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Re: OT Government Fraud




I don't think the IRS can build the adjustment into the tax tables because
not everyone got the "refund". However, it wouldn't surprise me if the
gov't tried to tax the rebate as income.

--MB



The tax rebate should only be considered income if it is not covered by
taxes already paid. I believe there is a prohibition (constitutional?) that
the federal government can not levy a tax on a tax. Also when paying income
taxes, other income taxes can be deducted and this lowers the tax bill.
Since I live in a state with no state income tax, the complications of state
vs federal income taxes is moot as far as I am concerned. I may not recall
correctly which one is deducted first, but as I recall the taxes of one
entity can be deducted before figuring the taxes of the other. I was under
the impression that the state taxes could be deducted from the income before
figuring the federal bill. But if the federal is deducted before paying the
state, the rebate could increase the income eligible for state income tax.

Eventually the bill for services must be paid, so when we get a rebate one
year it probably must be paid back in another year. The idea of producing a
quick boost in spending to help jump start the economy is reasonable as long
as it is recognized that taxes may have to be raised during the good times
to pay for the deficit spending during the bad. One of the problem with
applying Keynsian economics is that politicians are willing to remember the
part which allows deficit spending, while forgetting that taxes need to be
raised under other circumstances to maintain economic stability.

Is the government and industry fraud as bad as it used to be? Look at how
the robber barons manipulated the markets, but now this sort of thing is
much more difficult to do. They would quickly create a monopoly, and then
suck it dry. Yes I know one can argue about Microsoft and Enron, but now
the workers have social security as a safety net, which they did not have
during the heyday of the robber barons, and such activities are now
investigated and even sometimes prosecuted and compensated.

John M. Clement
Houston, TX