Robert W. Wood from Forbes says “It is chock full of perks to special interests, political pork and social engineering. Like a hodgepodge built with spare parts and constant add-ons, some of the results it produces are pretty unjust.” Here is a list of his 20 favorite “Really Stupid Things In The U.S. Tax Code”.
- In 1913, our whole tax law was 27 pages. It’s now over 4 million words, 9,000 bloated pages.
- Complying with the tax code costs immensely. Individuals spend 6.1 billion hours a year doing their tax filings.
- Many Fortune 500 companies manage to pay zero tax or get refunds in some years, and many claim billions worth of tax breaks.
- Many individuals pay nothing. Of 145 million personal tax returns in 2011, 54 million (more than a third) had zero tax liability or got refunds.
- 1,600 people who filed tax returns with incomes of $1 million or more paid no income taxes.
- The Earned Income Tax Credit is plagued by fraud, up to 29% of all payments. The IRS paid out $125 billion in fraudulent refunds in the last 10 years.
- Many tax giveaways don’t benefit the intended recipients anyway. The New Markets Tax Credit was meant to create jobs in low income areas, but instead steered nearly $1 billion to wealthy investors and Wall Street banks.
- Using names like “Find the Children,” “The Veterans Fund,” and “Cancer Fund of America,” the 50 worst charities in America raised $1.3 billion in donations over the last 10 years. Almost none of this money benefited missing children, wounded veterans, or cancer patients.
- Many tax-exempt charities give little to their cause. For example, Lady Gaga’s Born This Way Foundation raised $2.6 million in 2012, but only gave away $5,000 for grants to organizations or individuals.
- The alternative minimum tax (AMT) is a complex parallel tax system that has grown like cancer. It’s results are hard to predict and can be perverse.
- Billions in tax breaks go to wealthy professional sports team owners, who can count their player rosters as depreciable assets.
- A Tuna Tax Break provides millions to corporations operating in American Samoa.
- Prostitution is illegal almost everywhere, but Nevada’s Mustang Ranch writes off free passes as a promotional expense. Workers claim business deductions for breast implants and costumes.
- Tax credits for historic structures cost $1 billion annually, subsidizing beach front resorts, Major League Baseball stadiums, and luxury hotels.
- Wealthy hedge fund titans get a “carried interest” for their work. Their pay looks like wages but is taxed at capital gain rates.
- U.S. corporate tax rates are the highest in the developed world. To avoid paying them, big U.S. companies keep their income abroad. Americans lose out on all that capital.
- Unlike big companies that can avoid U.S. taxes on money stashed overseas, U.S. persons living abroad have to report and pay U.S. tax globally.
- The tax exclusion for parsonages lets clergy members get tax-free housing but the exclusion can be abused. Some clergy double dip, claiming the exclusion and the mortgage interest deduction.
- As sovereign government entities, Native American tribes don’t pay corporate income tax. Ditto for corporations wholly owned by a tribe.
- Despite millions in profits and revenue, the NFL, NHL, and PGA Tour are classified as non-profits, exempting their earnings from federal income taxes.
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