The Internal Welfare Service

I am back from a quick visit with the family and, since I am still off work, I am helping out my dad with his practice. He is a Certified Public Accountant so, as I am sure you can imagine, things are pretty hectic these days. Dad handles the complex stuff and I prepare the individual tax returns for his review.

Tax I was one of my favorite classes in law school, but I walked away from it with the distinct opinion that the Tax Code is a welfare plan for the rich. Now that I am seeing it firsthand in practice, my earlier beliefs are confirmed.

Two returns I prepared yesterday illustrate my point. One client makes over $100K per year, owns rental property and has a kid in college. Another client is a young 20's student who makes $6K per year from the odd jobs she works during her time off from college. The former will get a generous refund and the latter owes more money to the government.

How is this possible?

When the government gives you a deduction or a credit for something that not every other taxpayer gets, then it is subsidizing your lifestyle. For example, families get tax credits for their kids and for tuition paid on student loans. But, if you have no kids and you pay no tuition on a student loan, your taxes subsidize someone else's choices to have those things.

Because the well-to-do client gets deductions for all the "expenses" of operating rental property, the income earned from the rents essentially ends up untaxable. It's a wash. The government encourages property owners to operate at a "loss" by giving them welfare, i.e. deductions, to compensate for that loss. Because the well-to-do client has kids, he gets welfare (called a "tax credit") to subsidize his choice to have a family. The other client? Well, she does not own rental property. She does not have kids. So she owes money to the government from the whopping $6K she made last year.

It is shameful. Why should a single person be penalized for not having kids? Why should someone get welfare for having children? That was their choice and they should bear the responsibility for funding it. Why am I subsidizing someone's rental property? If they are wealthy enough to own rental property, they do not need my help.

Republicans spend an inordinate amount of time complaining about welfare and other "socialist" practices in America but, if they were really sincere about it, they would lead the charge to abolish the Tax Code. No deductions, no credits, no more welfare. As the inane cliche goes, "freedom isn't free", but the rich aren't paying for it. They are too busy collecting welfare.