Among the Tax-takers

By Earl Wright

I worked for the IRS and survived.  I learned about taxpayers, but the really interesting part of it was learning about tax-takers.

We all have this vague notion of people who don't pay taxes but receive money from Uncle Sam in what euphemistically is called a tax refund.  That's what I had, a vague notion, until I was forced to close my business in 2010.  I took a seasonal job with the Internal Revenue Service to get some household cash flow going.  We "Timmy Geithner warriors" were appalled by what we learned.

We generally knew that 47 percent of our population pays no income taxes whatsoever.  However, we didn't know, and I suspect that very few of you know, how much of your tax money is actually given to non-taxpayers -- in a lump sum, to do with as they please.  Overlunch we joked that half the tattoo parlors in America would go under without Uncle Sam's largesse.  Only later I learned that was closer to the truth than a joke.

Like most anti-poverty programs, the Earned Income Tax Credit when enacted in 1975 was supposed to be temporary.  It was visualized as a tool to lift the working poor out of poverty.  It was quickly made permanent and has been modified numerous times over the ensuing 36 years.  In 2004, 20 million families received $36 billion.  The flower children assume that was $36 billion spent on food, shelter, and health care.  We who live in the real world know it was spent on big-screen television sets, 22-inch chrome wheels, and colorful tattoos.

It was widely noted last week that those living below the poverty level in the U.S. tend to own cars, TVs, computers, cells phones, enjoy air-conditioning, and own video game consoles.  The free money these folks receive from you and me is not counted for poverty level calculations.

In addition, the feds estimate that between 22 and 30 percent of taxpayers claiming EITC do not actually qualify so we spend an additional $8 billion to $10 billion trying to straighten that out.

I can't talk specifics about my time at the IRS, but here are some generalities.  Those claiming EITC also qualify for other so-called refundable credits (how can something be refundable when nothing is paid in the first place?).  The typical 1040 would show an income of between $12,000 to $18,000 for the year.  It was usually accompanied by one W-2 with the income earned almost always by a female.  With other refundable credits listed, a "refund" would be claimed of between $6,000 and $9,000.

And these people believe that is their money; they have a right to it.  I fielded a telephone query from a woman who didn't even say hello, but blurted, "I haven't got my taxes."  For an instant I thought she meant that she didn't have enough money to pay her taxes, but I quickly realized she was talking about her "refund."  We newbies learned that those who pay taxes have a general fear of calling the IRS and tend to be nice on the telephone, while those who don't pay any taxes believe they are entitled and are not always pleasant to deal with.  We also learned these aren't the brightest people on the planet with many signing their refund over to a tax-preparer and then claiming they didn't know they had done that.  (The "instant refund" scam perpetrated by many storefront tax-preparers is a whole other story.)

I mentioned the tattoo joke above.  It turned out to be the truth in the only anecdotal story I heard during my stint at the IRS.  A golfing buddy said his girlfriend's daughter claims EITC among other things and received a U.S. government check for $6,000.  She used the money to take her toddler daughter and the child's ne'er-do-well father to the Monterey Bay Aquarium -- a couple hundred bucks -- and spent the remainder for a giant tattoo on her back.  I'm so glad I could help.

President Obama has asked us to embrace "shared sacrifice" to help break the stalemate over thedebt impasse while lecturing, "We might as well do it now -- pull off the Band-Aid, eat our peas."  Well Mr. President, are you including the above-mentioned 47 percent in your shared sacrifice scenario?  Should they pull off the Band-Aid while drinking their $5 energy drink in front of their 60-inch flat-screen TV?  I know I would feel much more like brothers fighting the good fight if their hands weren't in my pockets.