Debunking 3 Myths About Paying Taxes

by Miranda Marquit · 86 comments

Around this time of year, some myths about paying taxes tend to circulate. These myths are different from the difficulties that might come with trying to figure out which deductions and credits you are eligible (and which are still available for you to take). The following three myths about paying taxes can mean serious problems with the IRS, but remember, these aren’t the truth:

Myth #1: You Aren’t Legally Bound to Pay Taxes

One of the most popular myths about paying taxes is that you don’t actually have to. Unfortunately, the 16th Amendment to the Constitution, the highest law of the land, says otherwise. It is legal for the government to levy income taxes, and you have to pay them.

Some of the confusion (intended or otherwise by those who would like to avoid paying taxes) arises from language that has been used in the past, referring to “voluntary assessment and payment.” Many officials have been quite clear in explaining that “voluntary” means that your figure out what you owe and then volunteer the information and the payment without the government coming to get it from you. Of course, if you decide not to volunteer the information, the IRS is likely to come and get it from you anyway. And maybe throw you in jail.

Myth #2: You Don’t Have to Report — And Pay Taxes On — Income Under $400

The confusion surrounding this myth arises from the fact that businesses don’t have to issue 1099-MISC forms unless they pay you more than $400. But that doesn’t mean that you don’t have to report the income. You do. The IRS expects you to report all of your income. This includes the $25 in interest you earned on your bank account this year, even if the bank doesn’t send you a Form 1099-INT. Make sure you are above board with your reporting, or you could find the IRS investigating.

If you are found to have neglected reporting some income, you will be penalized, and charged interest, on top of paying your back taxes.

Myth #3: If You Can’t Pay What You Owe, It’s Better to Just Not File Your Tax Return

The truth is that avoiding your tax return isn’t going to make things better if you can’t afford to pay what you owe. Many people who spent part of the year unemployed, or had some other issue, are finding that it is difficult to meet their tax obligations. However, not filing your tax return is a bad idea. There is a penalty assessed for “failure to file”, and it can be hefty.

If you don’t think you can prepare your return in time for Tax Day, you can file an extension. This gives you six extra months to file your tax return. However, you are still responsible for payment of what you owe, even though you haven’t filed your return.

The IRS isn’t completely heartless. If you can’t afford to pay your taxes, and you owe less than $25,000, you can arrange to pay in installments. The IRS offer loans with reasonable interest rates so that you make more affordable payments. You can even apply online.

There are plenty of other myths about paying taxes out there. If you have a question about paying your taxes, you can visit the IRS web site, or consult with a tax professional.

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{ 86 comments… read them below or add one }

Bargaineering March 8, 2011 at 7:53 am

I get emails all the time from people stating this law or that court ruling that seems to “prove” that taxes are illegal. It all seems a little silly.

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MoneyNing March 8, 2011 at 8:53 am

I’ve even seen a video from someone claiming to be a former IRS employee giving seminars about how paying taxes is unnecessary.

I wonder if they can put the person in jail for doing that. (Then again, with the IRS tax code so complex, who can blame anyone for misinterpreting it? :))

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Jenna March 8, 2011 at 12:56 pm

How can you believe Myth #1 – Isn’t that how they always catch bad guys? For tax evasion?

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Susan Liddy March 8, 2011 at 5:55 pm

Ah, well, I’ve gotta say that I wish those myths were true, but alas… they are not.
Everyone has to pay taxes.
That’s the only way that we as a community will have public schools and roads.

The tax that gets me though, is the one that says I have to pay SS for myself AND as my own employer. As a business on ONE… me, That doesn’t make any sense to me.

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Randy Lee March 20, 2011 at 6:47 pm

>> That’s the only way that we as a community will have public schools and roads.

This is not true. First of all, schools are supposed be funded from your property taxes, and roads are supposed to be funded from gasoline tax. But beyond that, the idea that the government must tax the citizenry to have money with which to pay for services that we need from them is not necessarily true. Productivity grows every year, and the money supply must increase to cover that growth, else we would have deflation. The money supply could simply be grown by having the government print the money it needs to pay for things. Of course, this would mean that government spending would be very sharply limited or else we would have inflation. Also the government wouldn’t need to borrow, but again, that would mean we’d have to mostly eliminate our gargantuan defense budget. Sounds like a plan to me.

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Frank July 12, 2011 at 12:22 pm

Productivity grows every year? Christ where have you been? We’re stagnant behind inflation and have been for some time

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Randy Lee July 12, 2011 at 12:38 pm

OK, Frank. I guess that I should have qualified that statement with this proviso: “In a sane world, productivity grows every year.” Sure our productivity may stagnant for the last couple of years thanks to the crash, thanks to the bubble, thanks to fractional reserve banking, but if we didn’t shoot ourselves in the foot with FRB, than, obviously, productivity would grow in a steady and predictable manner. Read the novel For Us The Living, A Comedy of Custom by Robert Heinlein. Then read the economic writings upon which it is based: Social Credit by Clifford Hugh Douglas. Everything you know is wrong.

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HugeBrainGuy June 9, 2012 at 9:32 am

Wrong. Regarding federal income taxes and state run public schools, it is true that most funding is from local sources. However, not ALL school funding is from state/local sources and not funding that is local is from property taxes. Laws and funding sources vary from state to state. In addition to federal title and program funds for public schools and local property taxes, some states fund their schools partially from lottery funds (a small portion) and STATE income taxes and/or sales taxes and so funding often comes out of general fund dollars. As for roads, not all infrastructure is paid for, or CAN be paid for from gas taxes. Gasoline taxes are not enough and infrastructure spending is supplemented from other sources include income taxes. Now, how about the military? How about homeland secuitry? It’s not free. If you want to live in a modern, secure, educated society, it costs money. You must pay your membership dues. I know the rich (the so called “job creators”–which is laughable) don’t like to hear that. And before someone starts whining about the rich paying all the income taxes (except many pay none) the bottom 80% of the population has only about 7% of the wealth.

