayment, the IRS is quick to contact you about it and demand the balance of the funds. If the issue is one of some dispute, you may go back and forth for months over the matter, because the IRS is quite dogged about fulfilling its mission of loading up the Treasury. Make a mistake the other way, and depending on the nature of the mistake, they might do nothing at all. I’ve gotten money back for simple math errors (this, among other reasons, is why I pay an accountant to do my taxes now), but I’ve never gotten money back when I accidentally paid too much because I didn’t understand that I could lower my tax liability.

People often refer to the methods used to lower tax liability as ‘tricks’ and ‘loopholes’ and many of them are, especially when used by wealthy people (about whom more in a moment). But other techniques are very obviously written into the tax code and intended to provide tax relief, yet they can’t be found, because it’s so confusing. The tax system, in other words, is allegedly fair, but is actually designed to deliberately confuse, and ultimately disadvantage, low-income people in the United States who are trying to abide with the law and file their taxes.

It is also structured, of course, to favour the wealthy. The nature of the tax code favours people who have investments, interests in real estate and other properties, interest-bearing accounts, and other types of financial products only available to wealthy people. Many wealthy individuals pay shockingly low amounts of tax because even if they’re absolutely honest and don’t make any attempt to hide, move, or manipulate their wealth to avoid taxes (and most do), they’re still in a position to be treated preferentially by the tax code; and they have access to the financial professionals who can help them work the tax code even more.

Why can’t the US have a simple, clear, fair tax code that is easy for everyone to understand? Some people argue that the arcane nature of the tax code is necessary in order to create more opportunities for people; that without pages and pages and pages of discussion on various tax deductions, allowances, credits, and so forth, people would be taxed at a higher rate. Yet, this presupposes that there isn’t a better method for managing this, like taking away such exceptions for wealthier people (which would slim the tax code) and using tools like a VAT on high-ticket items to encourage wealthy members of society to pay their fare share of taxes.

To deliberately structure the tax code for obtusity and insist this is some sort of public service borders on the absurd. Let’s not pretend: the tax code was written by and for wealthy people, and it’s upheld by those same people, since they’re the ones in a position to pressure members of Congress and other government agencies to make favourable changes. Maintaining poverty with a confusing tax system is only one of the many ways the United States reinforces social inequality.