Friday, April 25, 2003

With all Dubya's current and proposed tax cuts for the rich, the government still has to get money from someplace. What to do? What to do?

How about demanding detailed, exhaustive proof that all those lucky duckies in the working poor actually deserve their Earned Income Tax Credit -- not with their tax returns, but well in advance?

The new measures, which are expected to be published for public comment shortly, are scheduled to begin in July, when the first 45,000 taxpayers who fit into a "high-error category" will be asked to submit proof of their eligibility within six months. The program will accelerate to two million taxpayers in 2004. Eventually some four million "high error" claimants -- a fifth of the 19 million who now claim the tax credit -- will be required to submit advance proof of their eligibility. ...

Only a few types of evidence will be acceptable to the I.R.S., and some are documents that will be difficult or impossible for people to get within the six-month deadline. To prove their relationships to children, for example, they are expected to produce marriage certificates, in some cases for other people's marriages; for marriages that took place abroad; and in a few cases for marriages of great-grandparents and great-great-grandparents.

Even American weddings may be hard to document adequately in less than six months. The State of California, for example, warns on its Web site that it may take "up to two to three years" to issue copies of marriage certificates, "due to budgetary constraints." The State of Ohio does not even issue copies of marriage certificates, only "marriage abstracts," which are not certified documents and take six months to obtain in any case. ...

Claimants in a "high error" category -- effectively, everyone taking care of a child other than the child's own mother -- will have to prove that the child was not only related, but also living with them, using either school records which may be unavailable, or an affadavit from a landlord (not a building superintendent).

This move has attracted some criticism:

...some tax experts criticize the higher burden of proof as unfair and a wasteful allocation of scarce I.R.S. enforcement dollars. They say that corporations, business owners, investors and partnerships deprive the government of many times what the working poor ever could -- through both illegal means and legal shelters -- yet these taxpayers face no demands to prove the validity of their claims in advance with certified records and sworn affidavits.

Others warn that the proposed I.R.S. rules will set a standard of proof so high that it will be difficult, and in some cases impossible, for honest taxpayers to meet it. As a result, some people entitled to the tax credit will no longer receive it. And those who do manage to file successful claims will almost certainly have to pay commercial tax preparers more for helping them with the extra paperwork.

But they're missing the point. They're adjusting the tax code to reduce incentive for people to be poor, so that instead, they will choose to be rich. Suze Orman can tell you all about it...

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