““The wages of sin are death, but by the time taxes are taken out, it’s just sort of a tired feeling…”
is a 30+ year new media development pioneer & differentiator who served several years in the US Peace Corps. His earliest political memory is arguing the merits of RFK, McCarthy, and Humphrey on the playground with his 2nd grade classmates in West Lafayette, IN. Ask him about his avatar (or maybe not).
It’s tax season. Which, as the Tax Foundation will tell you, means it’s whatever day in whatever month you’re reading this–it’s always tax season, especially for the millions of small businesses that are the true engine of our economy. But while deficits are a constant topic of political discussion, one of the significant contributors to them, tax evasion, is conspicuous in its absence from the dialog. To be fair, who wants to bring IRS karma onto one’s head by talking about it? We believe in karma, especially the IRS variety that will fall on you if so ordained, whether you’ve actually done anything wrong or not (let alone done what the guy just ahead of you on the fiscal highway did, officer), so we’re not going to call out the non-compliant, nor chastise the agency for not collecting from them. But it’s both the elephant and the donkey in the room.
The reality is that our tax system has always been at least somewhat voluntary. Don’t believe us? Just ask the current occupant of the Oval Office. Cheating on your taxes has been a time-honored American tradition dating back to colonial days, when houses like yours truly’s were built to have all fireplaces merge into one chimney (because the number of chimneys you had was used by tax collectors as an indicator of your wealth), and in an age of armies of one, this is increasingly so. As of 2010, the IRS estimated that it was losing an average of $458 billion a year due to tax evasion, and this does not include the $32 trillion the International Monetary Fund and others estimate the super-wealthy have hidden away in offshore tax havens. We looked in vain for updated figures from the IRS–for some reason, they’ve apparently decided it’s not a good idea to keep publicizing these numbers.
Not-so-stupid accounting tricks aside, the agency has been hamstrung by two other phenomena. One is the rise in self-employment, both the full-time, often involuntary type as companies increasingly shed the “liabilities” of employees and replace them with contractors (in many cases the same people, but without benefits), and the multitude of participants in “the gig economy” who are working 2-3 side jobs to make ends meet. There’s no withholding on self-employed income, which, sure as spring, results in nasty accounting surprises that our fellow citizens will do whatever they feel is necessary, by any means necessary, to literally paper over.
They might even feel, with some justice, that they can do more and better for their country with the money that’s being asked of them than the government can or will. It doesn’t help that the moment the typical start-up gets its head above water, so often the government takes all the surplus its proprietors hoped to plow back into the business to pay taxes on the rest of their income instead. Then, when the economic roller coaster all small businesses ride inevitably plunges–often, at least in part, as a result of the investments in infrastructure and scale they were unable to make–and these prospective entrepreneurs can barely pay basic expenses, there stands the government, again, with its hand still out.
Beyond this, the more complex forms the self-employed fill out (instead of just e-filing a simplified 1040 like they used to) bring them a lot closer to big boy country where deductions/avoidance are concerned, but usually not as close as they think–ask any IRS agent whether there’s really a “creativity crisis” in our country. Often those who employ contractors, rather than employees, forget to file 1099s on what they paid them, most accountants–in the face of the crush of more complex returns they’re dealing with–don’t have time to do more than run whatever the little people give them through TurboTax and check for obvious red flags, and the newly self-employed, in particular, are completely overwhelmed by the 70,000+ pages of tax code they’ve just stepped into.
Meanwhile, Charybdis for our faithful collectors has been the open hostility of the Grover Norquist wing of the Republican Party that until very recently held sway, which has resulted in cuts to the IRS budget of more than 20% since 2010, even as its responsibilities have increased and its working environment has become more complex. The Republican repeal of the individual mandate in the Affordable Care Act, which the agency was saddled with enforcing (without additional funding to do so) promised to provide some relief, but the complexities of the Republican tax cut of 2017, especially with respect to pass-through income, appear to have pulled the football away just before the collectors got a chance to kick us for old times sake. Not to mention that, into this environment of fiscal climate change, the government shutdown dropped a blizzard of 5 million pieces of unsorted mail it’s estimated it will take the government 12-18 months to dig out from.
Thanks to Lois Lerner (or, more accurately, grotesquely effective misrepresentations of what she did by the dark money right) the agency can’t really go after anyone where there’s as much as the tax on a $11,400,000 estate‘s worth of potential politics involved (ahem, including bloggers). Even a puny (by social media standards) tax rebellion organized in response would overwhelm its increasingly meager and stretched resources. Think a Democratic takeover is going to reverse this? Suuuuure, the Dems plan to stay in power by increasing the number of tax audits that fall on the heads of their supporters, big and small (ok, since it’s the Democrats, we’ll admit that’s not as improbable as it sounds, but…).
