By Jim Bowman
I posted that last night on Facebook, and sure enough, this morning my feed is filled with people who don't know shit about taxes retweeting the stupid opinions of other morons who also don't know shit about taxes. This is just as annoying as last week when these same idiots all suddenly became Constitutional Scholars. Or the month before that when they were all experts on use of force laws and police tactics. Or the month before that when they suddenly got their epidemiology degrees from the University of Internet and turned into infectious disease experts.
It's a problem, he's got that right.
Of course the comments are all about the "morality" of paying your "fair share". Which isn't how any of this works in real life. Just stop it with your vapid hot takes already. You clearly have a child-like grasp of a complex topic, and your words are making America dumber.
Oh yeah. Enough virtue is being signaled out there to save the whole human race from perdition.
As a former accountant, please allow me to explain why all of today's newly formed tax experts are fucking morons, and we should metaphorically put a brick in a sock and beat them over the head with it until they shut up.
I'm going to keep this blog post simple. I'm not going to get into any of the specifics of the leaked Trump taxes. Why?
- We don't know how full of shit the NYT is, and you don't do taxes based on rumors and innuendo. You do taxes based upon financial statements and the company's books.
- This shit is super complicated and my happy ass is retired and likes getting paid more money to write books instead of reading through thousands of pages of IRS regs.
First off, "morality" doesn't have jack shit to do with taxation. You pay what you legally owe. Nobody willingly pays the government more than they legally owe.
This has always been this way since America has had income taxes. There is endless court precedent. You pay what you legally owe. That's it. If you pay less than you legally owe, then the government will fine or imprison you. If you pay more than you legal owe, the government will laugh and laugh, because you are an idiot, and you deserve to be poor.
Every single person who barks about how somebody else should be paying more? They themselves are paying the minimum they can get away with. As they should. As should you.
Case in point:
I remember when I was taking my first tax class back in college. This class was all accounting majors by this point. At the beginning of the semester the professor (who'd had a long career as a tax guy) gave us an imaginary family as our clients and had us do their taxes. One kid didn't take advantage of all the obvious deductions for his clients. When the professor asked why, the kid said some mushy thing about how he didn't think it was FAIR to keep that money from the government… Holy shit. The professor ripped this kid a new asshole. HOW DARE YOU!?! IT IS NOT THE GOVERNMENT'S MONEY! IT IS YOUR CLIENT'S MONEY. YOU OWE THEM YOUR BEST! IT IS YOUR SACRED DUTY TO SAVE THEIR MONEY! YOU DISGUST ME AND YOU SHOULD NEVER BE A CPA!
That class was one of my favorites.
Don't you love it?
Basically, you pay what you owe, no more, and anyone who claims otherwise is full of shit.
. . . "loopholes" is a term most often used by people who don't understand accounting or tax law, to complain about how somebody else used the existing laws created by congress to pay less than what that person thinks is "fair." Regular people have heard the bullshit term loopholes tossed around so much that they start to believe that it is some magical easy button that rich guys can just push that makes it so they don't have to pay taxes.
Nope. They're just laws. These "loopholes" exist because at some point in time congress (both democrat and republican both!) decided that they wanted to promote some type of behavior or discourage some other behavior. So they basically put a reward into the law saying if you do this thing we like, you'll pay less taxes! Or the opposite, congress wanted to discourage some behavior, so if you do that thing we don't want, it will cost you more.
A Republican thing, right?
Both sides have done this forever, state and federal. We want you to drive electric cars so if you buy an electric car you get a tax break this year. YAY! Uh oh, we want you to stimulate the economy by buying this kind of machinery faster, so you have to depreciate your assets this other way or you'll pay more! BOO! You get a discount for paying your employees health insurance, YAY! Oh, wait… Not that kind of health insurance. BOO!
So on and so forth, up and down, these perks come and go, all based upon whatever behavior congress is trying to promote at that time (or what favors they are doing for their friends). Why was mortgage interest deductible? Because at one point congress said "we really want people to own houses!" Even regular people have things that are considered "loopholes" to somebody.
So when the blue check mark journalism major (who probably dropped out of PoliSci because "there's too much math") declares that it is immoral that some rich dude didn't pay his fair share because he used loopholes, those are basically a bunch of meaningless buzz words strung together to prey on the feelings of the gullible.
Which unfortunately is a lot of people.
Joe Biden has been making shit like this up for forty something years now. Congress meddles in business and your personal lives to try to steer outcomes. And as a result the tax law just keeps getting bigger and bigger, and more complicated and confusing, until it is the bloated leviathan we have today.
How big is the US tax code? NOBODY KNOWS! (and I'm only partially kidding with that answer, because there's thousands of pages of actual laws, and I don't think anybody can actually pin down how many thousands of pages there are of supporting documentation and IRS regs and findings that translate those broad laws into the nitty-gritty real world application accountants have to deal with).
A "bloated leviathan," he says.
It is this complexity that makes it hard to figure out what anyone actually owes. The more complicated your affairs, the more of these laws you run into, the more "loopholes" you may be able to take advantage of. . . . .
Let me give you an example. I can't remember the exact details because this was over 20 years ago, but when I was getting my accounting degree we learned about this challenge someone did, where they got something like a hundred different tax preparers, ranging from Big 5 (back then) firms, medium size firms, small firms, individual CPAs, TurboTax, H&R Block, the works… to do the taxes of the same hypothetical family of five. This family had a small business, some investments, some rental property, so on and so forth, but nothing super complicated. Then they had the hundred different preparers do their taxes… And they got a hundred different answers of what they owed that year. And each of those answers could be argued as being correct… And yet each of those answers could also be determined as wrong by an IRS auditor.
Which brings us to today, with people freaking out about how Trump allegedly didn't pay taxes for 10 out of 15 years and how that's UNFAIR. Assuming that the anonymous tip isn't total bullshit—and this is the New York Times we're talking about and they love to just make shit up—and that the information is accurate (which means that whoever leaked it committed a felony, but that's a whole different discussion)… my answer is so?
Is it plausible that a billionaire paid no taxes for a period of several years? Yep. Totally. See all that stuff I wrote above about the complicated tax code and how it is an accountant's sacred duty to take advantage of all the stupid laws congress has passed to save their client's money? Pretty much that. It has happened many times before, and it will happen many times again.
. . . Coming up from this author, what's "really unfair about our tax system" and where Trump comes in . . .
Answer Book 2019
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