Our Low-Tech Tax Code 691
theodp writes "After establishing that nothing can excuse Joe Stack's murderous intentional plane crash into an IRS office, a NY Times Op-Ed explains the reference in Stack's suicide note to an obscure federal tax law — Section 1706 of the 1986 tax act — which the software engineer claimed declared him a 'criminal and non-citizen slave' and ruined his career. Interestingly, a decade-old NY Times article on Section 1706 pretty much agreed: 'The immediate effect of these [Section 1706] audits is to force individual programmers ... to abandon their dreams of getting rich off their high-technology skills.' Section 1706, the NYT Op-Ed concludes, 'is an example of how Congress enacted a discriminatory law that hurt thousands of technology consultants, their staffing firms and customers. And despite strong bipartisan efforts and unbiased studies supporting that law's repeal, it remains on the books.'"
Tip of the iceberg or just another wing nut? (Score:5, Interesting)
The question I have is whether this guy is the tip of the iceberg or whether he's just another wing nut who can't admit when he's lost whatever argument he got in.
He does make some complaints in his screed about the kinds of issues that even rational people are worried about -- big government, big corporations and a "system" that feels stacked against individuals; some of these issues have been kicking around among conspiracy theorists and paranoids forever, yet a Treasury run by ex-bankers that loans out a trillion dollars to bankers and others who make sure the banks get paid is only too real.
Is unemployment and the rest of it going to create more of these guys?
Re:I'm sure it was a HUGE difference. (Score:3, Interesting)
Re:There's more to this story (Score:3, Interesting)
Uuuummm... Yes. That’s why in Germany, it is illegal to be a “contractor” with only one single client. Which means you already have to start with more than one, to not become illegal when starting your self-employment.
I never got why anyone would work as a contractor for only one client anyway. Isn’t the whole point of being a contractor, that you have more than one client, and that if one of them is a dick, you can say fuck you, and still work for your other clients? (= “fire one of your bosses”)
Re:Double-Standard (Score:3, Interesting)
So we can't objectively identify whether or not he had a point?
Obviously terrorism is evil and should be stopped, but it doesn't mean we should shut off our brains.
Re:Double-Standard (Score:4, Interesting)
This guy was a fundamentalist libertarian terrorist.
BZZZZTTTT! Libertarians don't go around quoting Marx.
Sorry. Try again.
Glen Beck goes around quoting "progressives." Does that make him a progressive?
Re:The more interesting part (Score:4, Interesting)
Speaking of which, I notice an uncanny lack of reporting over this incident. It exploded across the internet, but not really through the formal news channels. CNN, which covered the plane crash of a fighter jet into a residential neighborhood for DAYS with live footage, etc, only mentioned the crash briefly in their reports and on their website had only one small link that took you to the story.
Are you watching the same media I am? My CNN (you know, the one on the actual TV, not the one in your head) had nothing but the Stack crash for several hours on the day that it happened, including live footage of the outside of the building for as long as that was available. Then continued to mention it several times every time I've turned CNN on since then. MSNBC and Fox News have been covering it quite a bit as well.
But oh God, Tiger Woods just farted so let's dedicate a good 25% of each hour to THAT.
That's a good point. But when they also devote 30% of every hour to Stack, that pretty much kills your argument.
It's hard to avoid thinking that the government somehow "asked" the press to downplay this, and the press is complying.
Ok, now you're just trolling. We've already established your premise is false.
Re:There's more to this story (Score:5, Interesting)
A few items:
irrational or rational response? (Score:3, Interesting)
I was traveling through airports when I happened to see this story on the news, so I haven't caught up on all the details, but one thing disturbed me: the lying heads went on and on about how mentally disturbed this man must have been, and how could we identify such mentally disturbed people in the future, but never once did they ponder whether this was a rational response to an untenable situation. Never once did they question the role of a convoluted, maddening, and probably illegal tax code.
It is difficult living in a country where there is little rule of law because the multitude and complexity of laws makes virtually everyone eligible for a felony conviction at the arbitrary whim of unaccountable government officials. If Mr Stack had run into such persecution his response may well have been the only rational one. What other avenues were open to him to escape from the situation? Good riot police know that they should never cut off an angry crowd's escape routes, as they will have no choice but to fight, and most of us have heard of the dangers of a cornered animal, but what opportunities did Mr Stack have to avoid what he (probably accurately) described as a kind of slavery?
