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Numbers are a sure way to deflect attention from an unappealing political proposal.
Packaged with generalizations, a number means little without context. If I can’t understand or empathize, I’m less inclined to see myself in what you’re building. Down the road, I’m either disengaged or I react negatively.
It’s especially tough with taxes; there’s a general feeling that we can’t have much impact. As a result, it appears changes proposed by the Biden administration will slip through without the necessary scrutiny.
The problem is that we continue to make it cheaper for some of our wealthiest citizens to get tax exemptions
Tax laws tend to contain complexity, unfamiliar terms and huge numbers, plus many layers and levels between you and the myriad laws intended to protect you. That’s the problem. It shouldn’t be so difficult.
One suspicious element of the proposal is addition of a tax reporting threshold of $600 for funds flowing through bank accounts. (In response to critics, the amount was raised to $10,000.)
Proponents insisted the requirement will aid the IRS in catching super rich tax cheats. Further, the Biden administration insists the change would only affect those who earn more than $400,000 per year.
Many opponents call this a violation of privacy. That makes for sexy headlines, and those fears shouldn’t be discounted.
However, this might be a bigger issue: The requirement carries a hefty price tag, probably shouldered by consumers. That cost could in turn prevent lower income consumers from opening accounts.
How will the IRS use the information? Let’s say artificial intelligence exists to search for tax-evading financial activity (there isn’t, but let’s pretend). Who will investigate leads? What’s the threshold for prosecution?
Current regulations require U.S. financial institutions to consult with the Office of Foreign Asset Control to weed out any individuals or groups who violate the economy, foreign policy or national security. Further, institutions must report suspicious transactions and daily aggregate transactions of $10,000 or more.
This means individuals’ financial information is subject to government scrutiny. Supporters of the proposal say it ensures the “super rich” will pay their fair share.
Let’s say a “fair share” means we each pay a required percentage of our respective earnings, excluding reasonable exemptions. Billionaires are the “super rich.” “Very rich” means you earn $10 million or more per year.
Proponents of the tax changes rely on a widespread assumption that the super rich don’t pay their fair share. They also rely on the assumption that few will read the proposal; it allows for use of the step-up rule and capital gains exemptions that will effectively continue tax benefits similar to those currently received by the super rich.
Meanwhile, the proposed changes will increase taxes for the very rich; analysts estimate some will pay 50 percent of their income in federal taxes alone.
Some insist the very rich can afford it. That doesn’t explain why the super rich get a break we’re told they’re not getting. If these changes are supposed to bring equity to our income tax system, I’d call this a red flag.
Paying taxes isn’t bad. Neither are financial regulations. Taxes fund society. Regulations balance the scales.
The problem is that we continue to make it cheaper for some of our wealthiest citizens to get tax exemptions. And when we make noises about fixing the system, we tend to create more regulations and attendant obstacles and costs.
The average consumer bears the burden and expense. You experience this when you open a checking account, apply for a loan or move money from a 401k to an IRA.
True tax reform would make it easier for the average person to understand personal finances and navigate a system that truly protects their interests.
Karris Golden is a Gazette editorial fellow. Comments: firstname.lastname@example.org