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Jason Wreight November 6, 2012 at 2:26 pm

Onya Randy.
An American with more than three braincells!! A refreshing rarity!

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Jon the Saver March 8, 2011 at 6:16 pm

Haha, I wish myth #1 was true. I had a buddy who tried to convince me of that one back in high school. I laughed him off then challenged him to do it. I guess he wasn’t confident because he paid his taxes that year. Oh, the life of an idealistic young teenager.

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Wiseguy March 8, 2011 at 8:14 pm

Off the top of my head, I think the 1099-MISC threshold was $600, not $400. Not that it really matters. I’m just naturally a pedant. :-) This year I think they want to remove that cutoff and have 1099s for any amount, which has everyone in quite a stir.

The misconception I’ve heard was instead if you make less than the standard deduction of $5700, which would make sense.

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Miranda March 9, 2011 at 6:34 am

You’re right; it is $600. I can’t honestly say why I put in $400. I do know better. Must have been one of those weeks…

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Warren April 17, 2012 at 10:55 am

No worries, Miranda. It’s possible that you were thinking about the years-ago format of the Schedule D, for Interest and Dividends. You needed to itemize your sources of interest unless the total was less than $400. This was confused with the 1099 reporting threshold constantly.

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Steve Solosky March 8, 2011 at 8:23 pm

Myth #5: You Are Innocent Until Proven Guilty When Being Investigated By the IRS: When you are called in for an audit by the IRS (or worse, dragged into court), the burden is upon you to prove your innocence, not for the IRS to prove that you are guilty.

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Dan October 8, 2011 at 6:21 am

Actually, the burden is upon you to prove that your attested filing to the IRS is accurate. You say, “I made this income and have these deductions.” The IRS says, “Prove it.” Not in any way like having to prove your own innocence.

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motto November 15, 2011 at 5:29 pm

If assessment is “voluntary”, what is the logic for forcing to provide all information, and punishing for failure to do so?!

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Dan November 15, 2011 at 7:41 pm

I’m not sure what you mean, Motto. Could you clarify?

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Randy Lee November 18, 2011 at 7:35 pm

Atrain, I don’t understand what your point is. You claim that a close examination of the law shows that income tax is not required to be paid by most people, but then you admit that thousands of people are in jail for tax evasion. So what is the difference? If they are going to toss you in jail despite what the law says, why bring up the law at all? Do you think it’s smart or strategic to get tossed in jail for many years? Your approach seems totally illogical.

Jason Wreight November 6, 2012 at 2:33 pm

Put the onus back on THEM! Deny you are who they say you are; make them prove you’re NOT really Donald Duck. (That’s not easy if you’ve destroyed all your incriminating paperwork…including tax/social-security documents.)

How do y’all suppose illegal immigrants get by for many years without paying taxes??
I’m in Oz, and about to out myself as a’boat-people’ person. Have decided I’d enjoy an all-expenses-paid holiday on a tropical island, and all sorts of government hand-outs and benefits (including public housing) in due course!

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Savvy Young Money March 9, 2011 at 5:03 pm

haha yeah about myth #1…I’m pretty sure this guy named Ben Franklin said something about death and taxes at some point…

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Dennis March 10, 2011 at 3:39 pm

These myths would be moot if the income tax and IRS were put out to pasture with the Federal Fair Tax Act (HR 25/S 13) and the Michigan Fair Tax Plan. Please look them up and you will see that it will be much easier on us tax wise and make as much or more revenue for the nation and our state. They are sales taxes, not income taxes so you pay them when you want to, NOT when you have to.
See: fairtax.org and mifairtax.org and read them carefully.

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Ken July 17, 2011 at 1:30 pm

One small problem is that the “Fair Tax” act is also regressive, in that it taxes lower incomes more heavily as a percentage of their income than it does higher incomes because people with lower incomes spend a much greater portion of their paychecks than the rich do. While somebody pulling in $25,000/yr will likely spend nearly every last cent, somebody making $250,000/yr puts a much larger portion of their money in investments which wouldn’t be taxed. So basically the “Fair Tax” hits the lower and middle classes harder than it does the upper class… hardly what anybody would call fair.

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Wiseguy July 17, 2011 at 2:04 pm

Of course, that’s only “more” in the relative sense, not the absolute sense. Don’t forget about the rebates (“prebates”), which are designed to ensure that anyone living below the poverty line will effectively pay no tax. These rebates ease the tax burden much more greatly for the lower and middle classes than for the upper class.

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Ken July 17, 2011 at 10:29 pm

The problem is that the prebates don’t sufficiently do the job. Yes, they help the lowest of the lower class, but it still results in the middle class and upper lower class taking a heavier relative burden of the total tax, thus resulting in a regressive tax. (And the relative sense is the only way that makes any kind of sense and is ever used in this kind of discussion)

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Stephen October 14, 2011 at 6:42 am

“Prebates don’t sufficiently do the job.” Seriously? Then why do 42% of filers not pay any taxes? Seems like prebates do the job pretty well. Sure, they pay sales tax, payroll tax, and property tax. Taxes which fund local government, social security (by the way, SS is a much better deal for the lower/middle class than for the upper in terms of contributions versus eventual payback), and schools. All of which are more heavily utilized by lower/middle class than upper.

So I just finished my income taxes for 2010. I paid about 25% of income or $140k. How am I not paying my share per Obama? My kids go to private school and I’ve never been the recipient of any entitlement program. Get real, America!

