March Madness, April Angst

It’s March Madness. No, not because of basketball. Rather because the time has come to confront the looming horror of tax season. So, it’s gather the receipts, plentiful evidence of wasteful spending, paltry evidence of charitable giving, forms from various institutions, 10-somethings, W-somethings, Schedule something-or-others, organize it, either get it to the CPA or prepare to wrestle with the Turbo Tax in time to meet the Ides of April deadline.

Some fun. In a sane world or a just one, none of this would be required. Add up your income from all sources, pay a percentage graduated according to the total from one percent for the least among us to a middling amount for the middling to a mighty wallop for the mighty. Clean and simple.

Not three brackets, but maybe 30 or 100. Those in the top one or five or ten percent would experience a little suffering in their charmed lives, no new yacht until next year. Those in the bottom one or five or ten percent wouldn’t, for a change. A far cry from the present, where the man in the top bracket who earns $450,000 pays the same rate as the man who earns $4.5 billion. And both are likely to pay a lower rate than the man who earns $45,000 by the sweat of his brow. Why? Because their income comes from capital gains, taxed at half the rate, or is eligible for a myriad other gimmicks.

Will reform ever address these flaws, injustices and slaps in the face of commonsense? No. the vast, byzantine structure that everyone — from liberals to tea party types, from libertarians to Wall Street moguls — loves to damn didn’t just grow like Topsy. It is the result of endless pains behind closed doors, of political payoffs and chicanery, lobbying on the part of vested interests and pandering to voters if there are enough of them to form a bloc. So many oxen and sacred cows would be gored by reform that there’s no appetite for it in any elected representative. Few seats are that safe.

A glance at the tax form you’re struggling with is a reminder of how many back room deals it took to cobble together the Frankenstein’s monster of the tax code that all politicians say they hate while busily writing another exemption, exception, incentive, deferral, loophole into law. Often they are not in English, the better to disguise the intent. Always they are in code. The RMDs, IRAs, 401ks, 527s, FSAs, NIITs. For all I know there are ISISs and NRAs that have nothing to do with guns.
That special rate for capital gains? Somebody gained by having that included and surely shared the wealth via generous campaign donations, often funneled through phony charitable fronts coded 501(c)(3) to make them tax deductible. Who do we suppose thought of that dodge? The members of Congress who write tax law in exchange for bribes? Right-O.

There are special provisions in the code for capital gains – short term and long, carried interest, dividends, depreciation, all of which benefit someone. But probably not you if you’re a standard-issue wage earner. There’s a credit for earned income for some. There’s a tax break for being married and for having children, but anyone who is in either category knows the break isn’t nearly large enough considering the outlay in blood, sweat, tears, toil and cash entailed by either endeavor.

If you’re in the oil business there are breaks for you. If you buy it at the pump, not so much. If you have a hedge fund, a gigantic tax break can reduce your tax bill. If you’re the average working stiff who trims hedges, dream on. You aren’t a big enough fish have a lobby, let alone a lobbyist. But surely fisheries are and have their gimmicks enshrined in law. A Cod Depletion Allowance perhaps. In short, if you’re big enough or powerful enough to scare pols or reward them, you get the tax code you want. If not, pay up buddy. There’s no such thing as a free lunch –or even a tax-deductible lunch for you.

Another interesting thing about the ghastly Tax Code Zombie that Congress has concocted is that it is stuffed with provisions that have long outlived their usefulness, but will never die. There’s something on one of the forms about railroad pensions. When was that added? Are there still railroads? Do their employees still get pensions?

Even odder, though many segments of the electorate benefit from their pet parts of the tax code, they still hate it for giving breaks to anyone else. Polls show the middling people are more likely to accept the need for taxes than the rich who have benefitted so, well, richly from the country they don’t want to fund.

Perhaps the only people who ought to feel unalloyed joy when contemplating our tax laws are those who would be out of business without them – accountants, tax preparers, tax lawyers. But even they, in their candid moments, admit it’s a frustrating ever-changing, never-improving, Rube Goldberg disgrace.

And then they fill out another Small Business Form 5884, Work Opportunity Credit Form 2120, and Multiple Support Declarations on Schedule J, Farm Income Averaging Form 8820, Orphan Drug Credit Form 8933 or Carbon Dioxide Sequestration Credit. And you thought your taxes were complicated. On the other hand, they get paid for their suffering. You just get to suffer — and pay.

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