17 March 2013

Shining a Little Light on Some Common Tax Deceptions

I just find it increasingly bizarre that so many Conservatives, so many Christians I speak with are so concerned with global conspiracy and the threat of Socialism and yet cannot see the institutionalized corruption and Corporate Socialism in our own system. They cannot see the economic racket our own country has created.

Many have recently railed against those who don’t pay income taxes. I’ve heard many on the radio and in person decry the system of tax credits, deductions, and other ways that lead many people to receive a refund rather than actually have to pay anything on April 15th.
As I’ve pointed out, in many cases this is actually not a refund but a subsidy. Many people receive thousands of dollars ‘back’ on their tax return. And yet if you add up their withheld funds from their paycheck stubs, the amount they receive exceeds the amount withheld. That’s not a refund. That’s a subsidy.

I only say it because sometimes these are the same people railing against Socialism and redistribution. If they really feel that strongly about it, that it’s a moral issue, then I don’t see how in good conscience they can take that money. It’s blatant redistribution, and though I have benefitted from it too, I don’t feel guilty.

As usual it’s not as simple as some would make it. Yes, the United States has a progressive tax system that taxes higher incomes at a higher rate. But at the same time the Social Security tax which ranges anywhere from 12-15% is only taxed on the first $115,000 (approximately) of income. One friend of mine who makes a little over $100k a year is paying over $15,000 in Social Security tax which is split with his employer.

This is while someone making $500,000 or a million dollars pays the exact same amount. That’s actually a regressive tax that is unfairly levied on lower wage earners. Very few people realize this. A person making a million dollars effectively pays into Social Security at a rate of less than 2% of their income. That’s a regressive tax that favours the wealthy and a serious one at that. A million dollar income is saving well over $100,000 dollars in taxes. It would take about ten median income families to make up for that deficiency.
Of course if you’re self-employed like me, you end up paying the full amount as you have no ‘employer’ to split it with you. Ironically under Obama (who just wants to raise taxes right?) these obligations were as low as they’ve ever been. He actually cut our taxes and for self-employed folks it was very noticeable as our tax burden was significantly lowered. For a couple of years I only had to pay about 6% for Social Security. This all changed with the fiscal cliff mess.

The wealthy have long come up with ways to work around the burden of income tax. One of the ways the very rich have evaded it is through the establishment of trusts. Again very few people understand how this operates as most of us can’t fathom having more money than we can actually spend. Many wealthy people don’t earn income but live primarily on profits from sales and investment dividends. As we heard during the presidential campaign, Romney’s effective tax rate was under 15% because all of his income falls under Capital Gains. My friend I mentioned above is a wage earner and his effective tax rate (especially when he was still single) was much higher, somewhere near 30% if I recall.
So we have Capital Gains and Trusts, which I’m not delving into at present and then we also have Non-profits and ministries or religious organizations which in some ways can function similar to a trust in terms of how they disburse money.
And yet many of the religious exemptions are also somewhat dubious and certainly subject to great abuse. While the most egregious examples of this can be found among the televangelists, many other ‘ministries’ are equally corrupt, just on a smaller scale.

Ministries are kind of like political campaigns. You can establish a pot of money or a fund that you draw from. A trust is usually established with a foundational principle or asset that often is static. A campaign functions as sort of a living trust that’s supposed to exist for a specific purpose. For those who wish to manipulate it, the trick is to find ways to classify possessions and activities as pertinent to the campaign or in some cases the trust.

Functionally this is often income but legally in terms of accounting you can hide what you’re doing under the veil of expenses. Churches often do this with their pastor’s housing and other expenses. It’s a common business trick. The ministry ‘owns’ the car and perhaps because you use your house for work, the ministry can ‘own’ the house. Since the house belongs to the ministry it can also pay the utility bills. My late father was a cunning businessman. He rarely ‘owned’ anything. He tied up his possessions and assets in a labyrinth of corporations and limited partnerships. This helps you to evade taxes and in many cases liability.

If you’re shrewd you also ‘hire’ your wife onto your ministry team and perhaps even some of your other family members. Non-profits are often misunderstood because people don’t understand what profit is.[i] People can be making hundreds of thousands a year and that’s not necessarily profit. That can all be classified as overhead, an expense. So consequently you have some members of churches and ministries who are making obscene amounts of money (classified as overhead not profit) and yet in reality they’re making even more because so many of the basic expenses you and I have…are tied in with and paid for by the ministry. It’s one thing to make $200,000 a year and have a million dollar house, a boat and some nice cars. Surely you’re rich but not over the top. But what if you made that same amount money, but had no house payment, perhaps no utility bills, and no car payments? What if you don’t even have to pay for your gasoline or your lunches?
This is but a snapshot of what happens in a world that few of us can even conceive of. And this happens not only with the sleazy ‘ministries’ like TBN and Joyce Meyer. There are not a few respectable ‘Reformed’ and other theologically conservative ‘ministries’ that operate this way. It’s shameful.[ii]

The one tax we have within our system that I find to be the most morally objectionable is the property tax. This effectively makes us all renters. Don’t pay your taxes and you will (within a few years) find out who actually ‘owns’ your property. At the very least this tax should be rescinded for senior citizens. It’s wrong for people to have worked their whole lives, paid for their housing, and then have to sell out when they’re trying to live on a fixed income in their old age that can’t keep pace with inflation and tax increases. Once you’ve taken possession of your house from the bank, it should be yours. Anything else is akin to feudalism.