Greg June 30, 2012 at 5:07 pm

Actually, the Fair Tax has a rebate provision to return the taxes paid on the first $25,000 (maybe $30k) in income, thus it eliminates the alleged regressiveness. If you want to get rid of regressiveness, we should also eliminate the corporate income tax. It is the biggest tax scam out there because it gets pass along anyway to the consumer and hits the poorest the hardest.

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payslip March 21, 2011 at 8:37 am

Your article is very enlightening. We should all pay our taxes because it is our responsibility to our country. We can always consult and negotiate with the IRS when it comes to tax paying.

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J Mitchard June 22, 2012 at 10:00 pm

There is nothing *reasonable* about the overbearing IRS….

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Mekhong Kurt June 29, 2012 at 3:25 pm

I realize my experiences with the IRS are almost certainly quite rare — but they also were very positive.

When my Father died years ago, he left us (me and his one other heir, not my Mother but another relative) in the not-so-unusual position of being relatively land-rich and cash-poor. The available cash in his estate was in very low, low five-digit range, while the inheritance tax was reasonably into the six-digit one. As part of the land was the family farm of decades, home to my Sister, her husband, and their Son and therefore not something we wanted to sell, though we earn no income from it. The other was property commercial him with a livable income his last several years of life. (He died at 58, so had no SS, etc.)

Our accountant, inherited, so to speak, from our Dad, immediately asked the IRS for terms. They came in with what our accountant — a tax one with 40 years’ or so experience at the time and with Dad quite a few of them — assured us was a very, very fair deal. Rather than use the doable payment schedule the IRS offered, we posted all our land as collateral to pay the taxes off immediately, thereby saving a fair amount of money.

Soon after, Dad’s property manager (an agent with a professional management firm) talked it over with the tax accountant then did intensive market research for the time of Dad’s actual death, and found the actual practical mid-range sales price was considerably less than for the value we had paid taxes. Our on-retainer (cheap retainer but excellent) lawyer got together with the other two and the accountant, who hold some special classification with the IRS (apparently there are very few such tax accountants, in the hundreds or low thousands, in the entire country), notified the IRS. The IRS looked again — granted, a time-consuming process — then issued a substantial refund promptly once the decision had been made — including *interest*!

Like just about everyone else, I would love to see the tax code HUGELY simplified and made fairer than it is today — but that’s a job for Congress, not the IRS.

They treated us well and fairly at our weakest, most vulnerable possible moment.

NOTE: I don’t know ANYONE connected with the IRS at all, and never have during my 61 years, not so much as a part-time grounds-keeper. Nor, obviously, have I ever worked with the IRS in any way, shape, form, or fashion other than as a taxpayer.

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Ken Coleman March 21, 2011 at 3:01 pm

I believe it’s your patriotic duty to pay taxes. In spite of comments by some others, I have had excellent experiences with the IRS. Twice I made mistakes in favor of the Government and they were corrected. In regards to Patriotic duty, its a shame the wealthy don’t have that feeling instead of using their power to bribe congress to put in “loopholes?” to avoid taxes when they benefit so much from their country.

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Jason Gilley July 12, 2011 at 11:00 am

There is nothing patriotic about paying taxes. You’ve clearly been drinking the koolaid. That’s just as bad as saying people have a “fair-share”. Complete propaganda.

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Mekhong Kurt June 29, 2012 at 3:43 pm

Mr. Gilley, if you resent paying taxes so much, then — I almost NEVER make this statement — give up your US citizenship and move elsewhere.

I have never had children and I’ve lived abroad the past 25 years or so, not availing myself of *any* US government services myself except at a U.S. embassy and consulate — services in those instances I pay quite dearly and clearly above their actual cost, and during my rare visits to America. As I do own land in the US (the sole source of my income), I do pay taxes, including for fire and police service should those be needed for my property.

All told, counting state county, local, and special district tax authorities — the IRS plus over *30* of the others — I pay almost precisely 40% of my gross income to some agency or another, counting the IRS.

Yet I gird it up, fork over the money, glad to help my country and my fellow citizens, especially the millions of fellow Americans currently in dire, desperate need of help through no fault of their own — NOT leeches or parasites by ANY sane stretch of the imagination. Were I to become truly convinced I needed to ante up a few more percent, I would swallow, maybe hard, and do so — with one proviso I’ve never demanded before: that the truly wealthy kick in a few bucks too. If I can pay yet another few thousand, then so can they — and as a far lower percentage of their incomes than that few thousand would take out of mine, They write their checks, I write mine, fair and square, done deal. But if they wiggle out, I *will* balk — mightily, loudly, and at length, in my Congressman’s office, both Senators office, e-mails, phone calls etc. to the White House and anyone else I can think of, saying, “Now wait just a doggone MINUTE! If *I can fork over another 5% of my income — a very decent one, to be sure, but a tiny faction of cash-rich multi-millionaires, then they darned sure can match me dollar for dollar with a WHOLE lot let pain. Meanwhile, why don’t you go confiscate a few 100-foot luxury yachts, 25-passenger play jets, and the like. THEN come talk to me.” (Of course, I would pay up anyway, as I am patriotic and law-abiding, but I sure would be hollering the entire time.)

I genuinely believe that if someone is so deeply convicted that he or she should not have to help pay for our government truly need to surrender the US citizenship and passport, then move abroad. And I genuinely wish you personally well, Mr. Gilley. But please do go, should you be so thoroughly convicted; be true to your deeply-held beliefs.

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Mekhong Kurt June 29, 2012 at 3:45 pm

Correction: a few percent would be in the upper hundreds for me, not thousands I mistakenly typed before. That’s all I ask of the rich — a few HUNDRED out of THEIR pockets, too.