So what is a beleaguered, but noble government agency (endorsed by Jesus Christ himself) endowed with unlimited powers–providing it can keep the power on–to do? Well, let’s go back to the beginning: our tax system is largely voluntary, and increasingly so. When someone gives you something they don’t really have to, what are you supposed to do?
That’s right: thank them.
We understand that right now, as we speak, an IRS compliance officer is reading this in a branch office somewhere in Florida (Tampa, if you must know), feeling like each one of his/her cells has been transported to a separate sun to burn for all eternity, or maybe imagining themselves falling into the Seine.
But keep reading, pale kings and queens, and hear us out.
Fear and intimidation don’t work, not in the 21st century, probably never as well as you thought they did. Unfortunately, when a CEO who rules by fear (e.g. Al Dunlap, Robert Crandall, Jack Welch, Harvey Weinstein, or others on this list) flames out or is quietly retired, they usually aren’t hot tickets on the lecture circuit, and even when they are, they don’t tend to share any of the ways they went wrong. Even the poster child for fear-based management, Steve Jobs, is the exception that proves the rule. When he was a tyrant, Apple tanked and he got open-apple-deleted. When he started collaborating with and listening to people (even a little bit), we got the Apple we know today.
And speaking of today–and tomorrow–we can tell you, because we raised them, that shock and awe is really not going to work on the generation behind us (now the largest voting bloc in the country, by the way). They’ve already got that peaceful, easy feeling, they know what freedom really means, and can see the hot, dry day their taxes are saving up for. Treating them with respect, on the other hand? Let alone as the future the rest of us were put on earth for? That might just throw them for a loop.
Repeat after us: Humility is strength. Gratitude is strength.
Humility means being grounded, looking up at others high on the tightrope being buffeted by every breeze, and wishing for their own sakes that they would fall. Gratitude means acknowledging and appreciating all the people and forces that give you the strength to do better. And if you’re so hard-bitten a revenuer that we’ve become too sub-human to think of us in this way, let it also be added that it really is easier to catch arthropods of all kinds with honey than vinegar. So let us be your Cyrano for a few precious moments:
Once again, let’s begin at the beginning, with how you address us.
Really? Is that all we are to you? A source of revenue? And are you not a taxpayer too?
How about “Dear Fellow Citizen” instead? Better, right? Though still a little cold, so if you have access to detailed data on our political leanings, interests, and proclivivites–and we assume you do–you might want to go for some additional personalization, e.g.:
- “Dear Comrade” for lefties
- “Dear Patriot” for wingnuts (yes we know, liberal friends, but whatever works, right?)
- “Dear Valued Customer” for red state Americans
- “Dear Platinum Member,” for those who’ve contributed $100,000 or more/year (we’re pretty sure those who’ve pay $1,000,000 or more already know what their benefits are)
- “Dear Victim,” for those you’ve determined have a particularly black sense of humor
And so on. Don’t address us by our real names, though, no matter how many marketing experts tell you it raises response rates–in this case, they may not be responses you want. Besides, most of the time the names you know us by no one who really knows us ever calls us anyway. Which doesn’t mean you should start data-mining for our nicknames.
The Hard Part
Next comes the hard part, so do what your parents told you (they do have parents, friends) and get it over with.
Tell us how thankful you are.
Trust us; like a tough workout, it’s going to hurt so good, and leave you on a high so euphoric, you’ll be thinking it’s got to be illegal. But we know it’s going to be a challenge for at least a few of you fonzarellis, so here is a template you can use, free of charge, as long as you don’t audit us for taking it as a deduction:
Thanks so much for your recent tax return. Everyone pays taxes, of course, even the poorest among us, but not everyone takes the time and effort to help us figure out how much of a contribution to the common good they ought to be making, let alone actually follow through.
We know you know that unless you have withholding on all your income and claim no deductions, our tax system is largely voluntary, built on mutual trust, and we appreciate your trust in us. You could have underreported your income, exaggerated or claimed deductions you weren’t entitled to, even hidden your money away where we couldn’t find it, but you didn’t. [we know, we know, collectors, but believe us, assuming the best of people, rather than the worst, is surprisingly powerful, and really, what (more) do you have lose?]
We’re also aware of how challenging our tax code has become–believe us, those 70,000+ pages cause us plenty of headaches too [it’s ok to be vulnerable–remember how well “I feel your pain” worked for Clinton, before he was caught with the intern under his desk]–and that you’ve expended tremendous time and expense, neither of which you may be able to afford, to get us your information [fun fact, we spend nearly 9 billion hours a year–that could be spent growing your pie–filling out your forms instead].