Why have all these tax credits and deductions come about? After Johnson’s Great Society there has been a general hostility to government run social programmes. Obviously many have still been generated over the past fifty years and yet the political climate has become more and more difficult. Tax credits are a way for those on the Left (in lieu of programmes) to throw a bone to the poor and for those on the Right, tax credits are a negotiating point, a means of creating loopholes to soften the blow of tax increases. Or in some cases, the Right has pushed for tax credits in order to ‘aid families’ or ‘promote marriage’. Ironically the Earned Income Tax Credit which was greatly expanded under Reagan and his tax reforms is one of the biggest reasons many low and middle income people end up paying no taxes. Another is the Child Tax Credit which was originally passed under Clinton. The same bill also severely cut the Capital Gains tax rate which was a major reason Republicans supported it. The tax credit helped the poor and the reduction in Capital Gains meant massive wealth retention for the rich.
Notice the amount of revenue being reduced on both ends. The poor aren’t paying and getting a subsidy and the rich pay less and less. Of course this has also allowed wages to stagnate in light of inflation. When all your poor workers get a cash infusion every Spring you can afford to pay them less throughout the year. Many low wage earners scrape along throughout the year, robbing Peter to pay Paul, not really making it. Then about February or March they get their tax ‘return’ and they’re able to pay off delinquent bills and in some cases make large purchases, like a washing machine or a down payment on another dilapidated car.

The business owners have had their tax rates lowered and because the subsidies exist they can get away with paying their workers a lower wage and not be viewed as running some kind of sweat shop or racket. They’re benefitting from the tax system but the worker who can’t afford to go to the doctor or dentist, let alone save any money is ‘mooch’ because they get a few thousand which they then spend on the things they need and perhaps yes, a pleasure or two.[iii]

And now we’ve reached a point where the credits have become so expansive that many are exempted from the burden of income tax. 
Obviously these people pay into the system in the form of sales taxes, property taxes, gasoline tax etc… and certainly Social Security. The money they receive in the form of a ‘refund’ is not coming from the same account. As I said before in that case it’s actually a subsidy.

But again these people are made to feel guilty, but when sports teams receive millions in tax subsidies and breaks to build a new stadium, that’s okay. When the owners sell the team that has increased in value due to the new stadium and pocket the profits…that’s okay too? Somehow that’s not cashing in and taking advantage of tax dollars?[iv] And certainly these businessmen are not ‘mooches’ or parasites when they employ the government via ‘Eminent Domain’ to remove any property owners who are hindering their plans?
They can use tax money to line their pockets but the person claiming a child tax credit is somehow the mooch?

As is usually the case, these issues are complicated and the media’s tendency is to simplify them. This is especially true for those who argue from the Right or so-called Conservative view point. Often half-truths are told and deliberately done so to obscure a larger truth. Also the history of the present tax and economic situation is subject to historical revisionism and in many cases the truth is flushed down Orwell’s Memory Hole. This has been especially true with regard to what happened during the now mythologized Reagan years. Demagoguery rules the day and to find out the truth you need to turn off the television and start reading, something few Americans are inclined to do. And frankly, we’ve reached a point in which I believe few Americans are even capable of grasping these things.[v]

What can we do? Weigh the issues, learn the truth, and understand something of the mess. None of us are going to fully grasp the magnitude of what happens in the American economy. I certainly do not. And to be honest, even if we’re able and apt, most of us lack the necessary time. But I think it’s good to know something and perhaps enough not be taken in by the propaganda flowing from both camps.
But again, as I’ve often said, we live in a world of lies and deceit. I expect the world to manipulate the truth and call good evil and evil good. But Sacralism has made the ‘Church’ drunk on power and the danger today is that we have a myriad of deceivers running about proclaiming lies to be the truth and declaring man-made systems of thought and social philosophy as ‘Biblical’. They teach it on the radio and in the pulpit, they write books and they appear on television shows run by people that care nothing for the truth and are happy to manipulate the Kingdom of God to their own ends.

