Sunday, June 14, 2015

Civil Disobedience - Tax Divison

Obamacare and Student Loans; will the two cause massive civil disobedience as far as taxes are concerned?

The IRS has historically relied on voluntary compliance. For many years that has been around 82%. One reason has been the reputation of the auditors and well publicised consequences for not complying.  

In recent years the IRS has cut back on the number of auditors. My snarky take is they were cutting into the bonuses of the senior administrators plus the pain in the ass of actually supervising them.

People who are in default of their student loans lose both their tax refunds and any social security benefits until their loans are current. Many of these debtors have no hope of repaying and cannot clear them through bankruptcy. Add possible penalties for not having health insurance, and the only incentive for filing is fear of the consequences of not filing. Wonder how many are just saying, "Fuck it"?

Small business owners are getting squeezed by the health insurance mandates. The first response is making everyone part time. The risk assessment is staffing and productivity headaches versus going out of business. Say they go rogue, let all their employees claim ten dependents, and not pay into the system the money they withhold for social security and medicaid. They are betting the employee won't file a tax return. What is their risk assessment? Go under right now or face a potential dire outcome somewhere down the road? Another strategy is to bend some rules and make everyone a 1099 independent contractor. Again, the risk assessment. Stay in business now and hope to slip and evade in the future or go out of business now.

My guess is that already suspect 82% will go way down, tax revenues will go way down, and our economic death spiral will get worse. A good picture of our economy.

As always, YMMV.


Momma Fargo said...

You are giving me a headache. I am just trying to wait out this administration but I fear we might hit rock bottom first. Ugh.

Well Seasoned Fool said...

This administration hasn't helped. The removal of the firewall between commercial banks and investment banks was what doomed us. Courtesy of the first family of banking, the Bushes.