In short, if Mr Stack had no viable alternatives, or if he was feeling especially patriotic, this response may not have been irrational. If all his friends and colleagues never suspected that he was insane, it may be because he wasn't. The fact that his suicide note was angry and used profanity does not necessarily mean that Mr Stack was mentally unbalanced - it may simply mean that he had good cause to be angry. If someone tried to enslave you, would you be angry? Would you say some naughty words? If so, does that mean that you are wrong or mentally ill to object to being enslaved, or does it mean that the bastard who is trying to enslave you is wrong?
The fact is, all Americans have become or are becoming the slaves of the United States government, which in turn has become the instrument by which those who take more than they give (at present 60% of Americans) have harnessed the productive classes for their own benefit. This is the tyranny of the majority, and it looks like it will only increase in the future. Talking to people overseas, I have met many who envy American wealth but none who envy American "freedom".
The fact that the lying heads on the News never addressed this question concerns me. The American media is no longer interested in discovering the truth, they merely do the bidding of their employers - and with the U.S. government being the largest advertiser, guess who their employers are? It may well be that Mr Stack really WAS crazy, but we will never learn the truth from the media.
Simple solution (Score:3, Interesting)
Gross receipts tax. It's like a VAT, but on everything you receive. No deductions, no exemptions, no exclusions. Applies to everyone with a tax ID (i.e. persons and corporations). Double taxation for small businesses? Yup - you get the protection of the government via corporate veil, you pay the extra. (disclaimer - I own an S corp - I would be double taxed)
Then it doesn't matter what is deductable. It doesn't matter how you make it or where it comes from - gifts, cap gains, interest, wages, inheritance. It favors local production (fewer middlemen). It's easy to administer. Everybody pays something.
It does not, however, allow for social tinkering via the tax code, so it will never be adopted.
What Special Exemption? (Score:1, Interesting)
Every electrician or plumber uses resources provided by a company under supervision from a company employee. They usually claim to be a corporation doing contract work for the company. Do you expect them to bring their own wires or pipes every time they work on a client's building?
This "work for hire" class has existed longer than the "employee" in the US. In the 1770's people usually hired the carpenter or tailor to make them a chair or coat. People paid taxed directly on owner-run businesses.
Re:Good luck getting it repealed now (Score:3, Interesting)
The reality here is the only thing this asshole was try to fight for was the right to be a tax cheat.
Just like your founding fathers. After all, excessive TAX was the REASON for the revolt - or at least the one put forward in school books. Oh wait, were you trying to make a different point with your comment? Were you trying to say that the founding fathers were somehow "good terrorists" and this guy is a "bad one" because he had tax issues?
You picked a bad example, guy. However if you look at history, (excessive) taxation in times of ludicrous government excesses (or failure to address the problems in the economy) is usually what sets the stage for revolt. We're not there yet, but Slack is a sign that the barometer is falling and a storm is coming.
Re:There's more to this story (Score:5, Interesting)
I tried to get private healthcare once, I can't. You should try it yourself.
Re:Double-Standard (Score:2, Interesting)
"This guy was a fundamentalist libertarian terrorist."
Hey, douchebag - terrorism is our birthright. Our country was pretty much formed from terrorism (refusal to follow wartime protocol, guerrilla tactics) and battle.
The government fails to understand this and it looks like the people are truly going to need another violent revolution to force the government to truly work for us again.
Re:There's more to this story (Score:2, Interesting)
It's ridiculous. I filled out an application the other day, and they asked me if I had drank an alcoholic beverage in the past 6 months.
They also asked if I had had abnormal test results in the past 10 years. Then they asked for specifics, and I was at an absolute loss.
Re:Boo hoo (Score:1, Interesting)
That's completely irrelevant.
There's a common ignorant mindset that people with more money than oneself have no right to complain about anything.
The GP was essentially saying that because some people can afford nice things, those people should bend over and take whatever screwing they get in life.
As long as they have a satin pillow and Ralph Lauren bedsheets to get ass-raped on, it's no problem, right? You don't even got no sheets!
Re:There's more to this story (Score:4, Interesting)
Most self-employed folks get health insurance sometimes and not others. I am no exception.
We dropped health insurance at one point because the insurer raised rates from $800/month to $1200/month just due to market pressures. This was after they used the "reasonable and customary" way out of paying about a third of what I expected them to pay. Looking at the cost/benefit, we decided that it would be far better to just drop the health insurance for a while than to keep it. Almost all the time we have had medical care required we have paid out of pocket anyway.
I agree we need health insurance reform, btw. However, the current proposals would make the situation worse rather than better for many self-employed folk such as myself and there are a number of much more urgent reforms that need to happen first.
Why is it we in the US require more transparency regarding costs of car repairs than we do non-emergency health care?