In fact, we can say we know, without exaggeration, that while it may not involve the same risk of life and limb, the sacrifices you’ve made to both report and contribute to the cause of the country we all love and share are often as daunting as they are for those who serve. You are a true patriot, and [insert your own heartfelt words about how grateful you really are–if stuck, try to imagine what you’d say to someone who just saved your life, because like it or not, that’s what we’ve been doing, year after year after year].
And that’s it. Not so hard, right?
OK then, since we know you’re doing your completely thankless jobs because you’re patriots who want to serve (no sarcasm intended, really), now comes the fun part, where we get to work together against our common oppressor, and show that what we just wrote for you, and you for us, can literally add up to a lot more than words…
Breaking It Down
In a survey not too long ago, a representative sample of Americans was asked how much of the federal budget they thought went to foreign aid, and what percent they thought should be spent on it. We, the people, said we thought 20% of our tax dollars were going to help other countries, whereas the amount we thought ought to be allocated to this purpose was 10%+. The actual amount we spend on foreign aid is less than 1%. That’s right; it’s not only in our own households where we have no idea where the money’s going.
So tell us. Each. If I’ve paid $10,000 into the US Treasury this year, tell me how much of that, in my dollars, not percentages, is going to defense, to health & human services, to environmental protection; run down the whole list of cabinet-level interests one by one. And don’t forget interest on the national debt; in fact, break that down a bit more for us, so that we know how much of our hard-earned money is going to the Chinese government, the Japanese government, foreign investors, the 1%, and others eating our pie chart because your bosses couldn’t keep their fiscal pants zipped.
That alone is probably enough to get people like me fully petechial, but for most Americans, it’s probably still too abstract. So take what technology is giving and drill down to the concrete. You’re sending us a letter, not volumes 3-1000 of the Mueller report, so we know you can’t tell us where every fraction of our two cents is going, but with a little social media data mining (we hear there are Cambridge Analytica employees looking for work), you should be able to figure out the parts of the budget each of us is most likely to be interested in, and focus in on those in the letter you send us each.
If it’s “too soon” for that (post-2016, the new 1984), you could brush aside those silly checkboxes you include (yes, we’d like to give a dollar to mom and apple pie, because if we don’t, no one else will, we say bravely) and use that space to ask us directly what we’d most like to know. In fact, when Congress finally gives you the wherewithal to go fully electronic, you could link out from the 1040 to a long list of viewing options we can choose from. In the meantime, there’s nothing stopping you from including a URL, right?
Make a virtue of the reality that the federal budget is so vast you won’t be able to tell us everything about anything, no matter how narrow you make the focus. If a lot of us are interested in clean energy, send us each different snippets, different factoids you’ve pulled from the federal maw. We’ll get together and trade them like Bazooka Joe bubble gum jokes, Snapple bottle cap facts, or fortune cookies, and that’s what you really want: us talking to each other about what you’re sending us. You want to be the water cooler during May sweeps month; you want us looking forward to this letter every year like it’s the Wells Fargo wagon, not a letter from Wells Fargo.
And have fun. Any of us who have gotten other letters from you know you’re angry, have scores to settle. If you’re tired of the wealthy throwing that 70,000 page book at you, tell us how much each of us are paying for the hedge fund managers using the carried interest loophole, including the resulting national debt interest, or how much we end up paying every time some hustler gets away with paying no taxes on a $400 million estate. If you despair at seeing so much of what you work so hard to collect wasted, let us know how much we’ve paid, and will continue paying, for defense industry profits “earned” during the Iraq War.
Going Full Monty
At this point, you’re probably thinking that if you send a letter like this out, personalized to each of us, it won’t be long before there’s a revolution afoot. At least some of the founders would say ‘and about time, too.’ They’d be cheering you on from memorials all over the country. No less than Ben Franklin would firmly have your back. Still, we know some of us have given you good reason to be skittish about being the messenger, and, not to be outdone by the junior senator from Massachussetts, we have a plan for that.
Did you know mental health questionaires given to new psychiatric patients regularly ask whether the sufferer has difficulty doing their taxes? No doubt you know that “fear of filing” is a real, significant problem (some of your “clients” won’t fill out the paperwork even after you present them with whopping bills that assume they have no deductions whatsoever), that there’s substantial case law in which mental illness has been considered a valid defense against tax charges, and that mental health issues such as major depression and bipolar disorder are regularly deemed reason to reduce or eliminate tax penalties.
