Tag Archives: irs

A Question for Joseph Stack

Apparently, Joseph Stack flew his plane into an IRS building, out of concern that the Treasury Department was stealing from the middle class.

If Mr. Stack thought the right bomb, in the right place, at the right time could change the policies of the Treasury Department, why didn’t he fly that bomb into Mr. Geithner’s office?

Perhaps he hoped enough paperwork would be destroyed by attacking the bureaucracy that others would be sympathetic to future attacks on the Treasury Department?

Certainly a small-scale attack on the IRS bureaucracy will not lead to any change in policies in the way a successful attack against the Treasury Secretary would. However, it would be interesting if CNN or other news outlets follows up on this in one year, and reports the number of businesses that were not audited because of this act of terror.

Protecting Retirement Savings

Supreme Court rules IRAs can be shielded from creditors,” CNN, 4 April 2005, http://www.cnn.com/2005/LAW/04/04/scotus.bankruptcy.ap/index.html.

Sometimes a kind policy and a wise the same thing. This is one of those times.

The Supreme Court on Monday ruled that creditors may not seize Individual Retirement Accounts when people file for bankruptcy, giving protection to a nest egg relied upon by millions of Americans.

The unanimous decision sides with a bankrupt Arkansas couple fighting to keep more than $55,000 in retirement savings. As a result, IRAs now join pensions, 401(k)s, Social Security and other benefits tied to age, illness or disability that are afforded protection under bankruptcy law.

IRAs should not be treated any differently because the benefits are tied to people’s age, the court said.

I can’t comment on the points of law, but this is a great decision. It is important to raise America’s savings rate, and retirement savings is a great way to do this. However, if individual retirement accounts were subject to bankruptcy seizures, less people would use them. If creditors could take them, this would increase their risk and decrease their attractiveness.

With this decision, the Supreme Court furthers a 21st century economy. Centrally controlled pension systems have had this protection for decades. Now individual investors also share in their benefits.

Revenge

Bush Plan Could Imperil Tax Write-Off for New York,” by Ian Urbina, New York Times, http://www.nytimes.com/2004/12/27/nyregion/27taxes.html?oref=login, 27 December 2004 (from Democratic Underground).

A dish, best served cold.

As the Bush administration looks to revamp the tax code, New York officials say they are particularly worried about one idea being considered: eliminating the federal deduction for state and local taxes.

If the president pursues this plan, New York State would lose about $37 billion per year in federal tax deductions, more than almost any other state, according to Internal Revenue Service data. The change would affect about 3.2 million households in New York, three-quarters of which are middle- and low-income, tax records indicate.

This change would be one of the worst things for New York to came out of Washington in a long time,” said Senator Charles E. Schumer. “But if they take this route they can expect a serious fight.”

But there’s more to this than financially punishing blue-staters.

Weirdly, the U.S. tax system encourages states to adopt income tax, by making money individuals pay to states in income taxes deductable from their national income tax debt. Why the government would wish to depress the marginal willingness to work of Americans is a question best left behind in the dark FDR error. Happily, the Bush administration is looking to modernize this. President Bush is promising to push a simpler, pro-growth tax code, and removing the income tax deduction would be a great first step.