Re:There's more to this story (Score:4, Interesting)
When I was unemployed about 2 years back, I looked into getting catastrophic health insurance in case anything big happened. Not looking for coverage for a cold or gym membership reimbursement, but I couldn't find anything. Apparently my own state government of Massachusetts, in its infinite wisdom, declared it illegal!
So much for helping the down-on-their-luck and the poor, huh?
If car insurance worked like health insurance, we'd never see the real costs of things like oil changes because we'd only pay the co-pays. And the costs would rise since every shop would need an extra person to handle the paperwork and claims.
Re:Was it a cause of his legal trouble? (Score:5, Interesting)
Look: If you want economic security as your top priority, don't be self-employed. Starting a business or going out on your own universally means that one must be willing to accept a lack of security. And for all that you have to work harder than anyone else.
Furthermore, every new business fails. It isn't a question of if you will run out of money. It is a question of when. More money doesn't solve that problem. What separates out a successful from an unsuccessful business is that the successful one manages to keep going through the failure and eventually arrives at success. If you don't have the fortitude to do it, don't.
There are a lot of benefits to starting such a business, though. They include freedom and the possibility in time to earn more than you would working for someone else. I prefer this route, but I would certainly not recommend it to everyone.
That's far too glib. (Score:5, Interesting)
More accurately, it is likely he had a house and a plane because he did not pay his taxes.
After paying for his legally required share of the two utterly ridiculous wars we are prosecuting, US bases all over the world, the cost of keeping an unprecedented number our citizens in jail, subsidies for businesses that otherwise would naturally fail... he might very well have been unable to purchase a house, much less an aircraft. 20% to 40% of one's income in your hands over the years (more, if you actually do the math*) makes for quite a difference in how you can approach purchasing big ticket items like homes and boats and so forth; and if in doing so, whether you ride the wheel of debt that has been arranged for us, or if you are able to actually make such purchases without incurring additional costs in interest.
It is well to keep in mind that like any enterprise that involves the legal system, trying to stand up for a position that the government finds itself in disagreement with - legitimately or otherwise - is also a hugely expensive undertaking, easily capable of bankrupting any person of average income. The presumption that you can fight city hall is false for most people. It's just another way to shipwreck your life.
Perhaps taxes are too high, and government too large, after all. I seem to recall that there are Americans who are looked upon as heroes because they fought against unreasonable tax policies. Is it fair to assume that each and every one of those we hold in such high regard perfectly managed their lives? This guy clearly could have made different decisions (no doubt most of them to his detriment), but would they have been "right", or merely compliant?
I could point out many historical examples of "law abiding citizens" that most certainly were not doing "right." To call this fellow an "idiot", as you do, is to attempt to wrap the whole event in a nutshell of disrespect that does not serve the interests of the dead IRS employees, the family Stack left behind, or, frankly, the rest of the nation.
It does, however, serve the needs of the government. An entity that is more in need of careful pruning than encouragement, in my opinion. I can't support Stack's action, because in the end, these people were neither his enemy nor the source of his problems. However, from where we stand today, it is history, and all I can do is hope that more people think about the problem, instead of assuming it is inevitable that we pay such huge amounts for "services" that primarily benefit other than the general population. Perhaps while they're at it, they'll think about how the government has stepped outside the boundaries defined for it by its formal authorizing mechanism.
After all, a government that is doing what it was actually authorized by its citizens to do is a lot less likely to incur the wrath of its citizens, thinking rationally and "acting rightly", or not.
---
*note: The amount of your money that goes to taxes is the amount you actually pay directly, plus the amount paid by any first-party you do business with. For instance, if you pay a plumber $100 to fix your pipes, and the plumber is paying a 25% tax rate, then $25 of the $100 you gave the plumber goes directly to the same tax well that your direct taxes do. Here's the math. Let's say you and the plumber are both paying 25%. Then, you initially earned $133; the government taxed you 25%, which is $33.33, and now you have $100 left. Now you give that $100 to the plumber, who in turn has to give $25 of that income (25%) to the government. $75 of your $133 has arrived in the plumber's hands, actually paying for the plumbing work. Your actual tax rate here is 75/133 which is about 56% - not the 25% that it initially appears to be.
And the income of the plumber, w
Re:There's more to this story (Score:4, Interesting)
Um. On google images search for the term "lol preexisting condition". Review the picture. That pretty well summarizes the state of healthcare in this country to individual procurers of healthcare. When you are covered by a large company's health plan, there are not preexisting condition limits.
The only way this will ever fixed will be by fiat of law. The market has categorically failed.