If you know much, if anything, about mental illness, you know this isn’t just malingering or excuse-making; there’s something about the process that literally drives people crazy. Let us explain it to you. For many of us, doing taxes feels like walking on the edge of a knife, in bare feet. On the one hand, we don’t want to get audited, and most of us have the conscience or patriotism required not to want to cheat, either. On the other hand, strapped as the average American is, for the sake of our families or businesses, we don’t want to pay a penny more than we have to, especially not when we see the big boys who run the government for their own fun and profit regularly paying you much smaller percentages of what they make and own than we do, despite the so-called “progressive” tax code. Nobody likes to be played for a sucker or a chump, and among the world’s peoples, Americans probably like it least of all.
So here’s what we think the next section of your letter should tell us. You know how much we each make. You know the categories of deduction we each take. You know, or certainly ought to, the average amount taxpayers are claiming as deductions in each category. If you went truly electronic, you could greatly expand those deduction categories to include the full range of valid 21st century expenses we report, in the language that 21st century taxpayers actually use to describe them. But meanwhile, statistics 101 says that with 129+ million returns efiled so far in 2019 alone, you really ought to be able to tell us–easily–what the average person or average business in our income range claims as deductions in each category, so that we know what’s reasonable to claim, what you’re generally considering acceptable, and, especially, what our fellow Americans in the same part of the boat are deducting.
You may be thinking if you do that, the net result will be even less revenues, because all that will happen is that those who have been claiming little or nothing in various categories will belly right up to the lines you’ve drawn in what they claim going forward. That could happen in some cases, for sure, but leaving aside that most of us are honest–if we weren’t, we’d likely be making a lot more money–it’s hardly the only epiphenomenon you can expect, and most of them are good for all parties.
First of all, you’d earn a huge reservoir of good will from taxpayers everywhere that would likely increase your general rates of compliance–we’re a lot more compliant when we don’t think we’re being played by you (and by less honest citizens), or feel as if every year were a salary negotiation with someone we can’t see and who can’t see us. Transparency is always the best policy with the American people–we’re known around the world for this, at least we were. Second, believe it or not, some of those who are making wildly extravagant claims–too many, in fact, for you to chase with the limited resources you have–are actually likely to worry or feel pangs that cause them to lower their claims going forward, when they see where they stand.
Third, there are a wide range of things we claim that we’re not supposed to. You tell us collectively what these no-nos are, at least for those with the perspicacity to drill down and parse your website, but we suspect most Americans who take such deductions anyway figure they’ll make them now, plead ignorance later, especially since, in all likelihood, they have friends and colleagues who have done likewise who haven’t been called on it because you’re so overwhelmed. Telling everyone who deducts the cost of their wardrobe, for example, that the average person didn’t deduct for this at all tells that individual (and their families, for those aren’t really the CFOs of their households) they are doing something out of the ordinary, perhaps even uncool from a peer perspective, and you and they both now know it, without having to bring down far more hammers than you actually have access to.
More generally, you can expect that knowing what everyone else is claiming, knowing what we need to do to ‘fit in,’ is likely to result in your getting more and more predictable, regularized returns. Wouldn’t this make it a lot easier and less costly for you to process them, as well as pick out the folks who really need to be flagged?
But if you’re still worried, there a couple of additional steps you could take that really ought to get you over:
- Tell us the medians, rather than the average/mean amounts being claimed. Almost by definition these numbers will be lower (because outlandish outliers, all on the high side, will no longer be able to skew them). And medians also likely better reflect what we care about–what most of our peers are doing.
- Tell us what you think is reasonable, irrespective of what the numbers say. Along with the mean/medians you’re reporting, this will provide double-notice to those who are above the lines that winter may be coming.
The People’s Code
When you start collecting statistics on what people are claiming and for how much, you’re likely to start seeing patterns that your bosses really ought to know about, in particular things that maybe should be deductible even though they aren’t, because so many of us are acting as if they are or should be. Which would hurt from a revenue perspective, except that we’re also pretty sure there are plenty of deductions for wealthy individuals and big corporations buried in those 70,000+ pages that you think are obscenely inappropriate mutants of the incestuous coupling between greed and power.
So to close the deal with your new friends–that’s us, the people–the last part of the letter we get each year from you should have two elements, joined like Jesus and Barabbas. The first should be a loophole you’ve found that you think is particularly egregious. In fairness, let the lobbyists who slipped it in provide a few sentences of defense–after the previous sections of your epistle, we could all use a good laugh. The second should be something you think ought to be deductible instead.
