Taxes and Karma "Come Together"

See the stone set in your eyes
See the thorn twist in your side
I'll wait for you

Slight of hand and twist of fate
On a bed of nails she makes me wait
And I wait without you

With or without you
With or without you

Taxes (Continued) Oh No Not That Karma Stuff Again

OK bloggers, I first want to report a couple of administrative issues.

I realize most of you have lives and my blog is likely a very low priority  but all 11 followers “choose to follow” and through various emails (by all of you) expressed at least an interest.  Yet as a follower Steve  tells me Debbie his wife gets updates but he does not.  My sister tells me the same.  I stuck a poll on the blog to vote on one of my questions yet only Barbara and I voted on the blog.  John tells me he gets feeds inconsistently.  A few of you have responded by email to posts and I am totally OK with that (I enjoy it actually) but others have posted comments for all to see (which I also like).  Several College friends Les and Whitey have never said a word or responded to a blog notice so I am not sure they are even on this earth anymore!  I must tell you all that I am perplexed at how on earth Google is managing this whole blasted thing. 

Anyway I will start researching alternative blog sites to see if something might work better.  Meanwhile I enjoy writing this…….”with or without you”.  Hence this week’s music opening!

Now on to the Topic and some answers to the Tax Credit I get such a fantastic benefit from.  But first a few comments from those who wrote to me directly.   One did not post a public comment (maybe due to the issues I noted above) so I will leave them “anonymous”.

“So how much should a couple pay? Good question - I said 20% but upon reflection - I prefer 15% whereby I would contribute the 5% difference to a charity of my choice....rather than the government making that choice for me.”

I assume the rest of my college friends are paying no Taxes and therefore have no opinion!

One of my Stowe friends sent a lengthy reply which I enjoyed very much.  He made a number of great comments but I will only provide a few specific highlights:

“Really liked your subject although I am no where as erudite as you and Barb.”……. 

“So my answer on 1 would be 15% ought to do it. On two I guess I answered it above. We can take care of those who are down an out but I am quite comfortable taking all that is legal.”

 “That said why does the code have to be so complex that I need a person with a masters in tax science?”

And his BEST

“I think you should take all you can get because the gov't (last eight years) is quite callous about what they believe is owed them. On five, you sound like me. If you have the time fight them but $17 aint' great ROI.”

My only disagreement with him on the last item is his last 8 year comment.  Not so much because we disagree politically but because I believe this specific problem tax complexity and fairness is as much a Republican Creation as a Democratic one.

In addition the worst specific experience Barbara and I ever had was on a Tax Audit by the IRS under a Republican Administration.  The IRS is a thing of its’ own seemingly benign to most ordinary taxpayers but potentially dangerous as evidenced by the scandal of politically discriminating on Tax Exempt organizations under Obama, going after political enemies under Nixon, and on selective and abusive enforcement of ordinary citizens.   

 If you saw Barbara’s Blog comment to my last post you will note she says abolish the Income Tax.  I tend to agree with here but not exactly for the same reasons.  She has brought me along on thinking of a consumption tax though, long before this blog.

Ok so about Tax Complexity.  Most of you are aware that the tax code is complex.  Our filings include, or have included in the past, energy credits and this TAA credit, Deferred Compensation plans, Municipal Bond Fund exemptions, Personal Business fillings from my consulting business, and most recently Real Estate Income from our Stowe Home.  Oh the wonder of it all.  All of them especially the basic deductions like mortgage deductions, charity deductions, dependent deductions etc. have their origin in “good intentioned” public policy.  To promote families, promote home ownership, promote charity, promote energy saving, promote health care, promote investment, to promote many noble things.  As my father preached to me the road to hell is paved with good intentions.  I think we are in a tax “hell”.

OK so back to the case in point.

First to those of you looking for “Tax Savings” forget about this one.  This credit has benefited about 30,000 taxpayers (I looked up on internet so who knows that may be fake news) who meet a narrow selection process.  I think it was like hitting the lottery for $45,000 and I did not have to buy a ticket!

 So how did Barb and I  win this “lottery”?  In one word I will say “Karma”.

Remember that job at Reliance Insurance Company that I quit back in 1987?

Remember that they went Bankrupt, helping my Division turn a profit and grow in 2000?  Basically growing my own income in the process?

Remember I retired early?