C//
insurance games you (Score:5, Interesting)
One thing everyone is forgetting about health insurance. They cheat. Insurance doesn't pay what they should, and they'll always have some excuse. They can outright deny your claims. More common is burying you in technicalities that somehow amount to them paying a good bit less than they ought while trying to convince you and the doctors that they've paid their share. Watch Sicko sometime, and try not to let any bias you may harbor about the director interfere with the message.
First thing you know is the hospital is hitting you with one of their fantasy bills for something you thought was covered. You think you're only on the hook for 10% of the 30% of the completely scandalous list price the insurance negotiated when they entered into an agreement with the doctors. But then they won't pay it. They give you and the hospital a load of crap about how some of the drugs and procedures aren't approved, the visit is classified in a certain way, the particular deductible hasn't been met yet. They've got a mile long list of excuses. Denied by insurance, the hospital has the gall to turn around and demand from you not just the 30% the insurance was supposed to pay, no, but the full 100%, because of course you don't have any such agreement with the hospital. Pretty big jump when your share of the bill changes from 3% to 100%. I've had the hospital harassing me with weekly calls and finally siccing a credit collection agency on me for a bill that the insurance bastards should have and finally did pay after much determined calling and calling and calling and waiting on hold and waiting while they "investigate" and waiting for supervisors and listening to them blame the hospital for entering incorrect codes (to which I replied that it was the insurance's fault if they'd made the system too complicated for the doctors to get right), and angrily refusing when they try to tell me I should just pay up and stop making trouble. Cost me a lot of time to straighten out just one-- so much time that maybe I could have earned as much or more money than what the insurance tried to cheat me out of. I have several others that look like they're never going to be paid. And they didn't surface until more than a year after the medical work was all done-- that's how long the hospital tried to get fully paid through the insurance. To be fair, the hospital shares a good bit of the blame for their outrageous billing practices, in particular, the miserable fee for service system with the completely insane rates that somehow can't be figured out in a timely fashion because they've got to pack it with every service they can. Decided I was through arguing about it all and am just letting the rest rot. Statute of limitations FTW!
You may even have to find a lawyer to threaten to sue the damned insurance company.
Re:Was it a cause of his legal trouble? (Score:5, Interesting)
I'm sorry, but I work for a company in the top 10 of the fortune 500 and with the economy the way it is I'll be _lucky_ to not be outsourced by the end of this year.
Job security in IT is _not_ joining a large company that is going to ship your job overseas the second they realize they will save 50%+ letting you and your staff go.
Going out on your own may not yield the best results up front, but once you get a somewhat stable client base you are basically secure.
In the world of outsourcing IT, keeping yourself visible and available is the way to go. Not locking yourself behind some corporate facade that will drop you first chance they get.
Re:irrational or rational response? (Score:3, Interesting)
Actually, the situation is probably worse, with the most productive being sucked dry. You have to differentiate between the productive rich and the thieving rich and the parasitic poor and the honest poor. The value creators and value producers are presently being vampirized by the rest, and they physically number very close to 60%.
The simple truth is that there is a net transfer from net taxpaxers to those that aren't. You might want to read the excellent article on the topic over at http://www.vinsuprynowicz.com/
Re:Can someone who understands the IRS explain? (Score:3, Interesting)
In theory it's to protect the rights of workers so they get all the benefits of full time employees if that's what they are, however in reality it's to close a tax loophole. Ya see the thing is generally speaking capital gains tax is less than income and payroll tax. Consultants running their own companies generally pay capital gains on most of their income whereas employees pay income tax and their employers pay payroll tax, which generates more revenue for the government.
I like your post, not being argumentative.
The solution to the above, I propose, is to actually close the tax loophole. Eliminate the distinction between capital gains and labor income. It would put labor on an equal footing with capital provision. As a side benefit, it would help to stem the explosion of the American aristocracy.
To those who cry double taxation I would then add; eliminate the tax on corporate profit. If you tax only people, then you don't get these complexity problems. For those who play RPGs, you can compare these to class and race balance issues.
Not enough tax revenue? Simple -- check out the PPC adjusted 1954 tax code [wikipedia.org]. Getting paid more always means taking home more, so there is motivation to excel. The more our system benefits your wealth concentration, the more you pay to support the system from which you benefit.
And if we still decide we want some benefit for long-term investment, I could acquiesce -- if we make it truly long term. Hold a stock for more than 5 years, we give you 10% off the taxes. Hold it for more than 10 years, 20% off. Or something like that. This would have a limiting effect on the quarterly-report oriented book-cooking and gutting of product quality and customer service.
Uneasy with taxing people based on inflation? Fine, adjust the taxable stock value according to the CPI. This would also motivate us to start being honest about the CPI, instead of using "CPI(*)" (* = not counting things that increase in price).
