Obama's True Aim: Not the Deficit Reduction

but rewriting the US tax code so that it is "fair".

Reuters' article quotes Obama at a news conference at G20 in Toronto, saying he is serious about reigning in the huge US budget deficit (i.e. deficit incurred by his government).

"I'm serious about it," Obama said when asked at a news conference at the Group of 20 summit in Canada if he believed he could meet his deficit reduction goals.

No plan, no anything, but he is serious. He even challenged people who want deficit reduction (i.e. his government actually cutting spending), basically saying "You want deficit reduction? Oh yeah? Watch me do exactly that, and you'll regret it."

Oh wait, he has a plan, if you look at the opening sentence and the very last sentence of the article:

Obama also said that he believed a review of the "messy and unfair" U.S. tax code should be considered as part of a plan to deal with long-term budget problems.

"We've got to look at a tax system that is messy and unfair in a whole range of ways," Obama said.

Oh no... Most American taxpayers know the US tax system is a mess with a huge bureaucracy (IRS) gaining more and more power (latest via the health care so-called "reform"), and they know it needs to be changed.

Sound familiar? Just like health care. Majority of Americans knew the nation's health care system needed change, but they were and still are against the particular "reform" proposed by the Obama administration and passed into law by the supposed representatives of American people in Congress.

So my guess is that his "plan" is to scare people by proposing to cut or partial default on "entitlement" programs, and then when people cry foul propose vastly raise taxes to cover his spending and rewrite the tax code as he sees fit to justify the tax increase.

Shake and bake. Or never waste a crisis, and if you don't have a crisis create one.

You can bet Obama has his own definition of "fairness". Like raising taxes for the so-called "rich" so that the hard-working public union employees can retire with multi-million dollar pensions.

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Small Plane Crashes into IRS Building in Austin, Texas

That's after the pilot of the plane had set fire to his own house.

UPDATE: Man Sets House On Fire, Then Crashes Stolen Plane Into Austin Office Building (2/18/2010 KWTX.com)

"AUSTIN (February 18, 2010)—CNN is reporting that a man set his house on fire Thursday, stole a plane from the Georgetown airport and then crashed the aircraft into a multi-story building in Austin that houses Internal Revenue Service offices.

"CNN reported that NORAD launched two F-16s out of Ellington Air Force Base in Houston after the crash “out of an abundance of caution.”

"The plane was registered to Joseph Andrew Stack, the Federal Aviation Administration told an Austin TV station, whose house in north Austin burned Thursday morning.

"A neighbor rescued a woman and a girl from the burning house, according to Austin media reports." [The article continues.]

(... Oh wait, if that was his plane it wasn't a "stolen" plane as the headline indicates, was it?)

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Prepare To Pay Back Tax Credit and Be Penalized

Zero Hedge has an article ("Prepare To Pay Back The Tax Credit", Tyler Durden, 11/16/09) that has a link to the report dated November 4, 2009 by the Treasury Inspector General for Tax Administration (TIGTA).

I took a quick peek at the report titled Millions of Taxpayers May Be Negatively Affected by the Reduced Withholding Associated With the Making Work Pay Credit, and here's what I found [emphasis is mine]:

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WHY TIGTA DID THE AUDIT

The Making Work Pay Credit, a provision of the American Recovery and Reinvestment Act of 2009, will apply to most taxpayers with earned income. The credit will be in effect for Tax Years 2009 and 2010. The Making Work Pay Credit was implemented using new income tax withholding tables issued by the Internal Revenue Service (IRS). Application of the tables could negatively affect a significant number of taxpayers. The overall objective of this review was to assess IRS efforts to implement the Making Work Pay Credit and to evaluate its impact on taxpayers.

IMPACT ON TAXPAYERS

The Making Work Pay Credit is to be advanced to taxpayers through their wages by a decrease in Federal income tax withholding. This creates the vulnerability that some taxpayers may have their taxes underwithheld at the end of Tax Years 2009 and 2010. If taxpayers are advanced more of the Making Work Pay Credit than they are entitled to, they may ultimately owe taxes when filing their Tax Years 2009 and 2010 tax returns and may be assessed estimated tax penalties.

