U.S. has one of world's lowest tax burdens?!?

[2B]

This I find absolutely amazing.  The American tax code is rife with opportunities to fraudulently hide tax liability.  I always thought that one of the main benefits of simplifying the American tax code would be to increase compliance dramatically.   I suppose corruption must be the explanation for why other countries would have low compliance.

Our financial system is probably the best documented in the world. The only way you can get money is electronically. You can do some business in cash; but if you do too much, that in itself will trigger an audit.

Most other countries are less controlled and either accept or encourage an underground economy.

Now the US tax system is one of the most regressive tax system. Our low income wage earners are slammed with over 15% SS/medicare tax. We could exempt all wage earners under $30K/yr (all taxes including SS), charge everyone else 15% of earning over $30K and we'd bring in more money. Why can't we do it? Special interests wanting their little piece of the tax code, the belief by some people in the power of "social engineering" and politicos that know that's a golden goose for campaign contributions.

 

[mathjak107]

id just change the color of money and make the old money obsolete...as everyone brought in all their old money for exchange the irs would record it all ......now more tax system needed after that windfall...ha ha ha ha

 

[youbet]

The American tax code is rife with opportunities to fraudulently hide tax liability..

Actually, most Americans earn their way via regular jobs, paychecks and W2 forms.  In that scenario, there aren't many places to hide......  Of course, for those accepting the risk and challenge of entrepreneurship, it's a different story.

 

[d]

id just change the color of money and make the old money obsolete

it is my understanding that India has essentially done this on a somewhat regular basis for some time ... it is help suppress the "underground" economy ...and further encourages the holding of gold.

 

[free4now]

Actually, most Americans earn their way via regular jobs, paychecks and W2 forms. In that scenario, there aren't many places to hide......

The problem is all the deductions, most of which have no paper trail. Lots of people just make up random numbers that sound believeable for deductions with no regard for whether they are legitimate. Maybe in an audit they will get caught, but even then they just pay a little fine which is much less than all the other false deductions they've benefited from.

I want a tax system that is entirely automatic, so the IRS just calculates the amount I owe from all the data my financial institutions provide them about my activities. Then cheating would require someone to convince the financial institutions to misreport, which would be pretty difficult.

 

[Maximillion]

Spain and Portugal entered the ECU, Property Value skyrocketed, all the non declared monies had to find a home or else they became useless.

 

[d]

I want a tax system that ...

I want it required that every elected official be required to 1) read the entire tax code (and be tested yearly) and 2) do their own taxes (no software either).

 

[youbet]

The problem is all the deductions, most of which have no paper trail. 

ALL the deductions? Maybe you can help me......  I just mailed my taxes in today.  Owed money, so waited until the last minute to give it up.  Other than maybe saving a few hundred bux on Sched A, itemized deductions, I don't notice anyplace to lie and cheat to save big bux that wouldn't be true big-time fraud.  Our income is all on W2's and 1099's.  No part time business or rental property.  Yeah, I could have exaggerated how much I give at church and maybe saved a few hundred bux, but what are people doing on sched A to cheat Uncle Sam out of the real money?

 

[laurence]

THey're doing a schedule C and writing off the house as an office, the car as a delivery truck, the computers they post on message boards with.....and then every 3 years (since you can only operate a business at a loss for 3 years before it becomes a "hobby"), they shut that business down and open a new one.

But it's not as prevelant as some would have you think. Most people overpay out of their paycheck all year long, giving uncle sam a free loan, and are happy when they get back a couple grand in April.

The thing is, we LBYMers have it good. There are so many ways to reduce your tax burden as a saver/investor. Those who spend every dime on crap also pay the highest percentage. But if you buy a home and have a mortgage, max the 401k and IRAs, etc. you really can dodge a lot of burden.

 

[youbet]

Guess I'm too honest, too dumb, or both. I just seem to pay and pay and pay and I'm doing all the normal tax avoidance/minimizing strategies.......

 

[bpp]

THey're doing a schedule C and writing off the house as an office, the car as a delivery truck, the computers they post on message boards with.....and then every 3 years (since you can only operate a business at a loss for 3 years before it becomes a "hobby"), they shut that business down and open a new one.

I wouldn't want to be them in an audit, though. That all can't be considered legit, at least not for more than one iteration.

Bpp

 

[free4now]

I don't notice anyplace to lie and cheat to save big bux that wouldn't be true big-time fraud.

Unfortunately lying and cheating on your taxes is fraud, which keeps me from doing it. But there are lots of people who don't have the same moral issues. Ever wonder why people are so afraid of audits?

And there are some ways that people cheat without even knowing it, like not reporting rental income (lots of people think they don't have to).

Sometimes you have to be attentive to make sure you are paying all the taxes you owe... This year when I was doing turbotax it entered double the proper mortage interest deduction since it took the info from both the rental and primary home questionaires. If I hadn't reviewed my tax forms in detail and drilled down to see where that number came from I would have blissfully gotten an extra four figures in tax refund. Maybe the IRS would have caught that maybe not. I can guarantee that an H&R block type tax preparer would not have caught it if their software did the same thing.

 

[d]

Ever wonder why people are so afraid of audits?

The more obvious reasons asside, there are two other reasons which quickly come to mind. 1) the fear on an honest mistake being found, and 2) the cost of being audited. Regarding the latter, I was audited by my state ... they "requested" all supporting documentation re investment income (including the basis of MFs, cap gain (short and long), foreign dividends, etc. ... that minor matter cover about 100 pages of documents, perhaps 100 hours to get together, and a whole lot of angst! End result, they owed me something on the order of $1.78