In truth, it is not the solutions that are hard. Being a well balanced capitalist economy is entirely possible. It is only the lack of honor and fortitude in D.C., and the lack of engaged citizenship by the public, that allows our system to continue to degrade.
Re:Was it a cause of his legal trouble? (Score:5, Interesting)
I'm pretty certain the Stack tragedy represents the outcome of some form of mental illness, not terrorism or a political statement. The jury is still out, but the rant seems kind of pointless.
OTOH, section 1706 has been a bone in my craw and the deep seat of a sincere grudge I hold very firmly. It was obviously a sop to IBM and when it emerged from reconciliation, also Cap Gemini and other large contracting organizations (at the time, AKA "body shops"). It was very obviously intended as an anti-competitive measure against people just like me. I have personally observed the negative influence of section 1706 on my business and career on more than a dozen occasions.
For the people who say "just work around it" - that's the point - it's another increment in the cost of doing business. Also it increases the risk to your customers - they have to verify you're not going to face them with an unforeseen tax liability. And so the whole market was modified to favor the large firms at the expense of entrepreneurship. And then there's the obvious begging hand of Congressional shakedown held out whenever someone tries to get the law changed to remove this double-dealing injustice.
Fucking Parasite Bastards. I'm sure I'm not the only one who feels this way. All these holier-than-thou pro-IRS bigots who holler "we're just following the law" or "We did our job fairly" need to consider the consequence of laying down to bed with tyranny. It isn't something which may be excused with happy talk and a smiley face!
Re:irrational or rational response? (Score:3, Interesting)
Stack's note claims that his problems stem from $12,000 in unreported income that his wife had, and a piano that had been claimed as a business expense or asset that the IRS said was not. He also mentioned having his retirement reset to 0, but hey, that's about as common as having freckles or wearing glasses.
This caused him to destroy a house worth $250,000 and a plane that is probably worth $20,000 to $40,000. The unpaid tax on $12,000 might have been $4,000 at most, maybe doubled with penalties especially given his previous tax problems, and if he had written off a piano he should not have, at most that is another $5,000 in income - I'm presuming he didn't buy a Steinway Grand or something, if so I hope that also wasn't burned in the house.
His note also failed to mention that his ex-cultist wife had left him the day before. It is possible based on the manner in which the house burned that he had booby trapped in an attempt to kill her.
Now, this aspect of the tax code probably is screwed up. But it's a little like deciding to pass gun legislation in the heated atmosphere following a mass shooting; do we really want people in the mental condition of the last days of Joe Stack to be dictating our tax reform debate ?
If you cleared your mind of all the emotive pictures and chatter of the last week, and sat down and looked at the tax code and picked something that needed changing, would the treatment of technical contractors really be at the top of the list ? There's a lot of crap in there, from how deductions are counted for leasing versus purchase to whatever causes all those big corporations to pay no tax year after year.
Also, if you pick Joe Stack in his final days as your guide in tax law, note that he also complained bitterly about the tax exemptions of churches, particularly the Catholic church. I don't see the Joe Stack fans arguing for a change in that.
Re:Was it a cause of his legal trouble? (Score:3, Interesting)
"if he [Stack] has a house and a plane he can pay his taxes."
I find this as compelling as, "Rich people can afford to pay more taxes." Which is to say; I do not find it compelling. The question is not what a person can afford to pay, it is what is the most economically efficient amount for them to pay. What amount maximizes the long term GDP of the nation? (and lest you think me a right-wing-nut or tax protester, I think that solution involves a significant shift back toward the PPC-adjusted tax policy of our rise to superpower(*))
Solving for efficient taxation is not tremendously complicated, but it is a bit more complex than the facile sound bite above.
* See 1954 tax code here: http://en.wikipedia.org/wiki/Internal_Revenue_Code_of_1986 [wikipedia.org]
Re:There's more to this story (Score:1, Interesting)
@CodeArtisan - You make an interesting point. I have an idea as to why the U.S. ranks so low.
Have you ever watched CNN? The have had a number of documentaries on 'Being Black in America' and the 'Two Americas' (by which they mean 'Black America' and 'White America'). CNN shows that the differences between the two sub-populations are so significant that it is really like they are two different countries living in the same physical space.
'White America' truly does has the 'highest overal quality health-care' in the world and that explains the other poster's remark. He's probably white and he's probably speaking of his own experience.
'Black America', for whatever reason, has very poor quality health-care. (The same goes for education.)
So that ranking by the WHO as #37 is probably the result of the WHO averaging health-care for 'Black America' with health-care for 'White America'.