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Thomas Mrak August 3, 2013 at 10:25 pm

The only fair tax is no tax.

America has become a country which rewards lazy people of all social classes, and punishes people who manage to compete without the government making things “fair” for them.

Eric February 28, 2012 at 5:19 pm

Why are so many people these days trying to punish and talk bad about American citizens being successful? That is one of the great thingsabout our country, we have the opportunity to actually get wealthy if we are smart, work hard, and/or make good decisions.This is not a M
Comunist or Socialist country. However, it sure seems as if the current executive branch of our government is trying to convert us.

Also, if a US citizen does actually become wealthy / rich, and makes $20 million for example; and follows the law while preparing their taxes and ONLY pays $3 million instead of $7 million in income taxes (15% vs 35%), does that make them a bad person? They are doing the same thing that any middle class citizen is doing…following the tax code/law and still paying A LOT of money to our government who has a really bad track record of managing money by the way.

If I were a person who became that successful and wanted to give back beyond what I was obligated to, I would give to a cause or organisation that puts the money to better use and with more efficiency and less waste.

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Mekhong Kurt June 29, 2012 at 3:50 pm

eric, no one, or at least not most of us, are attacking those successful folks who through their own blood, sweat, tears and SOME degree or another of government help — the public university and public schools they attended, emergency services for which they may have called, etc. — but those who do succeed with such help and feel they don’t owe one red cent back.

Successful people who help out, too are hard-working, admirable people.

Successful people who tell the rest of us, “Screw you; I’m not paying” can rot in jail, for all I care. They disgrace the names of the thousands of successful goodniks, not to mention their fellow citizens and their country.

The LATTER are those about whom we complain, not the former.

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Eric February 28, 2012 at 5:42 pm

How can you say that “The wealthy” does anything? That is saying that everyone that is wealthy does this bribery. This is ludicrous.Being wealthy is not an evil or even a slightly bad thing. This is The United States of America were everyone has the opportunity of success if they are smart, work hard, and make good decisions. Why talk bad about a fellow American’s success and good fortune, lumping them in with a few bad people? There are good and bad people in all income levels.

Let’s not make the mistake that so many in history have done (this is how the Soviet Union and the like came to be).

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Mekhong Kurt June 29, 2012 at 3:51 pm

Eric, see my reply above; it fits here, too.

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Todd Packer March 28, 2011 at 11:24 am

I have a hard time believing that it is our “Patriotic Duty” to pay income taxes. Forget the fact that there are numerous ways to fund the neccesary duties of government WITHOUT discouraging hard work by taxing income. The founders of this country revolted precisely because of taxation that they felt was unjust. Let us all be glad that those true patriots could not be convinced that they owed it to their country to fork over their hard earned income for the “common good.”

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Bill Door August 17, 2011 at 6:25 am

Do you remember the phrase “No taxation without representation!”? That’s what the original tea party was angry about: the fact that people of the colonies had no representation in British Parliament. They were glad to pay taxes as long as they had a representative there to make their voice heard. This country was founded on the principles of social contract, which implies that if you are to receive some benefit to society, you have certain obligations to that society. In this case, you have an obligation to the collective will of the society, as expressed in its government, to contribute your material support, i.e. taxes. Our founding fathers understood and accepted that. It has only been in very modern times that some people have decided that they are entitled to the benefits of society without the obligations that that entails.

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Mekhong Kurt June 29, 2012 at 4:00 pm

Mr. Packer, you wrote, in part, “The founders of this country revolted precisely because of taxation that they felt was unjust. Let us all be glad that those could not be convinced that they owed it to their country to fork over their hard earned income for the “common good’.”

Your reading at least partly incorrect in two ways. The founders revolted because they had no voice, no representation, at all, including the paying of taxes. We *do* have voices, if we just use them, especially our vote. And in many founders’ eyes, they really weren’t taxed to pay “their country,” despite being colonies of Britain, but what they saw as effectively a foreign ruler.

No matter how much one despises Washington, it isn’t a foreign capital, period.

Also, you need to know, if you don’t already, that the casual banting about of phrases such as “true patriots” — implying who disagrees with your name for them is a traitor — is unsavory and insulting, at best. I don’t doubt your patriotism, and demand you respect mine, even when we disagree. Just to be clear. Besides, such phrases instantly run up flags and sound the alarm of any observant reader, making anything you write or say suspect, at best.

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Dennis March 28, 2011 at 2:03 pm

Yes Todd. We should not be forced to pay any income tax and don’t need to if we would help tell our Congress and Senators and Prez to enact the Fair Tax bill (H.R. 25). If you go to the Fair Tax . org site and tell them you are for it, then we will win a tax system that will FREE us from the yearly compulsary IRS scare. You must know that people (consumers) pay ALL of the taxes, including the hidden ones, not the business. They have to do the paper work, which we pay for, but we get to pay the taxes. Now those hidden taxes amount to around 45% plus your compulsary income tax rate per pay check.

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Mike C. April 20, 2011 at 4:58 pm

Re: Myth #1

Everyone needs to watch Aaron Russo’s “America Freedom to Fascism”.

The Supreme Court of the United States ruled in multiple cases that the 16th Amendment gave no new taxing powers. Former IRS Commissioner Cohen stated in the documentary that the IRS does not have to act in accordance with the the Supreme Court rulings. The IRS is acting outside of the law.

These shallow online articles about the Federal income tax are grossly inadequate. If Supreme Court rulings don’t matter to you, then who cares what the truth is? The IRS has lost in the lower courts over this recently as well, never reported in the news, check it out.

