You bet and right here in America.
One would think you would pay tax only once on income in the land of free and fair but think again. The IRS loves to tax money twice and you’re probably paying tax on money that was already taxed, as well.
We’re talking about dividends, inheritance and a host of other “gotchas” implemented by the IRS so they can grab and grab again.
Dividends are those checks you receive from stocks you own. The company whose stock you bought made a profit and paid its income tax on that profit and that money the IRS gladly gobbled up.
But now the company pays you from what’s left over in the form of a dividend check. So guess what? The IRS says now you owe them even more tax on what you received. You accept this as fair but stop and think for a minute. How many times can the IRS tax money from money that was already taxed?
As many times as the law allows apparently.
This double taxation is repeated in many areas. Your parents worked hard and made some money and paid tax on every penny, yet when they die and leave that money to you, the IRS wants to tax it again. If your parents earned any of that money from dividends, the company that paid your parents paid tax, then your parents paid tax then you did again. It has now been triple taxed. If you then leave any of that money to your kids they will tax it yet again.
Why we put up with this is anyone’s guess. We are well trained to accept whatever they dish out and as long as Washington gets its share, they probably won’t change it. If we do some simple math, pass the money around enough times and the IRS will get almost every cent of what was earned by everyone. Quite a racket if I do say so myself. And how much is it costing us to figure out how much we owe?
The Tax Foundation estimates the cost of compliance for individuals is 2.8 billion hours, or $110 billion; the cost for businesses exceeds 3.1 billion hours or $148 billion; and the cost for nonprofits come in at a whopping 141 million hours or $6.8 billion. I’ve seen estimates as high as one half a trillion annually and that doesn’t include the cost of the new health care compliance.
Even more unpalatable, in a paper just out from Matthew Kerkoff of Financial Sense, the U.S. has the highest corporate tax rate of the industrialized world so U.S. corporations face a very high corporate tax rate. Unfortunately, wrote Kerkoff, many are extremely good at not paying it.
In a recent report by the Citizens for Tax Justice, they looked at the profits and federal income taxes of the 288 Fortune 500 companies that were consistently profitable in each of the five years from 2008 to 2012. Here are some key takeaways:
• As a group, the 288 corporations examined paid an effective federal income tax rate of just 19.4 percent over the five-year period — far less than the statutory 35 percent tax rate.
• Twenty-six of the corporations, including Boeing, General Electric, Priceline.com and Verizon, paid no federal income tax at all over the five year period. A third of the corporations (93) paid an effective tax rate of less than 10 percent over that period.
• One hundred and eleven of the 288 companies paid zero or less in federal income taxes in at least one year from 2008 to 2012. In the years they paid no income tax, these 111 companies earned $227 billion in pretax profits. But instead of paying $79 billion in federal income taxes, as the 35 percent corporate tax rate would seem to require, these companies generated so many excess tax breaks that they reported negative taxes; in other words they made money by filing their taxes.
In conclusion, something appears extremely out of whack when it comes to our tax structure, the cost of compliance and the ultimate result in who is paying what.
ts way past the time where we should seriously consider scrapping the whole mess and looking at a simpler and less costly way of paying taxes and making sure the burden is equally shared by all.
This article expresses the opinions of Marc Cuniberti. he hosts “Money Matters” on KVMR FM 89.5 and 105.1 FM on Thursdays at noon and syndicated on over 30 radio stations throughout the U.S. His website is www.moneymanagementradio.com.