Mel Brooks, the legendary comedian famously said, “Tragedy is when I cut my finger. Comedy is when you fall into an open sewer and die.”
Simply put, when it happens to me it’s tragedy, when it happens to you, it’s comedy. This logic also applies to many Americans’ views on changes to the tax code, and deficit spending. Most citizens think, “As long as it doesn’t impact me, I’m okay with it.” Unfortunately, whether you realize it, or not, these issues will negatively affect you.
The first imminent issue and many Long Islanders aren’t fully aware of its negative impact, is the change in tax code. The loss of the state and local tax deduction (SALT) will negatively affect a large chunk of residents.
The ability to deduct state income, real estate and sales taxes above $10,000 from your federal tax burden is now officially gone. If you didn’t know this already prepare yourself, because this financial hit will become a reality the moment you file your tax returns by April 15. In step with Mel Brooks’ quote, now that this is affecting me directly, it’s not a comedy anymore; it’s a tragedy.
The Trump tax breaks, that included the SALT tax, were supposed to supercharge the economy and pay for themselves through increased economic activity. In reality, GDP, which, according to our President, was going to jump to up to 5 percent after his tax cuts, is limping along closer to 2 percent. Instead of an economic boom filled with newly created tax revenue, the Federal government is running a trillion-dollar deficit.
The second issue to negatively impact you, the deficit, which compounds the national debt, will strike at a later date. A major reason for increasing deficits is the diminished ability of the federal government to collect taxes.
According to a December 2018 article in Salon.com, “The IRS conducted 675,000 fewer audits in 2017 than it did seven years earlier. Because of the repeated cuts, the IRS has drastically stopped pursuing ‘nonfilers’ who do not submit their tax returns. The number of investigations into nonfilers fell from 2.4 million in 2011 to 362,000 in 2017.”
The bottom line: if you don’t collect taxes, and taxpayers know they won’t get audited, you end up with an ever-increasing deficit. This government behavior is what caused Greece to implode, just a few years ago.
A multitude of news outlets report that only 84 percent of money owed in taxes is collected yearly.
As a result, the price tag of tax cheats comes in north of $400 billion annually. Next time someone brags to you that they own a cash business, while you pay your taxes, please recognize the subtext. It’s code for, “You’re a sucker for paying your taxes, because I don’t.”
Public figures, smug with self-righteousness, are some of the worst tax cheats. Michael Avenatti, the well-spoken attorney who represented Stormy Daniels against President Trump, hasn’t filed a tax return since 2010. Martha Stewart cheated on her taxes, along with former New York Giant Lawrence Taylor.
There is a long list of New York state politicians, including some from Long Island, who claimed to be fighting for the people, but were, instead, stealing from them through tax evasion.
Our national debt is $22 trillion, and growing, and every Democratic presidential candidate is advocating for funding everything from universal healthcare, to a $1,000 a month income for every resident over 18 years old, by raising taxes.
Yet no candidate has mentioned cracking down on tax cheats, as a way to fund their initiatives. Using higher tax rates to subsidize any of these proposals, without a high functioning IRS, will most certainly lead to higher tax cheating.
If America needs $1 trillion in infrastructure spending, and Social Security, Medicare and disability will run out of money within the next generation, then how will the federal government ever balance their budget if they can’t collect the tax revenue they’re owed? Anyone who relies on the federal government for assistance, especially the elderly, should be concerned.
When bad news doesn’t affect us, we dismiss it as someone else’s problem. Most Long Islanders haven’t fully digested the loss of the SALT deduction, and sky-rocketing deficits are still considered other people’s problems. Loss of the SALT deduction and the federal deficit will negatively impact us sooner than later, leaving all Long Islanders falling into a tragic financial open sewer.
