The IRS Reveals Our Failure as a Republic

Three years ago I received a notice from the IRS about a problem with my taxes. In part the letter read that the agency had tried to contact me several times, but received no response. In bold it read Final Notice. Only, I’d never received any notices.

I called the agency the next day and quickly found out that someone had fraudulently used my Social Security number to file a tax return.  This is common, the agent told me. When I asked about the “tried to contact you” and “Final Notice,” language, the agent told me that this was simply a form letter.

I asked if it was standard policy to lie to constituents, at which point I was told some drivel about how the agent on the phone wasn’t responsible for the letter, blah, blah, blah.

As federal tax day rolls around, I can’t help but reflect on that incident, and the fact that I must rely on an accountant to ensure my taxes are done correctly.

The annual cost of compliance with the federal income tax — not paying taxes, just calculating them — is at least $67 billion and six billion hours.

When the federal income tax was initially passed in 1913, the code ran 400 pages. It now spans over 73,000 pages. It’s so complex that most people would be foolish to attempt filing their returns without professional assistance.

This situation — that Americans can’t comply with their own laws without paid assistance from specialists — goes against the notions of self-reliance that led to the birth of the nation in the first place.

This can’t be what we as citizens intended, and certainly not what we want. The problem is that our system of government’s structure has failed to keep up with the needs of the population, so now our voices are lost.

The U.S. Constitution is an elegant document, but winning its passage wasn’t easy. Gaining approval from the voters in New York was of particular concern, so James Madison, Alexander Hamilton, and John Jay set about writing a series of articles, 85 in all. Written under an assumed name (“Publius”), the articles were published in New York in support of the new governing document.

We know them as the Federalist Papers.

These articles took on extraordinary importance in the years after the Constitution was adopted. They are the most comprehensive set of explanations concerning the Constitution, written by some of the very men who worked for its passage in the first place.

In Federalist Paper No. 10, James Madison explains why a representative form of government — i.e. a republic — is desirable over a true democracy. The short answer is so that a majority cannot trample on the rights of a minority.

One area of establishing a republic that Madison poorly defines is the question of how many constituents each congressman will represent. He pointed out that:

By enlarging too much the number of electors, you render the representatives too little acquainted with all their local circumstances and lesser interests; as by reducing it too much, you render him unduly attached to these, and too little fit to comprehend and pursue great and national objects.

So if too many constituents are covered, then representatives aren’t in touch with the people. If too few constituents are covered, then representatives are overly concerned with local issues and risk not seeing the big picture.

After the first U.S. census in 1790, the number of U.S. Representatives increased to 105 for a population of 3.5 million. On average, there was one representative per 34,000 people.

Today, the population stands at 320 million, and we have 435 representatives, each of whom represents just over 700,000 people.

Houston, we have a problem.

How can a single representative take into account the concerns and political leanings of that many people? They can’t. Instead, they pay attention to the small minority that provides the biggest return — large donors whose general leanings fit the voters in their district.

This combines the power of cash with the power of votes. What it doesn’t do is address the concerns of everyday people.

If it did, wouldn’t we have long ago found a replacement for the monstrosity we call the tax code, or at least demanded that the IRS work as if it actually were a service bureau owned and operated for the benefit of the public?

I’m not advocating for higher or lower taxation, just simpler regulations that the average American can follow, and communications that are straightforward and truthful.

To further illustrate the point, I brought up this issue to my representative. I contacted her via email, on her website that is supposed to exist specifically for this purpose.

What I received was a form letter via email that did nothing to address my issue, but went to great lengths to let me know the good works my representative had done on my behalf.

For some reason, on this tax day especially, I don’t think I’m getting my money’s worth.

rodney_sign

 

 

 

Rodney

How Will Trump Restore the Dream of the Golden Years?

President Trump has come into office with a tall order at hand to restore faith in our ability to retire on time… or at least come close. But the numbers aren’t in his favor… or ours.

Our new infographic, How Will Trump Restore the Dream of the Golden Years?, dives deep into U.S. retirement figures, to analyze a scary trend in the U.S. and gain perspective on the future of the retirement landscape.

LEARN MORE
Categories: Economy

About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.