Tuesday, February 3, 2009

Tax problems and a practical solution

With Daschle becoming the third Cabinet nominee to face surfacing tax issues, I find myself asking the simple question: why hasn't the IRS clamped down on this issue? There must be a senator tax loophole that the general public isn't aware about.

As far as whether this is egg on the face, I'm still sort of deferential - Obama's plans are to revamp Washington and obviously the roots of the problem are deeper than he thought. Change takes time - these blips are bringing awareness to a problem, which is part of the solution. It makes you wonder how many other senators aren't paying their fair share of taxes.

Obviously nobody likes paying taxes. Contrary to popular myths, most people do pay their taxes. It's just that the system helps those who know what they are doing. Times are changing though. Considering that a significant portion of commerce passes through the internet tax free, I suspect that there will be a closer look at how Uncle Sam can get his paws in on that action. In the meantime, and in an effort to put more people to work by professionally handling tax returns, I offer this unvetted suggestion.

Any certified accountant must handle a certain number of indigent or pro-bono cases a year. Easier said than done, but here are my thoughts as to why this may be a good long term idea. First, more people would be disposed to explore accounting as a career, whether at a private firm or for a public company like H&R block. This will put (at least in the longer term) more people to work. This can be paid for through tax credits for the accountant or accounting firm based on X number of cases taken. Second, there is a chance that with more people reporting their taxes, revenue will go up. I don't think it would be because people are necessarily paying more than they should, but I think that more people would be inclined to file (partly because of my third reason). Audit a higher percentage of people that do not have an accountant to pay their taxes. This would require more auditors to be hired. I'm not sure how this isn't done more with computer technology now but maybe it is and the auditing system is just underreporting. The increase in auditing would also generate income because those who are coming up short (or significantly short in the case of Daschle's $150,000 plus deficit) are going to pay the price.

I will have to give this idea more thought, but it can easily be done at the state level. If Delaware can come up with a good template, we certainly have a connection in the federal executive branch now that can pass our good suggestions along.