The Housing Bill's Hidden Taxes
 Monday, July 28th, 2008  by Tom deSabla

The new "housing bill" will apparently become law, and the implications are disturbing. First, the swiftness of Congress's "action" on this bill reminds me of other times they have rushed to action on major legislation, often without the benefit of having read it - like the Patriot Act, for example. It's nothing new either - the Federal Reserve Act was another such instance, and Woodrow Wilson himself later admitted he had made a mistake by signing it. 95 years later - the Fed is still here. It would be tragic if this housing bill has a similar destiny.

So, it should always concern us when Congress acts quickly, as they are usually scrambling to "do something" in response to some crisis, real or perceived. Their mistakes tend to stay around long after the individual legislators are gone. Also, they are so undisciplined that they can't pass focused legislation anymore - every bill has to be larded up with various authoritarian and free spending provisions that have nothing to do with the purpose of the bill. Las summer's "immigration bill" contained monies for securing the southern border - of Mexico. I could go on.

The new "housing bill" has a chilling provision that is largely unreported - the requirement that all credit card transactions, including online, will be reported to the IRS by 2009. The argument in support goes like this - "This is no different than when an employer pays you money, they have to report that to the IRS. Brokers have to report the sales of securities, and when you sell a home, the closing attorney reports the sale to the IRS - so what's the big deal? It's just closing another loophole, that's all."

First off, such a far-reaching tax provision demands to be debated on its own, and not snuck into an unrelated bill at the last minute. Second, the tax rules for securities "gains" are famously incomprehensible, and the IRS aggressively totes up the amount of every securities sale and calls it all "income," meanwhile, you are left alone to compute your losses, and hope they agree with you. Interestingly, with big banks, profits may be privatized and losses socialized; but with securities sales (and gambling losses) - the profits are taxed, but losses are yours to bear alone.

The real elephant in the corner, however, is our entire tax paradigm itself - one best described as, "every time money changes hands is a taxable event." This is no exaggeration. All the "exemptions," and "deductions" mean nothing, as they can be changed or eliminated at will. Tax rates are not the issue here, instead it's the increasing number or economic activities being labeled as "income" and reported to the IRS. Back when America had steady growth, savings, and low inflation, very few people paid income taxes. Until the 40's, according to the Treasury, less than 10% of us filed income tax returns. Obviously, more receipts became "income" during the intervening years.

Continued, just click here for Part 2.