Most of my critique is pointed at the Christo-American Right. If I lived among the Christians in Britain I would probably feel more compelled to speak against the Left. Both sides are wrong and yet since the United States currently possesses world hegemony I think the greater danger is here and in what the Christian-Right promotes.
If I lived in the Middle Ages I (like Chelcicky) would attack the so-called Christian Feudal System. If I lived in Latin America I would attack American Imperialism in the form of Globalism (as I do now) but then I would also have to critique Liberation Theology. I’ve met so many Christians who scoff and shake their heads in wonder and disgust at the very notion of Liberation Theology which seeks to synthesize Christian and Marxist elements. It’s so blatantly syncretistic and thus anti-Biblical. Agreed. But then they fail to see they’ve done the same thing by fusing the teachings of men like Locke, Smith, Rand, and others with the Biblical teaching and in end are guilty of the same syncretism.  Liberation Theology and Free Market and/or Imperial Theology are in the end the same corruption.

As Pilgrims, we’re never part of the Establishment. The Establishment wields both hard and soft power and it’s something we must eschew, especially the tactics employed to gain and maintain it. In that sense, we as Pilgrim Christians are always on the Left. We’re always critiquing the status quo. This of course is where these terms of Left and Right break down and cease to have meaning. Few today seem to realize the Reformation historically was on the Left, opposing the Conservative Catholic establishment.  And yet they didn’t go as far as the ‘radical’ wing of the Reformation, the extreme ‘Left’ found among the Anabaptists.

Many today think of the Left as being anti-individualist and anti-Nationalistic. Insofar as that’s true, then indeed we need to be somewhat oriented that way. There are aspects of Right-wing, Conservative, or Establishment thinking we can never embrace under any circumstance. But obviously the present-day Left goes too far embracing and promoting many things a Christian cannot endorse.
Where does that leave us? Watchful vigilant pilgrims, maintaining and proclaiming truth in a world of lies.

[i] Eating at a pizzeria the other night there was one of those shows on the television where people bring in old items and have them appraised. And then there’s some silly drama about the price negotiations. Time and time again we were struck by how many people didn’t understand the value of objects or how retail economics work. If the object was appraised at $100, they thought the retailer should give them $100 for it and we quite shocked when the retailer wouldn’t offer them more than $50 or $60 for it.

[ii] Personally I’m against congregations incorporating under 501c of the US Tax Code. I don’t think churches need to possess special buildings, bank accounts, or any of it. And thus I don’t believe in the tax exemptions. The church is not a bureaucracy or institution. There doesn’t need to be anything to ‘account’ for in terms of the government. This of course is a complete rejection of the majority of church models, institutions and frankly aspirations of much of American Christianity.

[iii] I’ve certainly known some of the people who go out a buy a big screen television. For some of them, they are defeated and humiliated. They’re in a dead end and they know the system has beaten them. They know they’re never going to get anywhere and will always be but a paycheck away from catastrophe. So for some of them since they’ll never be able to afford to do the things they want or hope to do, it’s almost as if they’re saying. “You know what? Who cares? At the very least I’m going enjoy my beer on Sunday afternoon while I watch the baseball game on my big television.”
Is it responsible? No. But contrary to Thomas Sowell and others, the $500 for the television will not turn their lives around if used to pay off some late bills. In the end it makes little difference. As Christians we can perhaps have a different perspective but to expect unbelievers to think otherwise is a pipe dream.

[iv] That’s largely how George W. Bush made his money. His oil ventures were a failure.

[v] Fred Reed demonstrated this with regard to foreign policy in an entertaining read that can be found at: http://www.fredoneverything.net/Abroad.shtml


Jamie said...

It's also interesting how many Evangelicals pride themselves on not accepting any subsidies, as if it makes them Holy or something. I would agree that truly they cannot escape it. I know a professing dairy farmer who actually rebels against Paul's instruction in Roman's 13 by not paying the mandated fee to sell raw milk. His antinomian argument is that since he doesn't accept any gov't subsidizing for his farm he shouldn't have to pay that fee. I'm sure that many professing would sympathize w/ him here, but the simple fact remains that he is in sin and should repent. PRIDE

Protoprotestant said...

Yeah I think we can all make a million little arguments and justifications along those lines.

Our society is corrupt and at some level it is impossible to comply with every last regulation.

But in the case you cite, that's deliberate and yeah, there's definitely a spirit of rebellion and pride.

I'm hardly suggesting our government is good or moral but to set aside laws like that (even if in this case they're pretty minor) is to say the authority is invalid. It's to say these powers that be were not ordained by God and I don't have to follow them.

It's difficult of course because there are times we must disobey. But paying a fee on milk is probably not one of those times.

Of course how many taxes would I like to skip? I don't use the 'services' of the US military, despite the lies they tell us. I wish I didn't have to pay the taxes that support them.

But like the Christians of the early Chuch. They paid their taxes to a Roman system that was waging war, building pagan temples and paying the priests who ran them.

Quibbling over taxes belies other theological issues bubbling beneath the surface.

I see a red white and blue flag with a cross emblazoned on it.

Know what I mean?