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4. State and local governments will increase their role as tax collectors.
There are more than 8,000 taxing jurisdictions in this country. And they all seem to be licking their chops.
You would think that all the state surpluses you've heard about would reduce the need by states, counties, and cities for more taxes.
But that's not the case. You see, government seeks taxes not just for the revenues but for the power as well. Because money means power. And having the legal authority to take your money means having power over you. There is such a thing as too much money. But for bureaucrats and politicians, there is no such thing as too much power.
State and local officials will try to push through sneaky tax hikes, using such means as:
- Increasing the taxes on your telephone. There are currently 38 or more taxes affecting your phone bill. None in itself huge enough to cause you to go running to the hills. But combined they add up--and over time, they get increased bit by bit.
- Adding to "sin" taxes, like cigarette and alcohol taxes. But watch out what gets considered a sin. Seems that gasoline taxes are also a favorite for constant increases.
- Sneakily increasing your property taxes. In some states they'll pretend to cut your property taxes, knowing that appreciation will automatically increase the taxes beyond the decrease.
- And remember those stories you've read about IRS audits being down because of the supposed funding cuts? Well, the IRS routinely exchanges information with the states. And the states are likely to step up their audits. For example, after Nannygate--when an attorney general nominee lost the bid because she didn't pay payroll taxes for her kids' nanny-- several states subpoenaed nanny agency client lists to find tax evaders.
- States are also getting more aggressive in collecting "use" taxes. Use taxes are taxes you owe when you buy a product. If you drive across state lines to buy, say, furniture in a state that doesn't charge sales tax in order to escape your state's sales taxes, technically your state can come after you for the "use" tax. For example, they intercept truck deliveries from other states and get the names of customers.
Sneaky, yes. Scary, yes. And expect to see this type of behavior more often.
5. Congress and the states will use the tax code more and more to encourage narrow policy results.
For example, believe it or not, the tax code is being used to try to limit suburban sprawl. For example, the American Farm and Ranch Protection Act of 1997 reduced estate taxes for the donation of conservation easements in some areas. One bill would cut capital gains tax in half for the sale of land to government or nonprofit groups for conservation purposes, such as to protect wildlife.
Using taxes for nonfinancial policy reasons adds to the complexity of the tax code, and the compliance costs of obeying the law.
6. Government will continue to perfect its "foot in the door" strategy.
Once a tax is established, no matter how small, it's like a burglar getting a foot in your door. The tax never leaves. In fact, it inevitably grows.
Take one of the more than 30 taxes imposed on your telephone service. One such tax has been there since 1898. It was initially passed to help pay for the Spanish-American War.
That tax was never repealed. Instead, other taxes were added on--and on--and on.
Please read on...
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