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Various tax scams plaguing US

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Paying taxes of any sort is one of the least-pleasant activities any American can experience, including those level-headed taxpayers who know that taxation is an important and necessary function of a civilized nation.

Our Founding Fathers knew that well. When listing the powers of Congress in Article I, Section 8, of the United States Constitution, the power of taxation was the first one they named proving wrong the claim by anti-tax propagandists that the US was founded on anti-tax sentiments.

Since the beginning of the nation, there has always been a movement to escape taxation by some that would result in transferring taxes to someone else, all of which are fraudulently labeled "tax reform."

The most damaging and harmful tax movements of late have been the cutting of taxes for the nation's aristocracy and transferring the tax load to the working middle class. That began in earnest in the Ronald Reagan presidential administration and has been carried to its ruinous extreme by the current George W. Bush administration.

When not cutting taxes for themselves, anti-tax proponents dream up new and more-novel plans to make the tax codes more unfair for others and more beneficial for themselves.

One tax scheme was proposed by magazine publisher Malcolm Forbes, who ran for president in 2000 with his only platform proposal being a flat tax on income. Forbes, a multimillionaire, earned his great fortune by two strokes of genius: 1) being born; and 2) waiting for daddy to die.

Forbes failed to mention that under his flat tax, in which dividend and interest income were untaxed, he could have had his $500 million fortune stashed away earning only 5% for a $25 million annual tax-free income. It apparently slipped his mind that he should have mentioned that fact or the fact that the "death tax" on inheritances never prevented him from becoming extremely wealthy for doing nothing.

No person should ever take advice on wealth building from someone who inherited great wealth and no nation should base its tax laws on the proposals of one who would greatly benefit from those laws.

Others periodically offer the nation a sales tax of 23% up to 34% to replace the income tax, payroll taxes, capital-gains tax, inheritance tax and all other taxes. Proponents call the proposal "The Fair Tax," but like all sales taxes, the burden would fall more heavily on the middle class and less so on the wealthy. What proponents also forget to mention is that, while the working American is busy all year long at the job and paying the steep sales tax, the proponents, who could be reaping a small fortune from their investments, could well be off on a yacht stopping in all the Caribbean locations, which, surprisingly, wouldn't have the US sales tax in force. Or they could just settle down in the Italian villas their vast fortunes purchased and, surprisingly again, could avoid paying the US sales tax.

Others propose a "value-added tax" which would have the same effect. Under this plan, a sales tax based on the added value of a commodity is added to the cost of that item at each stop in its development or movement through the economic system. An example would apply to the lumbering industry that framed the author's formative years. A tree has no economic value standing in the forest. When it is harvested and sold to a lumber mill, a tax is added. After the log is sawed into lumber, another tax is added when that lumber is sold to a distributor for a price that also recoups the initial tax. Another tax is added when the distributor sells the lumber to a lumber yard, which adds another tax when sold to a customer, either a contractor of an individual. If sold to a contractor, another tax is added when the lumber, used in construction, is sold as part of a building. This total tax is paid by the end user, which is the individual, not the business or corporation. And the elite sailing the Caribbean on his yacht or taking life easy at an Italian villa pays no US tax.

As an example of the scam of national sales or value-added taxes is an American actor, educated and trained with American tax dollars who may receive $20 million American dollars to film an American movie for an American producer in Vancouver (no US taxes there) to be played in American theaters with American moviegoers paying $10 American (oops, that might be the cost before several layers of "value-added taxes" were heaped on). Then the actor and the producer could take their American loot to their Riviera villas and never pay a cent in American taxes while the American earning $20,000 annually as a sewer worker (ala Ed Norton) pays all the taxes. That is advertised as a "fair tax" by those backing the scam.

Others who benefit from the US economy simply make no bones about their desire to escape US taxation. Halliburton, the giant oil-services corporation once headed by Vice President Dick Cheney, has abandoned its Texas birth place to run off to Dubai to escape US taxes all the while feasting on American defense contracts, many associated with the war on Iraq.

The Boston Globe reported in March about another scam perpetrated by an American corporation under the headline:

Shell companies in Cayman Islands allow KBR to avoid Medicare, Social Security deductions.

The Globe reported:

Cayman Islands - Kellogg Brown & Root, the nation's top Iraq war contractor and until last year a subsidiary of Halliburton Corp., has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in this tropical tax haven.

More than 21,000 people working for KBR in Iraq - including about 10,500 Americans - are listed as employees of two companies that exist in a computer file on the fourth floor of a building on a palm-studded boulevard here in the Caribbean. Neither company has an office or phone number in the Cayman Islands.

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***************************************************** Thomas Bonsell is a former newspaper editor (in Oregon, New York and Colorado) United States Air Force cryptanalyst and National Security Agency intelligence agent. He became one of (more...)
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