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dollarwise April 21, 2011 at 5:41 am

For one, I feel obligated to pay my taxes. However, if the money was used by our government (which is us) for substantial purposes (which does not include shoveling it off to foreign nations) then I would be more satisfied. But, the politicians (both) believe it’s their money and feel generous at all times even to be duped by our country’s enemies. As is said, “The enemy of my enemy, is my friend.” Just who are our friends?

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josh May 22, 2012 at 8:26 am

Foreign aid is about 1% of total expenditures.

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cps April 29, 2011 at 10:40 am

the issue is that your federal taxes are an unapportioned tax and that is illegal according to our constitution as if it really matters when our people won’t be involved enough in their own government to actually take the responsibility needed to fix any of the problems in our govt nothing will change.

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Wiseguy April 29, 2011 at 11:13 am

While you may have a valid point in regard to voter complacency, you’re wrong about the legality of the federal income tax. It’s been legal since 1913, thanks to the 16th Amendment.

http://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution

If you’re going to start an argument based on the contents of the U.S. Constitution, you had better know what it says. I’m glad you want to get people thinking and learning, but please do so by sharing referenced, legitimate facts rather than unsubstantiated FUD.

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Tax Knowledge July 12, 2011 at 11:08 am

Maybe you and everyone else instead of drinking the Koolaid should actually read the 16th amendment in light of all the law. Congress has always had the power to tax anything. They just had rules according to whether it was an indirect or direct tax. The 16th amendment is only addressing the issue of apportionment in regards to collecting incomes (income is defined as an indirect tax according to the law, like investing) that had apportionment associated with it. It does not refer to direct taxes, which a tax on your labor would be. Also, direct taxes have to be the same for everyone. So it would also be a violation of the Constitution to have tax brackets if our labor were taxed according to the law.

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Wiseguy July 12, 2011 at 11:26 am

That is incorrect; income taxes on wages are not considered a direct tax.

‘In U.S. constitutional law, an “indirect tax” or “excise” is an “event” tax. . . . Income taxes on income from personal services such as wages are also indirect taxes in this sense. The United States Court of Appeals for the District of Columbia Circuit has stated: “Only three taxes are definitely known to be direct: (1) a capitation [ . . . ], (2) a tax upon real property, and (3) a tax upon personal property.” ‘

http://en.wikipedia.org/wiki/Direct_tax#U.S._constitutional_law_sense

I’d love to have an informational discussion to the benefit of all and learn of any errors in my understanding, but in doing so please refrain from personal attacks.

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Tax Knowledge July 12, 2011 at 11:48 am

It was all the comments before yours that got me so irritated as to make the koolaid remark. Most of America has no clue what the law says, they just blinding follow a common belief that the government can do whatever they please instead of having the opposite mindset of that the government can do ONLY what WE want it to do. WE THE PEOPLE are the rulers using the government branches as a proxy.

An indirect tax is one that can be avoided. Clearly working to live is not something you can avoid. Also, labor is considered property under the law and therefore a tax on it would be a direct tax. Sorry, I don’t have the time to go look up the references.

Wiseguy July 12, 2011 at 12:09 pm

I agree that citizens’ apathy and lack of knowledge are highly frustrating and counterproductive. The government is supposed to be a tool “of the people, by the people, for the people”, and the only reason it can feasibly act without our permission or beyond our desires is because our collective inaction allows it to do so.

I’d be interested to read those references when you get the chance to find them, as they appear to contradict what I’ve read and linked thus far. Thanks.

dhdhjj June 16, 2011 at 7:58 am

Its extortion by a tyrannical government! If the American people had any sense they would stand up en masse and refuse to play the blackmailer! What are they going to do, arrest 300 million americans! F the government and Obama!

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Buckeye July 2, 2011 at 8:28 pm

Don’t forget to add at least one truth to this story. It does not matter what the rich claim their percent is because after the Bush Adm. loopholes they likely do not pay anything and get hugh rebates.

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Gerry July 12, 2011 at 10:52 am

FAIRTAX!

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Dennis July 12, 2011 at 9:42 pm

Did you say “FAIRTAX” as in we need it? If so, then I’ve been waiting for someone to jump in and help get that “Word” out and make it happen. The info is out there so everyone, please, read it carefully and understand it and you will see that the FAIRTAX is the solution we need!

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Amused September 9, 2011 at 2:14 pm

It would be a solution if it were actually FAIR for everyone! But, it clearly isn’t…

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Dennis July 17, 2011 at 3:53 pm

Yes Ken, Wiseguy is correct. But everyone who is an American citizen gets that prebate if they want it, and they should. It IS a fair tax whereas the income tax is absolutely NOT fair in any sense of the word! Please go to that site and read everything carefully and see that it will end all of the hidden taxes that we pay. At this time we pay around 55% in taxes on everything we buy, rent and earn. with the Fair Tax it’s any where between 0% and 23%. This is where Wiseguy nailed it.
The rich will pay their taxes like the rest of us. Don’t forget — we the consumer pay all of the taxes so why not pay less!
As far as the 16th amendment goes, you can see why is needs to be abolished just as the FairTax will do.

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Ken July 17, 2011 at 10:35 pm

And as I pointed out in the reply, the prebates are not sufficient. even with them studies have shown that the “Fair” Tax would be regressive.

If folks want a truely fair tax, then put into place a flat income tax. Set the percentage, get rid of the loopholes, and suddenly you don’t have Warren Buffet paying a lower percentage of his income than his secretary anymore.

With a flat tax, you could add in the minimum to pay where everything above a certain amount is taxed to help out the poor below the poverty line, but thats a different debate entirely.

A real fair tax = a flat income tax, pure and simple.

