Now that I got that ISIS rant out of my system last week, I can get back to saving our economy. This week I want to focus on the income tax. Let's be honest, we all hate paying the income tax, but we love all of those government services at the same time. For instance, we all want America to have the best military in the world. We don't all agree on how big the military should be, but we all want to be safe. We all love the interstate highway system, even if some of us around here would gladly go back to two-lane travel to Memphis if it was construction free. All of us except the wealthy who don't need them like Social Security and Medicare.
Most of us agree that our income tax system is way too complicated and needs to be reformed, but that's not going to happen any time soon. That's because our tax code, as written, benefits the wealthiest Americans more than anyone else, and they are the people who donate most of the money to political candidates. Politicians love to brag that they can't be bought, but I've never heard one say that he couldn't be rented.
Candidates all talk about reforming the tax code, but one thing I never hear any politician talk about is making the IRS do a better job of collecting the income taxes that people actually owe. Year after year the government loses billions of dollars just because the IRS fails to collect them efficiently. From 2001 to 2011 it's estimated that the IRS failed to collect $3.44 TRILLION in income taxes. Think about that for a minute. Our national debt, that's at $18 trillion and counting, would be more than 3 trillion less if the IRS had simply done it's job better.
In 2006, if the IRS had done it's job, the government would have ended the year with a surplus instead of a deficit. That year the deficit was $248 billion. Uncollected income taxes that year were estimated to be anywhere between a low of $35 billion to a high of $600 billion.
We lose anywhere from $40 billion to $70 billion in income taxes legally through off-shore tax havens. Unfortunately, that's not likely to change. That's because those off-shore accounts are held mainly by our wealthiest citizens, and as I pointed out above, they make sure those tax havens stay in place.
So, who's doing the cheating?
It's not the people living on a paycheck. The IRS gets its cut of that money before they do. It's not the wealthy. They have that friendly tax code, CPAs, and tax attorneys that allow them to avoid taxes legally. It's the self-employed and small business owners who do most of the cheating on income taxes. You know, the same guys that Republicans and conservatives keep telling us will save the economy if Uncle Sam will just get off of their backs.
When it comes to the economy, as Ronald Reagan was fond of saying, the government isn't the solution, it's the problem. In one column I showed you how the government wastes money. In this one I've shown you how badly it does the job of collecting the taxes it needs to operate. If the government would do a better job in those two areas, our economy would be in much better shape. It's too bad that nobody running for President is talking about any of this.