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logo    How the Government Cheats Ordinary Taxpayers

Everyone is aware of the penalties the government charges taxpayers who underpay their taxes, but it never seems to care much about the overpayment of taxes caused by poorly written or unfair legislation, which systematically cheats taxpayers.

Recently, people have been allowed to deduct either state income taxes or state sales taxes, and since for some years sales taxes were not deductible even in states without income taxes this certainly is a benefit to taxpayers. But it is a benefit that cheats.

Everyone, including Congressmen, should know that it is practically impossible for a taxpayer and all of his family members to collect, keep, and maintain each and every sales receipt received over the course of a year. And even those collected sometimes turn out to be useless because the ink fades to a point where they become unreadable. So, in effect, taxpayers cannot take full advantage of this benefit, which means that they overpay their taxes. If a company offered a ten percent discount on a product but only delivered nine percent, it would be guilty of a fraudulent transaction; yet, the government does it all the time.

But there is another feature of the tax code that is even more heinous. Say a person buys a house for $150,000 and after five years sells it for $175,000. Unless the person reinvests this sum in another house, he owes the government a capital gains tax on $25,000. But the person has realized a $25,000 capital gain only if the value of the dollar has remained constant over the five years. Yet that is rarely the case.

For instance, if inflation over the five years averages three percent, the value of the dollar has shrunk to $0.89 and the true capital gain is only $6,173. But if inflation over the five years averages four percent, the value of the dollar has shrunk to $0.85, and the taxpayer has actually experienced a capital loss of $478.

Only the government can get away with this kind of cheating, and its very existence proves that equal treatment under the law is not a Congressional concern.

Isn't this a violation of the equal protection clause of the Constitution which all Congressmen have sworn to uphold? (11/9/2005)