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Wiseguy July 19, 2011 at 10:56 am

Of course, that depends how you define “fair.” There are a number of ways to define “fair,” and it’s impossible for a plan to meet every definition simultaneously. Paying the same amount is fair. Paying the same percentage is fair. If we all pay the same amount, the upper class will pay the lowest percentage. If we all pay the same percentage, the upper class will pay the highest amount.

Consider a retired couple who, with their house and car paid off, live comfortably spending about $24,000 per year. Together, they had accumulated $2 million in total retirement savings. Due to dividends and interest with 8% returns, they also end up paying an additional $24,000 in annual 15% flat income tax. Is that fair?

Okay, so maybe that’s a contrived example, but the point still stands: you cannot be totally “fair” to everyone in every sense of the word. It’s situations like these that start the slippery slope toward creating a slew of loopholes. Since no tax plan can ever be perfect, every side will have to make some concessions to agree on a compromise. In this scenario, “fair” is when each side’s concessions are similar in magnitude.

Ultimately, the question to consider is not if we’ve found the perfect plan, because such a plan is impossible. The real question is whether or not a new plan is better than what we currently have.

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Stephen Uhl August 3, 2011 at 8:37 am

Whoever calls the FairTax regressive simply does not understand how the rebate (prebate) means so much more to the poor than it does to the rich. Those who recommend Flat Tax must realize that, since it is INCOME based it is just as gameable as the present system. FairTax (consumption based) gets tax help from pimps, prostitutes, pushers, the whole underground economy, as well as those millions of visitors who come and buy new stuff and services. In re FairTax (H.R. 25 & S. 13), “Those who understand it come to demand it.”

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Mark Lee August 30, 2011 at 12:16 pm

I was once told that the IRS allows a one time write off of up to $50,000 of taxes due in a lifetime. Is that true? I owe several credit card companies that I have not been able to repay. Since they report any unpaid amounts after failing to collect, do I have any other choices? Thanks for your help.

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Miranda August 30, 2011 at 12:28 pm

I don’t think so. I know you can talk to the IRS about a payment plan for your taxes, and you can even settle your tax debt with the IRS. But I don’t think that there is a provision for just writing off a certain amount just because.

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RB August 31, 2011 at 11:33 am

Why is it that we pay taxes, then repay more taxes on the same earnings? Isn’t that illegal and double, and or, triple Taxation? Why do we get a paycheck with taxes taken out, then have to pay more taxes every time we use our already taxed-money? Why do we again have to pay at years end, April 14th? We are taxed multiple times on the same earnings, it’s unconstitutional, and ridiculous. Government = Out of Control..

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Randy Lee August 31, 2011 at 11:56 am

You are looking for reasons, but your are in an insane asylum. There are no reasons. The rule of law is only observed now with lip service. The government does whatever it wants, and cares squat about your rights. Sure, if they can use some bit of law to justify what they do, they will, but if they can’t, that doesn’t stop them. Try to stop them yourself. You’ll get run over. Unfortunately, things are going to get a lot, lot worse before they get any better as people are sadly complacent. Only when they are actually starving, will it dawn on them that perhaps they should have taken action earlier.

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foxy October 7, 2011 at 6:26 pm

the $400 mentioned in the article is the amount of net income on a self-employed tax form (Schedule C) under which you do not have to pay Social Security self-employed tax. It does not have to do with 1099 reporting requirements. That threshold is $600.

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bmben November 2, 2011 at 5:53 pm

According to the IRS’ own website, you do not have to file if you made less than $400 and were self-employed.

http://www.irs.gov/individuals/article/0,,id=96623,00.html

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CityzenMatt November 8, 2011 at 12:47 pm

If you have never read the Internal Revenue Code Subtitle A or Subtitle C, then you have no clue what your are talking about.
Taxes under these two subsections are very specific as to who is LIABLE for an INCOME TAX.
The US Supreme Court has ruled many times that INCOME taxes are for TAXPAYERS and the code does not apply to NONTAXPAYERS. Its just that simple. You are either LIABLE for the INCOME TAX or you are not.

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HPNIII November 9, 2011 at 12:00 pm

Okay, I had a first cousin who went down the road of you don’t have to pay taxes and he worked for the Federal Gov’t., what a dumb butt. He did pay his taxes and yes he was fired for not having done so. Had a co-worker do the same, guess what the IRS soon educated her of the truth and she paid her back taxes plus penalties and interest. Most of this comes about from people going to seminars held a the local notellmotel and of course for a minor fee they can order the DVD or package explaining exactly what to do and how to do it. They will tell you that “no one” has ever been hauled into court for failing to pay taxes because the IRS knows it is unconstitutional and don’t want the legal president nor publicity that would go with it. While these people may be free to give you bad advice for a charge under the first Amendment, rest assured there is no place in the constitution THAT WILL BE UP HELD IN A COURT OF LAW that makes paying taxes optional. You can read it and give it any interpretation you wish, but it is only the interpretation of the courts that count.

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Randy Lee November 18, 2011 at 5:57 pm

Look bro, you are living in a fantasy land. What I mean by that is this: IT DOESN’T EFFING MATTER WHAT THE LAW SAYS. You can argue till you’re blue in the face. The government does whatever the hell they want. You might get lucky and get an honest judge who will toss your tax evasion case out of court, but the feds will appeal and they will win every time. The “rule of law” is only given lip service in this formerly great nation. If the law fits what “they” want to do, then they obey the law. If the law doesn’t fit what they want to do, then they ignore it. End of effing story.

