November 11, 2019

Tax Time

Yes it is. And, guess what, the filing of your Federal return is getting longer and more complicated. The income tax code and its associated regulations contain almost 5.6 million words, seven times as many words as the Bible. Taxpayers now spend about 5.4 billion hours a year trying to comply with 2,500 pages of tax laws.

There are 721 different forms and the exact number of pages is as confusing as the tax code itself with the current estimate being about 75,000 pages. Just how many people actually understand the tax code is anyone’s guess. If you go to the Government Printing Office, www.gpo.gov, you can order a complete set of Title 26 of the US Code of Federal Regulations, all 20 volumes of it at the bargain price of $974 dollars with shipping included.

The latest IRS numbers are as follows:

Top 25% of earners pay 88% of income taxes

Top 50% of earners pay 97% of income taxes

Top 1% of earners pay 39% of income taxes

Bottom 50% of earners pay 3% of income taxes

Bottom 47% of earners pay 0% of income taxes

There are hundreds, if not thousands, of loopholes in our tax system. In fact, the Obama administration has created additional tax loopholes for green energy under the EPAC laws that offer a rebate of as much as $1.80 per square foot for green energy products. If you own a 200,000 square foot building, that is a tax credit of $360,000 dollars. No wonder GE was able to not pay any taxes at all.

Starting in 2014, the individual shared responsibility provision of the Affordable Care Act calls for each individual to have a minimum essential coverage for each month of the tax year and or qualify for an exemption and make a payment when filing his or her federal tax return. The IRS has issued Publication 5187 for your added help that is only 21 pages long and approximately another 25,000 words.

Need more help? Try calling the IRS where its staff has been depleted by 12,000 employees since 2010. Only 47% of the calls will ever be answered and your wait time will vary between 35 minutes to an hour. Write a letter to the IRS? Not a great idea as they respond to only 48% of all the written correspondence they receive. Current staffing levels at the IRS have been decreasing and are now estimated at approximately 93,000 employees. The real issue, however, is can they answer your question? There have been over 5,000 changes to the Tax Code since 2001. It is highly unlikely that the IRS will be able to answer your question.

So what about a flat tax? One of the biggest objections is that it would be regressive and penalize the poor and benefit the wealthy. But as the table indicates in this article, the bottom 47% of all earners pay no tax at all now? I doubt if a flat tax will ever become law unless, as we are slowly moving toward the most complicated Tax Code ever, the system breaks down or the loopholes become so numerous and complicated that the top 25% of all wage earners cease paying taxes. At any rate, sharpen your pencils, have the Advil ready, and have all the 1099’s stacked up neatly and the W-2’s nearby along with your mortgage statement, your statement from your local church and your charitable contributions, medical bills, your brokerage statement, etc. for the experience of your life courtesy of Uncle Sam.

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Written by
Donald Wittmer

DONALD WITTMER is a retired business executive who held key roles in the automotive and banking sectors. For a time, he also served as a Fiscal Agency Manager for the Detroit branch of the Federal Reserve Bank of Chicago. He received his undergraduate degree from Cincinnati's Xavier University, an M.A. in business management from Central Michigan University, and earned certification in bank operations from the School of Banking at the University of Wisconsin-Madison. A husband, father, and grandfather, he teaches part-time at the Kent Place School for Girls in Summit, New Jersey.

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Written by Donald Wittmer
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