WHAT TIGTA FOUND

Based on an analysis of Tax Year 2007 tax return data, TIGTA estimates that more than
15.4 million taxpayers could unexpectedly owe taxes for Tax Year 2009 as a result of the Making Work Pay Credit.

TIGTA’s analysis of the new withholding tables and the amount of the credit that taxpayers are to receive identified taxpayers who would be advanced more of the credit than they were entitled to receive. The changes to the withholding tables do not take the following situations into consideration:

• Dependents who receive wages.
• Single taxpayers with more than one job.
• Joint filers where one or both spouses have more than one job or both spouses work.
• Individuals who file a return with an Individual Taxpayer Identification Number.
• Taxpayers who receive pension payments.
• Social Security recipients who receive wages.

More than 1.2 million taxpayers included in these groups may be subject to: 1) paying back some or all of the Making Work Pay Credit and 2) being assessed the estimated tax penalty or an increased estimated tax penalty as a direct result of the Making Work Pay Credit.

RECOMMENDATIONS AND IRS RESPONSE

TIGTA recommended that the Commissioner, Wage and Investment Division: 1) increase media coverage and consider other forms of advertisement in addition to the mediums already being used and, to the extent possible, target these communications to taxpayers who may be adversely affected by underwithholding as a result of the Making Work Pay Credit, and 2) authorize the use of the withholding tables that were in effect prior to the enactment of the American Recovery and Reinvestment Act of 2009 for pension payments to help prevent a significant number of pensioners from being negatively affected by the Making Work Pay Credit. The IRS agreed with Recommendation 1 and disagreed with Recommendation 2.

----------------------------------------------------

So the IRS would rather collect tax penalties from pensioners and wage workers.

(Remember, if the health care bill passes in any form, it will be IRS who will be in charge of health insurance coverage compliance under the direction of an unelected appointee (Health Choices Commissioner, or whatever he/she will be called).)

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Health Care Bill Will Empower IRS

(Be sure to check out other health care "reform" posts on this blog.)

as if IRS needs any more empowering. Supporters of the administration's health care "reform", is that what you want?

Health care reform means more power for the IRS
(Byron York, 9/2/09 Washington Examiner)

"There's been a lot of discussion about the new and powerful federal agencies that would be created by the passage of a national health care bill. The Health Choices Administration, the Health Benefits Advisory Committee, the Health Insurance Exchange — there are dozens in all.

"But if the plan envisioned by President Barack Obama and Congressional Democrats is enacted, the primary federal bureaucracy responsible for implementing and enforcing national health care will be an old and familiar one: the Internal Revenue Service. Under the Democrats' health care proposals, the already powerful — and already feared — IRS would wield even more power and extend its reach even farther into the lives of ordinary Americans, and the presidentially-appointed head of the new health care bureaucracy would have access to confidential IRS information about millions of individual taxpayers."

"The presidentially-appointed head of the new health care bureaucracy" is none other than the Health Choices Commissioner, which is defined in Subtitle E Section 141 of H.R. 3200 heath care "reform" bill. Not just him/her/it, but people working in that bureaucracy would have access. And the Commissioner would not be accountable to anyone but to the president.

The article continues:

"Under the various proposals now on the table, the IRS would become the main agency for determining who has an "acceptable" health insurance plan; for finding and punishing those who don't have such a plan; for subsidizing individual health insurance costs through the issuance of a tax credits; and for enforcing the rules on those who attempt to opt out, abuse, or game the system. A substantial portion of H.R. 3200, the House health care bill, is devoted to amending the Internal Revenue Code of 1986 in order to give the IRS the authority to perform these new duties.

"The Democrats' plan would require all Americans to have "acceptable" insurance coverage (the legislation includes long and complex definitions of "acceptable") and would designate the IRS as the agency charged with enforcing that requirement. On your yearly 1040 tax return, you would be required to attest that you have "acceptable" coverage. Of course, you might be lying, or simply confused about whether or not you are covered, so the IRS would need a way to check your claim for accuracy. Under current plans, insurers would be required to submit to the IRS something like the 1099 form in which taxpayers report outside income. The IRS would then check the information it receives from the insurers against what you have submitted on your tax form.

"If it all matches up, you're fine. If it doesn't, you will hear from the IRS. And if you don't have "acceptable" coverage, you will be subject to substantial fines — fines that will be administered by the IRS."

and determined by the Health Choices Commissioner.

