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Monday, May 17, 2021

Anti-Transparency in United States Taxation... and the Solution!

By LUDWIG VON KOOPA - A bad day, but it doesn't have to be that way.

Normally, April 15 is one of the worst days of the year, since it represents Tax Day in the United States. That's the day Americans needed to have filed their tax returns to the Internal Revenue Service, which involves a lot of time spent divulging very personal information to an abusive government that often violates its citizens’ civil rights. This year, Tax Day was delayed by a month to May 17, so KoopaTV's annual (besides last year, apparently!) tax rant got to be delayed!

This year, I'll focus on the lack of transparency. I want to return to the subject of KoopaTV's last tax day article from 2019, about how then-presidential candidate Kamala Harris deliberately conflated size of tax returns with your tax rate. As the article explained, the size of your tax return is really up to you, but the most financially sensible thing to do would be to have a return of zero—that means throughout the year you paid exactly what the government decides you owe it and nothing more. Anything above that—a tax refund—is giving the government an interest-free loan of your money. It's more wise to have your money throughout the year kept in your paycheck.

Yet, Kamala Harris got rewarded for assuming that the American people are dumb. Yeah, she got pwned in the primaries, but look at her now! She actually got elected to be VICE PRESIDENT of the United States. How'd that happen? Well, I'll ask you: Do you know what your effective tax rate was in 2017? 2018? 2019? 2020? It's not impossible to calculate, but it does take a bit of effort, and you can only really know it months after the year is over. Lots of people don't know. But things like progressive taxation (your marginal tax rate increases the more money you make) make it more opaque if you're paying more money year-to-year because tax policy has changed or because of your own actions.

A lot of people truly don't know that what Kamala Harris said was problematic, and that's because the lack of transparency in the system is a feature.

Federal government Uncle Sam paycheck withholding tax refunds drawing
Source: How 9-9-9 The Movie portrays paycheck withholding.
(The government giving your own money back to you after hours of paperwork, and making it seem like a favour.)

Along the lines of a lack of transparency is the issue of inflation. I don't mean inflation “art” (which seems to plague the Koopalings’ awful fanbase), but when there's too much currency in an economy and not enough goods and services to spend that money on. Last month—April 2021—the inflation rate rose at the highest rate in over a decade year-to-year to 4.2%. That's an average number—you look at specific goods and you might get concerned. For example, the government reports, “The index for used cars and trucks rose 10.0 percent in April. This was the largest 1-month increase since the series began in 1953[.]” The cost of food increased. Gas is way up. (“The gasoline index rose 49.6 percent over the last 12 months, its largest 12-month increase since the period ending January 2010.”)

Now, you don't get to see these price increases marked out on your store receipts, but they're happening in many industries except ones with fixed prices like the videogame industry. (But to make up for that, you get more and more pricey DLC.) This is actually a hidden tax, because the increased money supply is due to government action. The government creating more money is reducing the purchasing power of your savings and earnings, which has the effect of a tax. Not having rarely-precedented inflation is one of those “Republicans have a lot of good reasons to vote against the American Rescue Plan Act” I mentioned two months back. A spending bill as big as that for an economy as close-to-normal as America's is is bound to bring some bad effects. Politicians like inflation because they get to talk about how great their spending is, while hiding the consequences of all of that extra money from the American people because it's not a line item on their bills. Despite the inflation tax, you'll still see Joe Biden going around claiming he won't raise taxes on the middle class—we knew before he became president this wouldn't come true.

What can be done about this lack of transparency that affects Americans’ finances without them knowing it? Well, while the inflation bit will require another solution (like tying the currency to gold and electing politicians who will spend money responsibly), Americans can do something about the income taxes. They can abolish the income tax entirely (along with the payroll tax, capital gains tax, corporate income tax), and replace it with a national consumption tax. There's a plan out there called the FAIRtax that does just that, which adds a “prebate” to all American households based on household size, which particularly helps impoverished households not have a regressive spending burden. This would end reporting your income to the government and filing a tax return on April 15 (or May 17). Your taxes will be paid when you buy something, and it'll always be the same rate. Very good transparency.

It's supposed to be non-partisan comprehensive tax reform. Unfortunately, those efforts are only being pushed by a select few Republicans, because it seems like nearly all (and in the case of the current Congress, literally all) Democrats are more than content with insidiously growing their power through non-transparent government funding and the social manipulation that the tax code allows. Many Republicans also enjoy social engineering with the tax code for their favoured conservative causes. As Jamie Dupree noted a month ago for the Atlanta Journal-Constitution, the number of cosponsors (all Republicans) for the FAIRtax legislation is getting less and less with every new Congressional session, and interest is waning.

It certainly doesn't help that FAIRtax champion Herman Cain has died. According to Americans For Fair Taxation chairman Steve Hayes, “Herman was a supporter of The FAIRtax and was looking forward to taking a very instrumental role in working with President Trump in his second term to enact true tax reform, The FAIRtax.” ...You may also note that President Donald John Trump does not have a second term.

Unfortunately, that likely means Americans will continue suffering for years and years to come under the tax day regime. And worst of all, they may not even realise there's a problem.

Thanks for coming to this videogame commentary story ran by Koopa Kingdom to hear about the tax policy of a different country in an entirely separate universe. KoopaTV appreciates it.

In 2022, Ludwig believes the IRS and the tax code is too big and complex and can't be run effectively.

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