We realize the second part may be tough for you, so here are a couple of ideas, just to kick things off:
- Make gym memberships–and their use–deductible. Given the costs of the obesity epidemic, this one should pay for itself a lot more easily than tax cuts for the wealthy. People will abuse it? You mean ordinary folks will get to do what the wealthy have been doing for decades? Don’t you think all of us deserve the chance to get smart? Besides, you can cap the deduction, and make it contingent on actual use of the facility at a specific frequency or higher. That doesn’t mean giving us–and yourselves–another form to deal with; it just means you reserve the right to spot-audit our claims with the gyms we say we belong to, like you do for any other deduction. It wouldn’t take much of a reduction in the 70% of health costs that go to treat chronic illnesses (almost none of which you get your hands on today, because we deduct it as medical expenses, leaving you to try and get it out of doctors and their accountants instead–lol) before this one could have you rolling in revenue enhancements.
- Make time, not just money, spent on philanthropic activity deductible. Why should only those who can afford to give charities cash be rewarded for their good works, especially given that every hour we spend on philanthropic activity makes the job of the government that much easier and less costly? As with the gym deduction, you can cap it, based on hours, and require us to provide documentation from the charity, if asked, just as you do for other in-kind contributions we make. Put some power back into philanthropy’s hands that Republicans (hypocritically) took away, give us the bandwidth to really answer JFK’s charge, and we’ll try make you the last in line to answer the Peace Corps.’
Maybe the increase in the standard deduction in the 2017 tax act makes ideas like these irrelevant to you. On the other hand, maybe the Democrats come fully into power, and ideas you’ll have put out there to 120 million+ taxpayer households gives them even more incentive and momentum to totally gut that bill, which we know you hate. Or maybe you make some of the changes you propose tax credits, not deductions, just to show all those EIC filers whose side you’re really on. In any case, you’d ask us to vote, to make a choice: the existing loophole or the new deduction you propose. Maybe even ask us for ideas, now that the Obama adminstration finally shook some sense into the Paperwork Reduction Act (but shh, ixnay on telling the current administration).
Don’t think we’re up for this level of involvement? Then you might want to check out the rapidly growing Participatory Budgeting Project, through which more than 400,000 of your fellow citizens are already working together to directly determine how more than $300,000,000 in government revenues should be spent in twenty-nine cities. That’s a lot more involvement going on than reading an entertaining, enervating letter that will be opened and read because of who it’s from, then just asking us to check a box or two in reply.
You’ve Got This
Even if you like everything we’re proposing, you’re probably thinking: we can’t do this. Yes you can. How the tax code is interpreted and enforced is in your hands. If the Supreme Court can take simple, clear, declarative sentences in the Constitution and twist them to mean whatever they want, you can surely go to Tampa on 70,000 poorly written, deliberately obfuscatory pages of tax code, creating or killing whatever deductions you want too. They talk about Deep State? They can’t handle Deep State. You’re not air traffic controllers–nobody wants your jobs and they’re apparently a lot harder. You may say, we don’t have the money or the technology to create letters like these. But the technology is already there, and has been for years, and the letters will pay for themselves literally in days or weeks, since all our money goes through your hands before anyone else gets their mitts on it. You’re already down at least $500 billion a year, and that’s just what you know about. In the all-too-mortal words of the tax-cheat-in-chief, what do you have to lose?
Actually we’ll answer that and tell you. If you listen closely you can hear it, whispered in libraries, sotto voce in coffee shops and diners, by otherwise unassuming middle-aged, middle class men and women in forgotten towns, like the one I live in: “Why should I be paying this when none of the money goes to anything I want it to?”, “The whole system is rotten to the core,” and “I’ll pay when he pays.” Yes, we’ve heard all these things said and more in the last year, by quiet people who keep to themselves.
Below these tiny ripples, one can’t help but wonder what’s stirring–the ancient cross-currents that induced the birth of our nation, perhaps?
And wouldn’t it be the kind of twist of fate one imagines God enjoying, even getting a good belly laugh out of, if the second American revolution, like the first, had taxes at its core?
But this time was led by the tax collectors.
Part of our 21st Century Citizenship series
Creative Politics synthesizes the best of liberal and conservative ideals with technology and history to generate policies, strategies, applications, and actions for the post-modern era that are well outside the beltway, and well beyond just talk. All Creative Politics blog posts are collaborative, living documents, the way Madison and Hamilton would create them if they were writing The Federalist today. We welcome, nay urge, your feedback in the comment/discussion section below, and will be using it (with credit) to make what you just read more and more real–thanks much for your time and insights; they will go unpunished!