Re:The IRS is not a *kind* organization... (Score:3, Interesting)
And if you're not spending it, what are you doing? Investing it -- either directly or putting it in a bank, and they're investing it for you. ...and what are your investments doing? Buying goods and services (on which sales taxes are paid) while funding ventures intended to make a return.
Also, think of it this way: What's better social policy, encouraging people to spend, or encouraging people to save? Taxing only money that's spent (the former approach) encourages saving, something which has long since been forgotten.
Also, the official FairTax proposal (which the grandparent was not promoting, as their post implied that some items would be "tax free") provides for absolutely no tax-free goods, but includes a refund based on poverty-line cost-of-living for one's family size in one's area; thus, if you're living below the poverty line, you're getting more money back from taxes than you put in -- and people spending far more than the basic cost of necessities on food don't freeload with cheap fillet mignon purchased with tax breaks intended to protect the poor.
Re:Was it a cause of his legal trouble? (Score:3, Interesting)
I'm saying that the "permanent employment" cookie is dangled like it's a treat, a prize, something worth selling myself out for. But that is precisely how and why this opportunity has arisen. Someone else had "permanent employment," but then management decided--through some undisclosed analysis--that that person/those people had to go. Then they found out that they needed this work function, therefore I'm getting a phone call from someone who clearly doesn't understand the job requirements, let alone the fact that they, too, are the victims of a "contract-to-hire" scam.
I realize that I could pay for the travel, the lodging, the food, etc., up front, and then claim the expenses against my income tax, but ...
Like everybody else, I've got no capital to invest -- at zero interest with the IRS -- and the banks still aren't loaning money for this sort of venture. Even then, even with crazy low interest rates, I lose money because I pay interest on the loan, but recoup only the capital from the IRS. Further, I've also made myself an attractive target for audit, or the outright levy of penalties, to be proven later--or never.
It took someone who's been around long enough to see the semi-cyclical nature of this situation. Everyone seems to be referencing the current crisis, but this happens whenever the economic outlook is bleak. IT is [ still !! ] considered to be overhead and is the first area for cutbacks.
Apparently the Congress is [ still !! ] listening to the Old World. Gee, when has the government been so profoundly disconnected to the people?
Oh, yeah ... like 240, 250 years ago. Bloody revolution. Pirates pressed into service as contractors, except that when the US didn't need their services, they kept ... blowing $#!+ up.
Huh.
Oh look, my favourite TV show is on. Let's see, comfortably numb, or rage against the machine?
Each seems equally effective from this vista.
Re:There's more to this story (Score:3, Interesting)
When I worked as a contractor in software development, I did a huge fraction of my work (like 95%+ in some years) for a single client.
They were pretty nice, paid on time, and had interesting work, so why wouldn't I?
In Brazil I think it's a little weirder - the employer may get in trouble if I'm only working for them. How can they be expected to know this is beyond me...
Re:Was it a cause of his legal trouble? (Score:3, Interesting)
Most of us pay our 1040s and that's that. Many of us can't understand why paying taxes is complicated, because we file a 1040 take the standard deduction and move on with life. Obviously if you're a contractor, self-employed or a small business owner, you know better.
With that said I don't agree completely that avoiding taxes should be encouraged and is perfectly acceptable. The courts have decreed that avoiding taxes is not illegal, not that its should become a national past-time. Firstly, on principle, anything that is not illegal is not necessarily OK. Many things are legal that are not OK, including flipping off passengers in traffic and jumping in front of the line at the grocery store. Second, by finding loopholes in the tax law, you are finding was to avoid carrying your burden. It should not be on individuals to be deciding for themselves how much they should pay in taxes. A lot of confusing debate goes on about who is carrying the tax burden, and no one really knows since we're all not really paying taxes the same way. The government still needs the money, so the result will be increased taxes on everyone else. Finally, by putting it on individuals (particularly those with large accounting staffs that still represent less than 1% of their corporate revenue) to find loopholes you encourage the complicated tax code we have today.
So I agree that our tax code is bizarre and complicated, and I can understand that taxes are not straightforward for very many, that for small businesses it is a crippling overhead, I can't justify avoiding taxes as an upstanding activity. The tax code should be short and sweet, with a minimum of exceptions. But I think it will continue on as-is, because those benefitting from finding loopholes would not appreciate what happened to them if they had to pay the full burden the general public has agreed to (although I suspect we could then get away with lowering the tax rate if we did so).
Re:There's more to this story (Score:5, Interesting)
Whoaaa! $800/month ($10k/annum)
In Australia:-
Everyone is covered with free emergency care in the public system. (Which is very good despite what fringe whiners say)
The public system has waiting lists for non life threatening stuff (Which can be days to years)
You have the option of buying private health insurance which for a family is around $2k/annum.
