The Tax Preparation Industry is a Sheep-Shearing Operation

Parasites, parasites, everywhere, and lots of blood to drink!

In honor of Tax Day I am republishing a (modified) piece I wrote for American Greatness last year.

A pox on the IRS. A pox on Congress. A pox on Intuit TurboTax. 

 America’s tax collection system is an abomination. It is an offense against our constitutional rights, republican government, and common sense itself. 

 As of 2019, Americans spent 1.7 billion hours and paid $31 billion per year to do their taxes. This is obscene. In a just world, the vast majority of taxpayers should pay zero dollars to do their taxes. The IRS knows how much you owe (because it violates your Fourth Amendment rights by demanding that information from your employer), and it will punish you for not paying that amount. But the IRS won’t tell you what that amount is.

This is idiotic. I am a resident of Michigan and I own a home here. Twice a year I receive a letter from the city where I live with a tax bill based on their estimation of the value of my property. That letter contains the precise amount I owe. I then drive down to city hall and drop off a check. 

You’ll notice that at no point did I pay a middleman to help me pay those taxes. The same principle should apply to federal and state income taxes. The government should simply send Americans a bill at the end of each year specifying what they owe. Even better, taxpayers who have their incomes siphoned on each paycheck by employer tax withholding shouldn’t even have to file at all. 

Of course, all this presumes we should keep our current unconstitutional income tax mass surveillance system—which we shouldn’t. But If we are going to have this monstrosity, it should at least minimize the pain it inflicts on ordinary Americans. Instead, we have the worst of all worlds. The government doesn’t just pick our pockets; it helps third-party grifters get in on the action. 

ProPublica has done years of stellar journalism on the disgusting relationship between the IRS and Intuit, the company that makes the TurboTax online tax preparation software. Intuit has worked tirelessly behind the scenes for decades in order to keep tax filing as complicated and byzantine for taxpayers as possible. For years, Intuit fought efforts to keep the IRS from offering taxpayers a free online way to do their taxes.  

During the Obama Administration, Intuit got what it wanted: a one-sentence regulation in a 3,000 page appropriations bill that banned the IRS from spending any funds “to provide to any person a proposed final return or statement.” In effect, the IRS is barred, by law, from telling Americans how much they owe in taxes. This provision was brought to us courtesy of Republicans in Congress and their Democratic allies, like Zoe Lofgren (D-Calif.), the congresswoman for Silicon Valley, where Intuit’s headquarters are located. 

 America is filled with parasites, like Intuit, that seek every possible opportunity to suck down the wealth and treasure of ordinary citizens. Intuit’s behavior isn’t unique by any stretch. The “Iron Triangle” between administrative agencies, Congress, and private sector grifters has been around for as long as there have been modern federal bureaucracies. Intuit’s multi-million dollar campaign to lobby Congress to keep tax preparation expensive and confusing reveals yet again that this country is one giant sheep shearing operation. We are deep indeed into the looting phase of late-stage imperial decline. From 2006 to 2019, Intuit’s stock price rose 800 percent. 

 All of this, of course, could have been avoided if we only had a truly republican and constitutional tax system. 

 At this point, that option is probably completely off the table in any practical sense. Still, it is worth thinking about in order to show just how corrupt and broken the current system really is. 

 For one, the federal government managed to turn the entire private sector into a tax collection agency. Every business in America is a branch of the IRS. This is due to the existence of tax withholding. For that invention, we can partly thank the great “libertarian” economist Milton Friedman. As he himself admitted, he was an “architect” of this policy. The Independent Institute has the full story.

Friedman was an economist at the Treasury Department in 1943 when the change from the installment plan of paying taxes was substituted for the pay-as-you-go withholding system. Under the old system, income taxes were calculated at the end of the year and then paid in quarterly installments in the next year. As it was, in 1944 the government essentially collected, with some caveats, twice as much tax from Americans by collecting both the 1943 and 1944 income taxes in the same year. In other words, the federal government used WWII as an excuse to implement one of the most widespread surveillance systems in the world. It lives with us still.

 The effects of tax withholding are terrible for the character of the people. Taxpayers frequently don’t realize how much they are paying because they never see the money. They don’t feel the effects of withholding because they don’t pay that money themselves—their employer does. The money flows directly from the corporation to the government. When low-income taxpayers do file their taxes, they frequently receive a refund, which leads them to associate the IRS with getting money. This is a lie, of course. That money they are getting is a portion of their own money that the government overcollected. These taxpayers effectively gift the IRS an interest free loan every year.

 Turning businesses into arms of the IRS has turned America’s tax collection agency into the most powerful arm of our national surveillance apparatus. The Fourth Amendment states that Americans have a right “to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures,” and that the government must get a warrant, rooted in probable cause, before making any such search. 

 The courts and Congress, however, do not apply this amendment to tax collection. As a de facto measure, the IRS treats any search related to knowing an individual’s income as inherently reasonable. So, dutifully, each year, millions of employers across America dispatch reams of documentation to the federal government documenting exactly how much money their employers make—down to the cent. 

This is how a totalitarian regime collects its pound of flesh. When America was still a free country—before FDR—taxes worked entirely differently. Before 1860, virtually the entirety of federal revenue came through tariffs. In 1834, when the national debt was paid off, for instance, Andrew Jackson got rid of all excise taxes (taxation at the point of creation on items such as whiskey) and cut tariffs in half. We now cannot comprehend what it would be like to have a government that is efficient, frugal, and concerned with the well-being of the people. Instead, we have a regime that is actively at war with its citizenry. 

 By the late 19th century, excise taxes made up a larger and larger share of overall federal revenue, but these taxes mostly had no discernible effect on most people. They certainly didn’t require a massive surveillance state in order to be collected. 

 Everything changed with the Progressive movement. At the beginning of the 20th century, a consensus formed among America’s ruling and intellectual class that the older constitutional order was bad and should be jettisoned. That consensus endures today. The reasons for that rejection are difficult to explain but can be summed up best as a spiritual condition. Simply put, something went wrong in the American soul in the decades after the Civil War, and the nation has never recovered. 

 Our tax collection system today reflects that degradation. In a true republic, the government would require very few resources in order to do its job of protecting our rights and liberties. At the time of the founding, the total tax revenue per American per year amounted to about $1. It took the average worker about four days to make that amount. 

 Today, the average American needs to work until April 18, or 108 out of 365 days a year, in order to pay his tax burden to the federal government. America is one giant fleecing operation. You are a sheep, and you are getting sheared whether you like it or not. 

 Americans deserve better. At best, the federal government should metaphorically nuke the tax preparation industry grifters from orbit. Americans should be sent a bill every year specifying what they owe. Even better, the government should get rid of tax withholding and tax surveillance. Instead, every American should have to write the check themselves for everything that they owe—social security, Medicare, income, everything. If they are going to be responsible for preparing their own taxes then they should be trusted to do the math themselves with the IRS only intervening in demonstrable cases of fraud that are investigated like any other crime.

 Those changes alone would likely generate great general interest in the workings and doings of the D.C. plutocrats and octogenarians who treat the public treasury as a private debit card for themselves and their friends. 

 Taxation without representation, indeed.