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Randy Lee November 18, 2011 at 6:09 pm

What I’m trying to say is this: If the men with guns put you in jail, what difference does it make if it’s legal or not. You’re still rotting in a box. Sure, at some point we are going to have to push back hard, the blood will flow, and, then, finally, things will change. That time ain’t here yet. OWS talks about the 99% and the 1%, but the sad truth is that until a significant percent get that they are being screwed, it ain’t time to jump. Most of the 99% think that things are just peachy… :(

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larry won November 17, 2011 at 7:43 am

Look people if you want to keep more of your money,vote for Ron Paul he will do away with IRS they are wicked lets bring sanity back to gov.what better way to boost the economy.

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Wiseguy November 17, 2011 at 7:49 am

I would rephrase “he will” as “he would like to”. Having Ron Paul as President might help, but the President’s job in the legislative process is merely to sign bills into law. He doesn’t have the power to make changes like that. We’d first need to pass such a bill through both houses of Congress. That’s where change is really necessary if we genuinely expect things to happen differently.

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Taxed2death November 19, 2011 at 4:30 pm

If you are working for an Employer how do you avoid paying taxes when it is withheld from your paycheck? Unless you commit perjury and claim 12 or 15 exemtions.. We are screwed>

“Democracy is 2 wolves and a lamb voting on what to have for lunch – Liberty is a well armed lamb contesting the vote” – Ben Franklin

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Don November 19, 2011 at 5:53 pm

My question is sure there was the 16th amendment to our constitution,but was it totally and completely ratified??

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Dan Ari November 29, 2011 at 4:27 pm

WRONG! Myth 2 is wrong. To quote the IRS: You must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1. (Publication 501, page 2)
Table 1 clearly states the amounts. For a single filer under 65 years old, “THEN file a return if you gross income was at least…$9,350″.

Your blatant failure is frightening.

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Wiseguy November 29, 2011 at 4:43 pm

That is not what #2 was talking about. :-) Even though it was irrelevant in this case, thanks for providing a reference to back up your argument. Most people don’t bother to do that.

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WhatIThink January 12, 2012 at 7:19 am

My understanding is that if you fail to file taxes, then the IRS can go back as long as they want in an audit. But if you file returns, then they can only go back 6 years regardless.

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Unlicensed Dremel February 12, 2012 at 4:41 pm

Lookit, while #3 is true (all of them are true), that it in no way helps you (in fact only hurts you) to fail to send a return if you owe, it is very important to point out that the IRS/Federal government LIES to us all by not only not telling us that, but actually strongly implying the opposite. The IRS *specifically says* that one “must” send in full payment for tax when the return is filed if you owe, and then stops right there without saying anything more – without telling you “well, what do I do if I don’t have it to send?” Since they don’t have any instruction or provision whatsoever for dealing with that contingency, people (logically-soundly yet incorrectly) infer that one must wait and not file until one has come up with the cash – Which incurs additional penalties (failure to file). So they LIE to us to rack up more penalties against us. Important point.

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Unlicensed Dremel February 12, 2012 at 4:47 pm

And oh yeah, the 16th Am was not really ratified properly, but the courts have said it was, so it was, for all intents and purposes. As for Dan Ari, the reply to your claim is right – you’re both right – they’re not mutually exclusive ideas – sure you have a standard deduction of X, Y, or Z, but #2s point is *assuming* without saying it, that you’re *already past* that threshhold. Past the thresshold, all income must be reported. But as a practical matter, who’s gonna know? And by the way, I believe it’s $600, not $400, no?

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Eric February 28, 2012 at 5:22 pm

Why are so many people these days trying to punish and talk bad about American citizens being successful? That is one of the great thingsabout our country, we have the opportunity to actually get wealthy if we are smart, work hard, and/or make good decisions.This is not a
Comunist or Socialist country. However, it sure seems as if the current executive branch of our government is trying to convert us.

Also, if a US citizen does actually become wealthy / rich, and makes $20 million for example; and follows the law while preparing their taxes and ONLY pays $3 million instead of $7 million in income taxes (15% vs 35%), does that make them a bad person? They are doing the same thing that any middle class citizen is doing…following the tax code/law and still paying A LOT of money to our government who has a really bad track record of managing money by the way.

If I were a person who became that successful and wanted to give back beyond what I was obligated to, I would give to a cause or organization that puts the money to better use and with more efficiency and less waste.

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Randy Lee February 29, 2012 at 2:01 am

Eric, I will reply to your question. The problem is that for the last 20 years or so the formula for success has changed in a way that is in fact very negative and worthy of all the scorn we can muster. In the past, success was achieved by starting a company that made a product that people wanted to buy. The result was that the entrepreneur got rich, but, at the same time, his or her company employed many people who shared a very significant portion of that success, and, on top of that, the company made products that were an improvement on what already was available, so the consumer shared in the success in that they had better products making their life more enjoyable.

However for the last 2o years, while the scenario I outline still takes place, it has been greatly overshadowed by two other formulas for success that, in contrast, only enrich a few people, while impoverishing a vast number of others. One of these is something I call, “turning equity into bonuses”. In this scenario, a predator acquires a company that makes products and employs people, and through a series of manipulations creates greatly increased short term profitability which is rewarded with monstrous salary and bonuses. A little later the company craters putting all its employees out of work, and leaving its customers with degraded options to fulfill the need that the company’s products used to fill. A variation on this theme are the companies like Haliburton who use political power to create artificially enhanced demand for their products generating huge profits for the top executives and a few owners, while paying nearly no share of the cost of their manipulations: death and destruction on a vast scale!