Private insurance gives you the choice of your own doctor in a private hospital.
Pre existing ailments usually have a one year exclusion.
Employers do not provide any form of health insurance.(because it is not required)
GP visits are covered under the Medicare system where you are refunded 50-100% of the consult.
If you spend more than about $1500/annum on medicines, the Govt covers the rest.
Some medicine is covered under a Pharmacetical Benefits Scheme which makes their cost around $15/treatment no matter what the price of the drug.
In the USA, it sounds like when the Military Idustrial Complex ran out of wars, they got into medicine.
chapter 8 (Score:4, Interesting)
Chapter 8 of How To Save Jobs [usspi.org] contains a nice discussion of the U.S. health care system. Since David Gewirtz has kindly made this book free to download, I've taken the liberty of quoting more than I might otherwise, concerning bankruptcy and rescission (emphasis mine):
Three-quarters had health insurance. Put those two numbers together. 60% of all bankruptcies in America were driven by people who couldn't pay their medical bills, most of whom actually had health insurance.
...
Most insurers claim the rate of rescission is fairly small. In testimony before the U.S. House of Representatives Committee on Energy and Commerce, Don Hamm, CEO of Assurant Health stated "Rescission is rare. It affects less than one-half of one percent of people we cover."
And yet, according to a story by Karl Vick in the September 8, 2009 issue of the Washington Post:
In the past 18 months, California's five largest insurers paid almost $19 million in fines for marooning policyholders who had fallen ill. That includes a $1 million fine against Health Net, which admitted offering bonuses to employees for finding reasons to cancel policies, according to company documents released in court.
Amazing statistical coincidence that the rescission rate mirrors the relatively low rate in modern society of personal health catastrophe.
Gewirtz is an odd duck, with significant background in both politics and technology. If your response to Gewirtz is to pigeon-hole him for easy target practice at one end or the other of the ideological spectrum, good luck with that. If he's as clever as I think he is, his misguiding jingoism on "buy American" could be cured by a close listen to Rustici on Smoot-Hawley and the Great Depression [econtalk.org], another flawed discussion which nevertheless can not be resolved by means of a circular pigeon dance. In the end, I rejected about a quarter of what Rustici puts forward, but felt edified by the other three quarters.
I'm about halfway through The Baroque Cycle [wikipedia.org] which has an an organizing theme tumult in the understanding of financial markets and the stability of credit and currency. If Neil's super-great (mostly paternal) granddaughter Nellie Stephenson were to write the Barack Cycle several hundred years from now, it would focus on the present tumult and disorder in our health insurance industry, with lobbyists in Washington taking center stage as the imposing yet perhaps doomed palace of Versailles.
America fails to reform it's health care system because it is now in the late phase of the French disease, terminal narcissism. Debate rarely turns on what needs to be done until coinage runs short. From what I've read, mission accomplished. Will the American empire make it to the next gas station running on fumes? America is not to be underestimated, but far enough back, hard to believe, neither was France.
These kinds of laws are a lot like Smoot-Hawley. The elite has a shallow hand-waving understanding of how this implicates tax revenue (shared by few of the wonks), while totally failing (with scant concern) to wrap their minds around the larger consequences.
Fortunately, there are economies gaining steam in other corners of the world less set in their sumptitude, that sucking glissando you hear as you circle around the velvet drain pipe.
In a vigorous nation, it might be prudent to fix this while time remains, starting with a cold hard look at some of these small fish nourishing larger ponds.
Re:There's more to this story (Score:5, Interesting)
If car insurance worked like health insurance, we'd never see the real costs of things like oil changes because we'd only pay the co-pays. And the costs would rise since every shop would need an extra person to handle the paperwork and claims.
This is the quasi-logical rhetorical form that gives the economics profession a bad name, for it conceals everything about the issue worth thinking about.
The underlying structure is the timeless vapour-lock of the insipid: "if there is enough food in the food, how come people are starving?"
Indeed, good question, and it happens to have an answer: distribution is often a harder problem to solve than production. This surprises anyone why? The former is largely a political problem (venality and custom), the later is largely an industrial/engineering/scientific problem. Our accomplishments on the later front include the green revolution, fiber optics, and sending a man to moon, on the former front our wreath of achievement is CNN.
In the case of our hyper-technological medical system, it's a miracle of paper-work that anyone gets the right sequence of treatments on a prompt and cost effective basis. The paper-pushers are hardly a burden on the system, they are practically the whole of the system, unless you regard the human brain as a leech on the human organism.