The section of H.R. 3200 this article mentions that would amend the IRS Revenue Code of 1986 is this:

TITLE IV--AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
Subtitle A--Shared Responsibility
PART 1--INDIVIDUAL RESPONSIBILITY
Section 401 TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE.

(a) In General- Subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new part:

`PART VIII--HEALTH CARE RELATED TAXES
`subpart a. tax on individuals without acceptable health care coverage.
`Subpart A--Tax on Individuals Without Acceptable Health Care Coverage
`Sec. 59B. Tax on individuals without acceptable health care coverage.
`SEC. 59B. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE.

The above is the cut and paste from the actual bill as posted on the Library of Congress THOMAS.

Now, this Section 59B defines the penalty tax if you don't have the coverage, and also lists exceptions. That alone makes an interesting and frustrating reading, but the section that has to do with IRS comes right after Section 59B. It's Section 6050X. (So... that's after 59B? There must be some higher order of reasoning behind numbering that I just can't perceive.) You can see, with some effort, that the information that the Washington Examiner writer gleaned out for his article is basically correct. [emphasis is mine, comments in Italic]

`SEC. 6050X. RETURNS RELATING TO HEALTH INSURANCE COVERAGE.

`(a) Requirement of Reporting- Every person who provides acceptable coverage (as defined in section 59B(d)) to any individual during any calendar year shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to such individual. [This is the insurer part of the deal. Your insurer will have to file a report with IRS.]

`(b) Form and Manner of Returns- A return is described in this subsection if such return--
`(1) is in such form as the Secretary may prescribe, and
`(2) contains--
`(A) the name, address, and TIN of the primary insured and the name of each other individual obtaining coverage under the policy,
`(B) the period for which each such individual was provided with the coverage referred to in subsection (a), and
`(C) such other information as the Secretary may require.

`(c) Statements To Be Furnished to Individuals With Respect to Whom Information Is Required- Every person required to make a return under subsection (a) shall furnish to each primary insured whose name is required to be set forth in such return a written statement showing-- [Then your insurer has to issue you a statement of your coverage so that you can file with your tax return. And these two'd better match.]

`(1) the name and address of the person required to make such return and the phone number of the information contact for such person, and
`(2) the information required to be shown on the return with respect to such individual.
The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.

`(d) Coverage Provided by Governmental Units- In the case of coverage provided by any governmental unit or any agency or instrumentality thereof, the officer or employee who enters into the agreement to provide such coverage (or the person appropriately designated for purposes of this section) shall make the returns and statements required by this section.'.

(2) PENALTY FOR FAILURE TO FILE-
[This segment refers to the specific sections in the IRS Revenue Code to be changed. To see what kind of penalty awaits the insurer and you, you'd better have a courage to dig through the IRS Code.]

How to prevent tax cheating? That comes in the following sections under Sustitle D, particularly Section 453:

Subtitle D--Other Revenue Provisions
PART 2--PREVENTION OF TAX AVOIDANCE
SEC. 451. LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS
SEC. 452. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE
SEC. 453. PENALTIES FOR UNDERPAYMENTS

(a) Penalty for Underpayments Attributable to Transactions Lacking Economic Substance-

(1) IN GENERAL- Subsection (b) of section 6662 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (5) the following new paragraph:
`(6) Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.'.

(2) INCREASED PENALTY FOR NONDISCLOSED TRANSACTIONS- Section 6662 of such Code is amended by adding at the end the following new subsection:

`(i) Increase in Penalty in Case of Nondisclosed Noneconomic Substance Transactions-

`(1) IN GENERAL- In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting `40 percent' for `20 percent'.

`(2) NONDISCLOSED NONECONOMIC SUBSTANCE TRANSACTIONS- For purposes of this subsection, the term `nondisclosed noneconomic substance transaction' means any portion of a transaction described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return.

`(3) SPECIAL RULE FOR AMENDED RETURNS- Except as provided in regulations, in no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified by the Secretary.'.

So, the section is saying that if IRS thinks there's is not enough disclosed, it would double the penalty, whatever the penalty currently is in that particular section in the IRS Code.