Well when I retired I claimed my Reliance Pension from the US Government’s Pension Benefit Guarantee Program which took over the defunct company’s pension plan. My ten years of service pays me $148 per month.  I started claiming in 2010.  Shortly thereafter they advised me that I was eligible under an act passed by congress in 2002 for the vaunted TAA Health Care Tax Credit!.  The 2002 Congress and George Bush added those who collect a pension from them the PBGA are all eligible for a health care Tax Credit regardless of TAA eligibility. Wala no other strings attached.  Now I had already obtained coverage for my own health care (I voluntarily left AIG’s retiree plan as it was too expensive) and had purchased an individual Blue Cross plan from Vermont Blue Cross.  Checked it out and  the plan qualified, furthermore, if I wanted they would front me the 70% of the premium for my plan every month! Wow, nice! I said no just send me at year end when I take the credit in a lump sum via my tax return process.  There is no income cap, just a lot of paperwork!

When Obamacare was enacted the credit ended in 2014 and I actually was happy with that.  I mean they finally were going to give credits to all citizens based on income (we can blog later on that subject).  It was the only piece of Obamacare I felt made sense I mean if I do not need help from the government for my Obamacare Policy (even though the same coverage now cost 20% more then and lots more than that now!) so why would anyone need help under that “old program” I assumed our congress and President could figure that out!  OK you might ask what happened?  In the fall of 2016 I got my regular quarterly PBGA newsletter (I so look forward to it!).  See what it said!

Here is the first Paragraph of the  Pension Benefit Guarantee Corporation’s Fall Newsletter.  I also provide a link to those who want to read the entire actual PDF.

“Health Care Tax Credit Makes a Comeback President Obama signed legislation June 29 to extend the Health Coverage Tax Credit through Dec. 31, 2019. Congress originally established the tax credit in 2002 to help displaced workers, including retirees receiving a benefit from PBGC, but it expired at the end of 2013. The Internal Revenue Service will manage the program again with partners including PBGC. Implementation details are being worked out. When new IRS guidelines are ready, PBGC will let participants know how to apply for the tax credit. You’ll find the information on the Retirement Matters blog on PBGC.gov. Sign up today for email alerts on PBGC.gov to make sure you receive all blog entries and important tax credit updates.”

http://www.pbgc.gov/Documents/fall2015.pdf

So now I was eligible to get money for even more expensive Health Care Coverage and thus a BIGGER credit.  How did this whole thing start you may ask?

Now for all you Republicans (and Democrats) please note when the Tax Credit for ALL persons receiving a pension from PBGA was originally passed in 2002 we had a nice cooperating congress and a Republican President.

            We all know GW Bush a Republican was President

The senate was split exactly 50/50 (That was because one senator switched parties from Republican to Democrat)

The House was almost evenly split fluctuating between about 208 Democrats and 223 Republicans.

Here a thought that flashes into my mind that maybe when parties are evenly split horse trading (The you give me this, I will give you that) becomes even more prevalent as a way “get things done”.  Note that Fast Track Free Trade was a major initiative of that congress and I would not be surprised if this was not involved in “tweaking” the TAA to include helping all those pensioners from all those bankrupt companies pay for healthcare.   No need to make it income dependent, just get it done and let the PBA handle.  I do not know for sure that is what happened but that is what I think!

So readers I for one am convinced that our entire huge and complicated tax system is filled with deals like this negotiated piece by piece for 50 or more years.  It has created a bloated powerful bureaucracy.  It serves special interests, lobbyists, unions, businesses etc.  Collecting funds to support our Federal Governments needs with tax revenues is almost now just secondary by product.

It has made people like me cynical and frankly “tax evaders”. 

This brings me to my final conclusion for this entry.   We really need to scrape it.  Why? First, because I feel every adult citizen needs to pay something to support the government we all need and to feel that they contribute.  Yes every citizen not “just” the 52% wealthiest. The main reason being disconnected from supporting our country only widens the divide we have.   I also understand that we need to raise revenue based on ability to pay, and that tax rates need to be simple, clear and “fair”. I also think it is smart policy that they need to not stifle investment, or suppress incentives to work. 

I will talk about the other part of my tax thinking with a different example next blog.  Why one of the biggest reasons I retired was that paying almost half my income in taxes for several years was not worth my time and effort, it is not good for our system either.

Until then adieu.

PS as to the morality of our own tax filing I sleep just fine.  I am a rule follower and believe that in the end one's path is best served in following societies rules unless it conflicts with REALLY DEEP moral values.  To me the tax code gets what it deserves.