E. O. Wilson: Trailhead [newyorker.com] is a nice read. Now imagine what it requires to individually and fairly compensate every ant in this society for their individual contribution as measured by the outcome to the hive of the trails they blaze or toil upon? You'd need a whole other ant hill just to keep track.
A founding principle of America is that all this score keeping is a pro bono service of the invisible hand. That's what "invisible" primarily means by those who invoke it: that you never see the bill for services rendered. A health system based on less individual score keeping for the corporate participants (such as the Canadian system) strikes most Americans as inimical to the American way, yet at the same time the cost of all this score keeping is brushed off the table as inefficiency and overhead endemic to the regulatory structure as opposed to being endemic to the problem itself, delivering health care products and services so complex and litigious and expensive it boggles the mind.
Yes, it's possible to stiff the invisible hand, if you don't mind watching 20% of American society line up for the soup kitchen while the nation fences with Asian tigers for increasingly sparse petroleum resources.
I've been trying to decode the lure of "the invisible hand" for over a decade. Visibility in America is anything or anyone that collects its debts; invisibility is everything else. Amazing what can hide in a word and for how long. The old gag in America is that as soon as the invisible hand becomes visible (by collecting its debt for services rendered) it's immediately dismissed as a burden of regulation, with the same fatuous logic that in a world with enough food for everyone, no one starves.
In the glib theory of the invisible hand, a twenty year old American male lacking health insurance who comes down with testicular cancer can borrow $100,000 against future earnings (without posting hard equity of which he has none), to cure himself of the cancer and remain a valuable member of the American work force, since this is the most sensible economic outcome. Equity-lite loans worked great with housing.
If your family posts equity, that's sugar-daddy insurance, a whole different ball game. In the American myth, everyone has a loving sugar-daddy to fall back upon when the heartless banks demand equity against their loans, and thus a productive future worker never falls through the cracks of too little treatment too late.
Re:There's more to this story (Score:4, Interesting)
Re:Was it a cause of his legal trouble? (Score:2, Interesting)
Have a tax code that's short enough for a single person to read completely through in less than 2000 hours of reading (leaving two weeks for actual work)
Become a New Zealand citizen... seriously.
Our tax code is 3408 (PDF) pages long: http://www.legislation.govt.nz/act/public/2007/0097/latest/viewpdf.aspx [legislation.govt.nz] . Most of that is irrelevant and can be skimmed (contents: http://www.legislation.govt.nz/act/public/2007/0097/latest/DLM1512301.html [legislation.govt.nz]). You would need to revoke your US citizenship: "If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad." as per http://www.irs.gov/businesses/small/international/article/0,,id=97324,00.html [irs.gov]
Other reasons:
Fundamentally, it seems like the New Zealand IRD is really interested in not wasting your time. I cringe at the stories about the IRS, and the dealing personal friends have had with it.
PS: Our state and private health care systems work too (from experience. Also our health stats mostly rank better than the US). If you want to pay for private health care (i.e. health care beyond what your taxes pay for) it is cheap, available and it also works.An expensive all-options private plan for an unhealthy 40 year old is about USD30 per week. http://wellbeingcalculator.southerncross.co.nz/OnlineQuote.aspx [southerncross.co.nz] (I hope accessable from a non-NZ IP address). Get a quote by selecting a plan and answering 4 questions: (Q1) Are you a non-smoker? ie. have not smoked at all over the past 12 months, (Q2) Do you eat five servings or more of fruit and vegetables per day? (Q3) Do you exercise three or more times a week? (Q4) Do you drink: Female - two or less glasses of alcohol a day (14 per week)? Male - three or less glasses of alcohol a day (21 per week)?
Re:There's more to this story (Score:4, Interesting)
But i was referring more to medically rather than lifestyle. Doctors doing more checkups, catching things earlier ends up saving more lives and money. One simple example of preventative vs repair work.
Re:insurance games you (Score:1, Interesting)
The insurance company doesn't "negotiate" with the physicians, physician's groups or the hospitals.
What they do is tell the hospital what they will reimburse. When the hospital refuses to accept the rate, the insurance company sends the hospital a $1000 dollar (that's one thousand dollar) check every week instead of the $1,000,000 (that's one million dollar) check that they are "billed" for to cover the hospital's services. Perfectly legal under their contract with the hospital.
Then every week, after the check arrives, the insurance company then goes back to the hospital and says "What do you think of the rate now?", until the hospital is forced to give in to the pressure due to mounting debt. Very hard to argue with the largest insurance carrier in your state.
This is the way it happens. This is the way it recently happened during "negotiations" between the medical center I work for (the second largest in the state), and said insurance carrier.