According to today’s Wall Street Journal (March 3rd 2009), Mayor Kirk has agreed to pay nearly $10,000 in back taxes, in an attempt to clear up tax related issues. WHAT?
Part of me wants to jump on the bandwagon and deride President Obama who ran on a platform of “change,” honesty, and transparency, for nominating 4 people to posts who were guilty (or heavily suspected) of tax infractions.
But I paused and in the spirit of hope and change, optimism and warm fuzzy feelings, I choose to look at this issue differently. Assuming that Mayor Kirk is a good guy, what really is the problem here? According the the WSJ, Mr. Kirk had speaking fees (honoraria) donated to his alma mater for a scholarship fund. That seems nice enough, right? Mr. Kirk and his PAID TAX PREPARER thought that since the money was sent directly to Austin College, that he wasn’t responsible for tax liabilities. Well, it turns out that the IRS isn’t as logical and since his income was high enough to LIMIT charitable giving, he owed on the contributions.
So in this case a few odd things:
- There is a limit to how much charitble giving you can have, and this is based on your income
- The tax law is so complicated that a tax expert and a mayor (who happens to also be a lawyer) didn’t understand this part of the tax code.
Our government seeks to punish the generous, that seems ridiculous. In this time of “fiscal crisis,” the President is calling for us to sacrifice and abandon “old-style” politics, so that he can pass massive partisan spending bills. Maybe we should also abandon “old-style” tax collection, administration and codification. That’d be change I can believe in.
What hope does this give to the rest of us who attempt to do our own taxes? If Mayor Kirk has run afowl of tax issues and his tax preparer have run afowl of tax issues, might we all be guilty of failing to comply with tax law? Well, i’m thinking that if we’re all probably guilty of failing to pay taxes, then we should save ourselves the hassel of paying taxes at all. Wait, until you’re nomincated to serve in public office, the the opposing party will hire a forensic accountant to determine that you are a tax criminal. At least then you’ll rightfully be one.
I’m not advocating that you consciously and systematically avoid paying taxes. However, with a tax code as complicated as ours, it’s quite likely that you are already some level of tax criminal. Ignorance of the law is no excuse, so maybe it is incumbent upon us to higher the best tax advisers to assure we’re following the letter and spirit of the law. But isn’t that too high a compliance burden? Yes it is.
When your elected officials, your chief executive, create a set of laws that we are all doomed to fail within in, we have a problem. This tax code insures that if we fail to comply with orders, the prosecution can pursue some sort of tax indictment, (or keep you from a cabinet post) and bully you into compliance (or resignation) by accusing you of tax avoidance. We’re all guilty of tax fraud, it’s just a matter of time or a matter of convenience. How Al Capone of us!
Nice blog, Michael.
I agree that the IRS’ tax laws are mindnumbingly complicated. However, my knowledge of the AMT (Alternative Minimum Tax) which most individuals making between $100K-$500K (1 in 5 Americans) per year pay and which severely limits their tax deductions to a bare minimum to not-for-profits, is not that of a junior partner in a part-time accounting firm. That being said, I understand that an individual is not allowed to accept any honorariums for speaking and then give them to a not-for-profit without declaring them as income first. This is from Accounting 101 (which even I haven’t had to take).
Ignorance of the law seems to be quite a culpable position for all of Obama’s Cabinet lately!