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Assinine Tax Laws

"To tax and to please, no more than to love and to be wise, is not given to men." - Edmund Burke.

"Anybody has a right to evade taxes if he can get away with it. No citizen has a moral obligation to assist in maintaining the government. If Congress insists on making stupid mistakes and passing foolish tax laws, millionaires should not be condemned if they take advantage of them." - J. Pierpont Morgan.

"The wisdom of man never yet contrived a system of taxation that would operate with perfect equality." - Andrew Jackson.

"The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing." - Jean-Baptiste Colbert.

"Don't tax you, don't tax me, tax that fellow behind the tree."  [Author unknown.]

It has been said that tax laws are like sausages - it's best that you don't see how they are made. Unlike fine sausages, many tax laws should have been left on the cutting floor. Often prepared by special interests, tax laws tend to be based more on emotion and greed than upon vision and intellect. Many tax bills are amended at the last minute, often dramatically so, and then require what are known as "technical corrections."  The tax blunderbuss often kills the camel along with the targeted gnat on its back. And let's not even mention the fact that so-called "tax policy" is all too easily associated with political corruption. (Ok, so we did.)

Over the years there have been a number of truly asinine tax laws. What are your "pet peeves"? Let us know.  Here are just a few of ours:


Hope and Lifetime Learning Credits (Section 25A).  A "poor man's tax break."  Ridiculous!  Tax sausage?  Pure, unadulterated political baloney.  The poor man shouldn't shoulder any tax - so that poor man shouldn't need any tax breaks.  That any poor person should be paying taxes at all is a travesty.  Rather than see to it that the poor are tax-exempt, we get this complicated abomination.  What it does do is permit politicians to brag about what they've done for us taxpayers and how they've helped children with their educations.  They've even gone so far as to make two separate credits out of this silliness, thereby effectively doubling their bragging rights, and to top it all off they've created yet a third "tax-shelter for the poor," the education IRA (Section 530).  (These education IRA's have some redeeming qualities, even if they are a bit skimpy.  They encourage saving and are available for folks with middle-class incomes and real tax troubles.)  An "election year grandstand" is what these overly-complex provisions are all about.  Funny, many of these same politicians who enacted the Hope and Lifetime Learning Credits are strongly opposed to school vouchers.  Go figure....


Alternative Minimum Tax (Section 55, et, seq.)  Glory be!  The taxman giveth with one hand and taketh away with the other.  The alternative minimum tax (fondly referred to as the "AMT") is a bald-faced acknowledgement that Congress really didn't mean it when they provided the tax benefits which are subject to .  Rather than "bite the bullet" and reduce or repeal the offending deduction or credit, our spineless Congress layered this twisted tax trap on top of the already overweight code.


Passive Activity Loss Limitations (Section 469).  Talk about overkill!  The "tax shelter" industry of two decades ago spawned an entire series of tax "fixes," any one of which would likely have been the death knell to the industry.  We get another message here as well.  It is alright to be passive so long as in doing so you make money - then you might qualify for such benefits as capital gain treatment (but don't be too quick about it or you'll lose that benefit).  Passively lose money and you will need to wait (ditto capital losses).


Generation Skipping Transfer Tax (Section 2601, et. seq.)   Once upon a time back in merry old England the King was angry because his subjects would put their property in trusts to avoid the inevitable tribute that became due upon death.  To "fix" that tax problem, the King invented the Rule Against Perpetuities.  That rule is still with us in most of the 50 states.  The California supreme court once found the Rule Against Perpetuities to be so difficult to understand that a lawyer couldn't be held responsible for his (or her) negligence in failing to come within its terms.  Well, the Generation Skipping Transfer Tax ("GSTT") makes the Rule Against Perpetuities seem simple by comparison.  The first GSTT was so complex, in fact, that after 10 years it was repealed before it ever became effective.  The current GSTT is barely better.  Like the regulations for "substantial economic effect" in partnership allocations (the infamous "704(b) regs"), the GSTT causes documents that take heed of its effects to be nearly incomprehensible.