By Bill Bischoff December 5, 2012
Journalists write lots of stories about taxes. They’re a staple of personal finance magazines and websites, and come tax season, it seems the mainstream media can’t churn them out quickly enough.
As a tax professional and columnist, I find some of these stories balanced and informative, but too many are biased and missing critical details taxpayers need to know.
Here are three common mistakes journalists make when writing about taxes.
Writing With a Pro-Tax Bias
Regardless of your political affiliation, you’d probably agree that taxes are necessary to maintain a civilized society, but let’s get one thing straight. Income starts off belonging to the individuals and businesses who earn it — not the government.
I go nuts when I see an article or hear a pundit use the phrase “tax expenditures.” This term refers to the amount of your income that the government doesn’t take due to the existence of various “tax breaks.” This language implies that the government is at first owed a significantly larger portion of your income than you end up paying in taxes. However, if you’re the lucky “beneficiary” of some “tax expenditures” like personal exemption deductions and medical write-offs, you’ll get to keep a larger portion of your dough.
This pro-tax jargon propagates the false idea that income is owed first and owned second. Your phrasing should reflect just the opposite – that money is earned and owned before it is taxed.
Ignoring Excessive Complexity
My personal copy of the Internal Revenue Code is over 4,000 pages of very fine print, and it weighs about four pounds. The table of contents alone is almost 300 pages. That’s just the Tax Code. If you add in IRS regulations and pronouncements that are supposed to explain how the tax rules work and court decisions dealing with tax controversies, you’re looking at many thousands of pages and who knows how much poundage.
When something gets this unwieldy, it doesn’t work right. And when folks like me who make a living from dealing with tax complications start ranting about excessive complexity, journalists should take note. The more perplexing and entangled the code, the more money individuals and corporations must spend to have tax professionals sort it all out.
Each year, the growth of the Tax Code is an underreported story. It’s easily quantifiable – in new pages, words or money spent coping with new regulations. And there is no shortage of sources ready to complain. Get after it.
Treating Targeted Tax Breaks as Simple Gifts
The government often uses tax policy to encourage behavioral changes it assumes will benefit the economy. That’s why you see tax deductions for home mortgage interest and tax credits for Chevy Volts and wind turbines. Targeted tax breaks like these can have far-reaching – and sometimes unintended – consequences, but tax journalists tend to focus on what they can do for individual filers and corporations – not what they might do to the economy.
Remember that when the government uses tax policy to promote or discourage the growth of specific industries, it does not always make the right choice. If it did, Solyndra would be profitable and the residential real estate meltdown would never have occurred.
Targeted tax breaks can also encourage heavy lobbying and in some cases governmental corruption. Beneficiaries of such breaks are willing to pay to get them and keep them.
So when you write about targeted tax policies, please be critical. Don’t focus solely on what a break can do for a return. There’s usually a story in what it might do to the country.
Bill Bischoff is a tax specialist and a columnist for SmartMoney.com. He has been a licensed CPA for more than 25 years. He has written several books on taxes, including “Anti-Audit Warfare: How to Avoid or Beat an IRS Audit” and “175 Tax Reduction Strategies.”
This entry was posted on Wednesday, December 5th, 2012 at 7:38 am. It is filed under On the Beat, Skills and Tradecraft and tagged with government, IRS, policy, tax code, taxes. You can follow any responses to this entry through the RSS 2.0 feed.
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