Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

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    May 2002
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Archive for May, 2002

Posted by taxguru on May 9, 2002

Taxing Possible Income

It’s bad enough when our rulers confiscate a portion of money we actually earned. However, it’s ludicrous when people are forced to pay real tax dollars currently on income they might receive several years down the road. This is already the case with the alternative minimum tax (AMT) on employee stock options. I have already described the situation where many people have tax bills costing much more than the stocks were even worth. That fight is still ongoing, and again I encourage anyone interested in helping remove this insane tax to join with ReformAMT.

In what is another step in the wrong direction from fairness and morality, IRS is now poised to charge the 15.3% Social Security & MediCare taxes on the so-called employee stock option income. This is ridiculous; but will happen if enough people don’t let their rulers know that they don’t like it. This is an election year, when feedback from us peons is a little more noteworthy to our masters.


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Posted by taxguru on May 8, 2002

Paying Taxes Late

The tax laws are jam packed with examples of double standards. Paying your taxes late is a big one. Miss the deadline by even one day and you are nailed with penalties and interest. However, if the government decides to take its time, there’s nothing you can do about it.

The latest example is the State of Missouri, which has found itself in a cash crunch. This has caused them to hold off sending people their tax refunds. According to this official press release, they are hoping to return to sending out refund checks around the end of June or the middle of July. This is just another perfect illustration of why overpaying your taxes and banking on a big refund is such a stupid investment. The MO DOR isn’t even require to pay any of the late payees any interest until after August 15.

What is a bit scary is that this very same thing could happen with refunds from IRS and from other states. The Feds are very close to running out of cash unless the debt ceiling can be raised by our rulers; and several states have had much lower tax revenues than their crystal balls had predicted for their spending plans. Eliminating wasteful programs is harder for the rulers to do than to just hold onto the taxpayers’ overpayments.


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Posted by taxguru on May 5, 2002

It’s Not Too Late

Libertarian activist, Jacob Hornberger has an excellent point in this article on how accustomed the American people have become to a world where part of our hard earned income is confiscated from us. This is still a relatively new concept in this country and was not intended to even exist by our founding fathers.

As Jacob concludes, while we may not be able to do anything about the certainty of death, if enough people want to, we can eliminate the immoral income tax system.


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Posted by taxguru on May 5, 2002

Facing Reality

One of the main reasons those of us who understand numbers have never taken seriously any of the financial statistics coming from our rulers in DC is the method by which they make their calculations. They have long used assumptions that are so far removed from real life as to be considered absurd in the finance department of any private sector company. Our rulers use what is called static analysis, which assumes that they can mess with the tax codes all they want and people will not alter their behavior any. Nothing could be further from the truth.

What really happens when the tax laws are modified is that people and companies do make dramatic changes in what they do. The only realistic way to measure the effects of tax law changes in the real (not DC fantasy) world is to use what is called dynamic scoring, as explained in this article from the Heritage Foundation.

There is no better comparison between the two methods than the Reagan tax rate cuts of the 1980s, which are constantly mischaracterized by the lefties. With a static analysis, cutting the tax rates would result in less money for the Feds, which is the impression that the liars want to give. This assumes that people and companies will have the same amount of income to be taxed. Reality was very different. With lower tax rates, people and companies had more incentive to report higher taxable income. The actual dollars to DC more than doubled as a result.

Anyone in the media or in power in government who bases any argument on a static analysis is either a liar, an idiot, or both, and not to be trusted.


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