Would this tax collecting solution help the IRS collect all taxes from everyone?

Question

Also, would you all approve of this? If you don't approve, then why not?

Here is the link to the information that I typed up:
http://www.geocities.com/committed_and_sane/New_Taxation_System.doc

I hate you a little bit Griffin. lol j/k
You are correct. Illegals wouldn't have bank accounts, but supposedly, politicians are wanting to give illegals drivers licenses, so if they have a drivers license, then you might as well allow them to set-up a bank account.

Or companies can hire people under the table until they are caught and are force to pay up to hundred thousand dollars in fines.

But that is a really good point. I guess the country is either going to have to make a separate plan to deport illegals, or just make them temporary citizens. I don't know what to do with illegals. The way I see it we have two choices, deport or let them stay.

Thanks Griffin and bostonia for writing a great comment to it. I have learned from this post that there are so many variables that must be looked at, removed, added, and updated that by the time you get something that works, you have a system like we have now.

I got an education from you two. Thanks again! I guess in an ideal world, this would work. If everyone would get a bank account and if all employers would pay all their employees using direct deposit, it would work. Unfortunately, the ideal world is called fantasy land, which I think about all the time.

Thanks again Griffin, and bostonia! Great post!

"it seems like it shifts a lot of the withholding burden from basically payroll departments to banks."

I wanted to respond to this. Basically, banks would have an automatic script that would do all this. I was thinking of the transaction fee that ATM machines are programmed to take from your account. So it wouldn't push any work-load onto banking staff, well except for the extra data that will be added with each deposit transaction.

But you two already pointed out several good points on why it won't work. I just wanted to through out an idea. Probably it has already been thought of before, but in case it hasn't, now all the people that think like me have learnt something.

Charlie & Angie G:

Those are very good points! I was thinking if money is taxed, when large sums of money is deposit like $500, then it wouldn't matter who you were. Most people aren't going to carry around a million dollars on them. That would be very stupid, because you are just a fool waiting to get robbed. For the past 3 weeks, in Springfield, MO, residential and store robberies are very high. So if these people knew you had a million dollars on you, then they would most likely either hurt you and take it, or if it really came to it, to get a million dollars, they wouldn't think twice about killing you for it.

So, I doubt people would keep money on them, or in there house, because there are people that would come after that money. So there would still be deposits. I think there are some people that would try to get around this tax collection solution by keeping money on them, but after they have it stolen from them once or a few times, they will make deposits in banks.

Answer 1

Where does this leave the illegal aliens?

Honestly though, it seems like it shifts a lot of the withholding burden from basically payroll departments to banks. Small business owners could and would demand a lot more cash payments, to continue evading taxes. Then take there cash dollars and put them on deposit at a foreign bank. Global companies would find some creative ways to make invoices so that it appears like they are for foreign services.

When it comes to tax evasion, the options are limitless. I'm not suggesting they are legal, just limitless.

You friend is partially correct about transactions over $10K. It doesn't really raise a flag, it just needs to be reported to the FRB. It was basically established to hinder money laundering, not tax evasion.

Incidentally, I hate the Earned Income Credit, but only because if it's name. Its not really a tax credit, it is just welfare.

Answer 2

It won't work, for a number of reasons.

1. You can't compel people to get a bank account. Some manage their money so poorly that no bank will allow them to open an account. Many deposits to bank accounts are not taxable transactions. How do you plan to handle that?

2. Tax evasion by people in regular employment isn't a significant problem. Taxes are withheld from their wages by their employer. Tapping their bank accounts won't solve anything.

3. Why kill off the Earned Income Credit and replace it with welfare type benefits? The whole idea behind the EIC is to get people working and OFF of traditional welfare. The intent is to provide additional funds for things like daycare until their income raises to the level of a livable wage.

4. Asset tax? Already have one. It's called property taxes and is collected locally.

Answer 3

Just 2 things to add to what the others have said.

1. Illegal Aliens can get a bank account now, it's one of the reasons listed on the application for an ITIN. The reason the IRS doesn't chase after illegals now is because they are mostly low income and thus have a low or no tax liability. Illegals don't qualify for any tax benefits such as child tax credit, dependent care credit, earned income credit, and social security benefits; but must pay income and social security taxes. Illegals can't legally get a job (SSN not authorized) so the only legal employment they can have is self employment (subject to SE tax). Persons who use a fake SSN to work aren't allowed social security benefits on that income, neither is the real person who owns that SSN so social security gets to keep the money.

2. The biggest part of the tax gap is due to the self employed and investors. Investors inflate the cost basis so they have a smaller profit, a loss, or back date the purchase so it qualifies for long term gains. The self employed try to hide income by not reporting cash and inflating business expenses. Most "regular" tax payers don't cheat because their income is reported to IRS by 3rd party's and taxes are withheld (interest, dividends, wages, collage tuition, pensions, etc).

Answer 4

seems like a decent plan