I can really see now that the government is indeed trying so hard to blow as many bubbles as possible to resuscitate the economy. It is already successfully blowing and growing the bubble in government-sponsored and subsidized subprime lending. Cash for clunkers "worked" well enough for the first week of the program; it achieved the result of bringing the sales forward, if that's what they wanted to achieve just to get 3Q GDP into green.

But the most tantalizingly promising bubble is the bubble of fast-growing, self-replicating and self-referencing bureaucracy. If the administration manages to pass its health care "reform", climate change bill (aka cap and trade) and vast financial "reform", imagine how many people can be employed by government agencies to be created! And to think we will be asked to participate in these grand schemes by paying for them!

I highly recommend that you go to the linked article and read the entire article. If the townhall meeting is still ongoing in your area, ask about this IRS further intrusion into private life. The last thing I wanted to quote from the article:

"In either scenario, the IRS would be the key to making the system work. Before you could receive any subsidy, whether through the IRS or not, the Health Choices Administration would have to determine whether you are eligible for it. To do so, the bills under consideration would give the Health Choices Commissioner the authority to demand sensitive, confidential information from the IRS about individual taxpayers. The IRS would have to provide it.

"Under current law, it is a felony for a government official to release taxpayer information in all but the most limited of circumstances. One such exception is for law enforcement; the IRS is allowed to give taxpayer information to prosecutors in criminal cases. The information can also, in some instances, be released to the Social Security Administration and the Veterans' Administration for the determination of benefits. The health care bills would change the Internal Revenue Code to permit the IRS to give similar information to the vast, new health care bureaucracy."

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IRS Wants to Tax Use of Company Mobile Phones

Where there's a need, a DIRE NEED (such as a gigantic budget deficit and equally gigantic spending plans), they will find a way, ANY WAY.

The Internal Revenue Service wants to tax your cellphone that you get as part of your company benefit.

Tax Man's Target: The Mobile Phone (6/12/09 Wall Street Journal):

"The use of company-issued mobile phones could trigger new federal income taxes on millions of Americans as a "fringe benefit," spurring efforts by the wireless industry and others to kill the idea.

"The Internal Revenue Service proposed employers assign 25% of an employee's annual phone expenses as a taxable benefit. Under that scenario, a worker in the 28% tax bracket, whose wireless device costs the company $1,500 a year, could see $105 in additional federal income tax.

"The IRS, in a notice issued Monday, said employees could avoid tax liability if they showed proof they used personal cellphones for nonbusiness calls during work hours. The agency also could decide on a set number of phone minutes as "minimal personal use" that would be untaxed."

Or the employers could use a statistical sampling to determine the percentage of typical personal use of a corporate cell phone.

Bud the IRS is only enforcing the existing law, mind you.

"Under a 1989 law, workers who use company-provided mobile phones for personal calls are supposed to count the value of those calls as income and pay federal income taxes accordingly."

But,

""The idea that you should keep a log saying, 'I made a call saying I will be late for dinner again,' that's a totally cumbersome and burdensome requirement that most employers and employees are not going to comply with," said Jot Carpenter, vice president of government affairs for CTIA-The Wireless Association, a trade group of cellphone-equipment manufacturers and service providers."

"Wireless companies also argue the IRS rule is outdated. Rates have declined so dramatically in the past decade -- with night and weekend calls free under many plans -- that it makes little sense for the IRS to assess employee benefits by nickels and dimes."

"John Harper, the mayor of Rowlett, Texas, said his town wrestled with whether to declare as worker income a portion of the 100 cellphones provided to city employees, but decided it was too much work.

""I'm all for collecting taxes for the government," he said, "but let's not end up costing us more to do it than the tax you ultimately collect.""

Mr. Harper, I totally agree with you. But you're forgetting something. The IRS would rather have the tax money that they currently do not have at all, even if that means possible decreased usage of corporate cell phones that will lead to possible decreased revenues at cell phone companies which will result in less corporate tax revenues for the IRS. A government agency is not known for thinking about a rippling effect of its action. Besides, all the trouble of collecting the usage data and preparing the paperwork, that's taxpayers' problem, not the IRS's problem.

So another tiny step for the United States to be more like those sophisticated (read "rigid", if you like) European countries. Another leeway (the government sees it as "loophole" for "cheaters") is being possibly closed.

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