Raoul the Taxman - January 1996

by Raoul

Many of Raoul's friends and clients have recently been asking, "Hey, Raoul, what does this new tax reduction bill mean to us?" Well, Raoul wishes that he had some good news, but he doesn't. In fact, all I can say is that it looks like another stab at the Republican concept of tax relief. In case you don't remember, here's how that works.

In 1986, the congress put into effect El Stinko Grande. It was very complicated, extensive, and despicable. The first thing about it that jumped out at Raoul was this. After the two year rate reduction phase-in, a family with a $350,000 taxable income paid over $45,000 less federal income tax. However, the family with a $20,000 taxable income paid $625 more in federal income tax! Stranger than fiction you say? Unbelievable? Nevertheless, it is true. Give Raoul a call and he'll send you copies of the rate schedules and tax tables for those years.

From the professional printed material that I see, it looks like a reduction in tax for taxpayers with $50,000 plus taxable income, and an increase in tax for people in the $30,000 and under bracket. Remember, that's $30,000 taxable, meaning that this could impact a Production Director, air personality, or self-employed individual with a salary or gross income in the $45,000 to $50,000 range. After deducting your mortgage interest, real estate, state and local taxes, contributions, business expenses, etc., you may, quite possibly, be in that range. So, what does that mean to you? As long as this system is in place, you owe it to yourselves and family to make sure that you are getting the most comprehensive tax job possible, especially since they are prepared to do it to us again!

What really slays Raoul are the innocuous names that they come up with for these periodic surprises from hell. Things like: "Revenue Reform Act," "Deficit Reduction Bill," "Revenue Reconciliation Act." Am I missing something? Do they really think that if they leave out the word "tax" it will go down easier? How about some descriptive names for these tax legislations, things that we can relate to, like "Stick Up Your Butt When You're Not Paying Attention Bill of 1995" or "You Work Your Cajones Off Then We'll Take All Your Money And Piss It Away On More Crap You Don't Need Surprise Of '95."

Get this. Talk about pissing away our tax dollars. Raoul recently heard that the Department of Defense will be spending in excess of $37 billion to destroy all of the excess nuclear missiles we no longer need and to dismantle the redundant military bases we have around the world. $37 billion? Well, I don't know about you, but a real money saving solution is obvious to Raoul. We take those missiles and we drop 'em on those bases. Oila! Literally, killing two birds with one stone. They could even sell tickets. Ten bucks a car load to see a thermal-nuclear explosion. And how about bidding out the face cream and sunglasses concession? Think, people!

So, who do we blame it on? Definitely, not the IRS, 'cause believe it or not, those folks are just like us, a bunch of poor stiffs trying to make an honest living and raise families with a decent quality of life. Raoul has been in this business for over twenty-five years and does not buy into the "Revu-Nazi" image of the IRS. In virtually all of my contacts with them on behalf of and in the course of representing my clients, I have found the IRS representatives, for the most part, to be well trained, courteous, helpful federal employees. An essential ingredient for the maintenance of our self-assessed tax system, a tax system that, although not perfect, is significantly better than the most popularly hyped alternatives. For instance, you've all heard the terms "flat tax" and "ad valorem tax." Raoul says buffalo chips to both, and here's why.

The morons who advocate a flat tax (you can recognize them by their flat heads and relentless search for the edge of the earth) think all income should be taxed at the same rate, with the elimination of all deductions. That means someone with $35,000 of gross income will pay tax at the same percentage rate as someone with $1 million of gross income. Who thinks that's fair? Or, how about two people who both earn $100,000 a year: the bank president who drives to and from the office he sits in all day and the traveling salesperson who pays all his or her own expenses in the process of covering a 5-state territory. Make sense?

Incidentally, Raoul believes that a flat tax rate which recognizes no deductions would remove all concept of humanity from our tax system. Humanity, you ask, with a sneer? Es correcto! Although sometimes complicated and inequitable, our current system provides, at least, some conscious recognition of what can occur in the financial life of an average American family, such as: serious illness, a wipe-out business loss, exemplary charitable generosity, or a single parent trying to raise a family on low income. That's right, it's all in there.

The ad valorem tax is an interesting concept. Basically, this would install a national sales tax, thereby changing completely the way the government collects money. Rather than a tax on earnings, individuals would pay tax based upon their expenditures. How this would work in the corporate/business sector has yet to be addressed. The theory here is that the people who have the most money will buy more crap than the poor people who don't have as much money, and therefore, pay more tax. Notice, however, that still, everyone pays at the same rate. Now, this is what Raoul sees as one of the hidden problems of the ad valorem tax. We are all familiar with the term "black market," and we know that institution exists in countries throughout the world. Why? Because those are the countries that operate their government services with a national sales tax. Cats with the heavy bread start going underground with their major expenditures in order to circumvent the tax system. In our country, this type of system would create, if not at least encourage, an entire new criminal infrastructure.

Hey, is Raoul a major pontificator, or what? Well, after all, this is my column. What I'm trying to convey is my belief that the congress should channel less of its efforts toward politicizing the process into a stalemate and more time tailoring the tax system to reward such things as risk taking, job creation, investment in our domestic economy, etc.. But obviously, they find it more productive to spend the majority of their time between getting reelected and blowing enough smoke up our asses to misdirect our attention from the terrible state of affairs to which they have brought our country. Well, after all, this is my column.

In the meantime, you can be sure that as soon as the regulations are written by the technocrats, Raoul will bring you the major points of next year's tax changes. And, because space is limited and the response to Raoul has been thunderous (plus there are so many topics of interest), I need your help. Have you ever agonized with trying to figure out if you should lease or buy your next vehicle? Ain't it enough to make you feel stoned? If you'd like to read Raoul's spin on this common question next month, fax me at 215/635-9277 or call your friend, Raoul, at 215/782-AMFM.

Esta bueno por me.

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