The other scenario is that of the financial “industry”. These vampires use political power to create artificial structures that have nothing to do with the production of products that people want to buy, but instead position the vampires as the gate keepers between the entreprenures I mentioned earlier and the means to implement their visions. The other variation on this fraud is the vampires’ positioning themselves as the gatekeeper between saved wealth of the working class, i.e. pension funds, and so forth, and ways to invest those funds in counter to the inflation that the vampires have engineered into the monetary system. Then when the saved wealth is invested, the investments are rigged to shift the saved wealth from its owners to the vampires. Instead of being guillotined or imprisoned the vampires use their vast wealth to manipulate politics so that they can create situations where they also receive the bulk of the government assistance that comes to rescue the victims of the crashes that the vampires caused in the first place.

Now do you see why people are upset with the wealthy? If you wish to prevent the entrepreneurs from becoming collateral damage in the righteous wrath directed at the vampires, which is a worthy goal, then it is important that you understand the vampires, what they do, and what can be done to stop them, while enhancing opportunity for the entrepreneurs freed from the need to feed the vampires.

To that end, I strongly suggest that you familiarize yourself with the work of the greatest economist the world has produced so far, Clifford Hugh Douglas. His work, which has been sadly suppressed, points the way out of this mess. Fortunately their is one very simple change that would have an unimaginably far-reaching effect for the better. I am referring to the outlawing of the practice of fractional reserve lending. I know that there seems to be no connection between fractional reserve lending and de-fanging the vampires, but if you study Douglas, you will understand.

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OldGuy June 26, 2012 at 7:17 am

Right on Randy Lee:
As a middle class veteran who has suffered in this economy and finally had his ‘hi-tech’ job outsourced to India I can say I still believe it is legal and fair that I pay taxes. I also believe in and admire our roads, schools and military and all the things they provide us. Having traveled extensively and seen what taxes and a long term vision can buy (see: Hong Kong and Singapore) and what that for my children. I also agree that something has changed with the way of becoming rich in America. Without creating anything but a interface (and siphon) for other peoples wealth there has been almost no advancement here in I’d say 15 years with all the mortgage and leveraged investment schemes – working or building things have become dirty words to ambitious and that is the way to decline and decline we have. Is America so decadent that we can’t build a high speed railway or even go to space any longer – is it true we can’t make anything anymore? If the wealthy were investing or creating that sort of thing now then I’d say more power to them for avoiding taxes – but no if they ever do invest in the future they want the working stiff to pay them back even if successful plus recoup their money for them (bailout the banks they own) if not! Now the big thing is to get rich here then renounce your citizenship to avoid taxes! I have very little use for them and all their carping about all the taxes they pay. Sure I wish the money be spend more wisely and if we spent more time on that than fictional interpretations of the tax law we would all be far ahead….. PS – I pay about a 22% tax rate – ok by me – just show me more than just wars for my money!

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Randy Lee June 30, 2012 at 1:34 am

Thanks Old Guy. Please seek out Douglas’ book Social Credit. It is published on line as a free .pdf. Also please seek to understand fractional reserve lending and how it negatively effects nearly every aspect of our lives. With this knowledge and understanding, please work to educate others. That is our only hope.

BTW, a course in economics and one in statistics should be required of every high school graduate, and only high school graduates should be allowed to vote!

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Lucius Cleigh August 20, 2012 at 4:46 pm

I am an expat American. I do not need to file a tax return with the tax authorities of my country of residence. Taxes are withheld from wages and bank interest. I recently found that there was overwithholding from the bank interest. I applied for documentation of that fact via the internet, and corrected the error over the phone. A refund was direct deposited to my bank. I file a very easy one page form every year, to claim a tax credit on my charitable donations. The downside is that income and payroll taxes eat up about 23% of my pay. In the country I live in, the fact that I support my spouse does not reduce my tax in any way. There are tax benefits to raising children, but I earn too much to benefit from them.

Because I am an American citizen, I have to file in the USA. Here, I can’t buy TurboTax at an office supply store. So I prepare my USA tax returns in Excel, the hardest computer task in my present day life, because I have USA investments. But when the dust settles, I owe very little (the first 100K or so of foreign wages are exempt from USA income tax). If schedule M were still in effect, I would get a refund! An American family with one or more children owes no income tax on the first 35-40K of income. If my income were entirely dividends, I would owe no tax on the 90K or so.

American tax law is very kind on stockholders and families, but getting to that kindness is horrendously involved. The tax law where I live is very simple, as long as I am not a business owner. But I owe far more tax than I do to the USA. If my pay were 40% of what it is, I would owe no tax, thanks to child allowances. I pay 23% income tax for the privilege of not driving a forklift in a warehouse. If cleared my mortgage, I could live as I do at present on about half my salary.

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Steve December 23, 2012 at 7:33 pm

Great to read that Social Credit has not been forgotten, Randy Lee.

The Social Credit Party had several elected Members of Parliament in the New Zealand several years ago.

The opposition parties campaigned to confuse and turn the voting public away from the monetary reforms proposed by Social Credit by naming it as “the funny money party” and calling it a socialist party.
There are still some supporters around.

Most people don’t understand economics.
Instead they believe that the depression which traditional monetary policies have lead us into, can only be countered by the political parties following the same economic policies again, promising *gold at the end of the rainbow* for your support.

The cycle repeats.

How bad does it have to get before people open their eyes?

Obviously the events of the last four or so years have not hurt enough.

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Robert Donnelly November 13, 2013 at 2:58 pm

I have read many of the posts above. Why is paying taxes referred to as a “patriotic duty”. It is the law of the land, period. I don’t think that there will ever be an agreed upon “fairness doctrine” I was employed by the IRS for 30 years. I have heard and seen it all. Are the tax laws equitable? – maybe yes, maybe no. But let me ask you this – when was the last time, if ever, you have communicated your thoughts and outrage to your Congressman? It is there, and only there that change will occur.

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