President Obama says tax avoidance “is a big global problem,” and it is—to big-spending liberals who fume that they don’t have enough taxpayer money to redistribute and waste on crony projects.
Actually, tax avoidance is not only legal and appropriate; as an American, it’s your patriotic duty. The less money taxpayers send to the government, the less money government wastes, and the more money citizens have to spend and invest—both of which create jobs and wealth.
But let’s start with some definitions. The IRS explains:
Tax avoidance—Avoidance of tax is not a criminal offense. Taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means. One who avoids tax does not conceal or misrepresent, but shapes and preplans events to reduce or eliminate tax liability within the parameters of the law.
Tax evasion—Evasion involves some affirmative act to evade or defeat a tax, or payment of tax. Examples of affirmative acts are deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are.
Hmm, that last sentence could describe an Obama press conference, but I digress.
Tax avoidance is absolutely legal, appropriate, and widely practiced—even by the tax experts who fill out Obama’s Form 1040. Tax evasion, by contrast, is illegal.
Maybe Obama misspoke and meant to say “tax evasion,” because the only ones who think tax avoidance is a global problem are those who think the government deserves most of our income, whether we actually owe it or not.
On second thought, that does sound a little like the president. He was the one who started pushing the term “economic patriotism,” as a way of castigating companies that legally leave some their profits overseas—after paying taxes on that money—to avoid being taxed again when they bring that money back to the U.S.
The fact is that minimizing your tax obligation is the patriotic thing to do, for several reasons.
First, the U.S. Constitution limits the federal government to those powers enumerated in the document. But Washington has repeatedly ignored those limits and expanded its powers to the point that it now invades every aspect of our lives.
One thing we as voters can do to fight that expansion is to stop feeding the problem—which is what our tax dollars do.
By legally minimizing what you pay in taxes, you help starve the beast and stunt its growth—just like the Founders envisioned.
Second, you put pressure on Washington to make the tax system simpler—hopefully, something close to a flat tax with few or no deductions.
Many of the problems we face as a country are the result of a bloated, complicated, and incomprehensible tax code. There are some 74,000 pages in the code, up from 67,500 when Obama took office.
The Tax Foundation says that Americans annually spend 6.1 billion hours of lost productivity and $31.7 billion in direct out-of-pocket costs complying with the tax code. Talk about waste!
But by taking advantage of all the legal options to minimize our taxes, we demonstrate that the nominal tax rates are mostly a sham. We all pay a lower effective rate, which makes the argument that Congress should scrap most of the tax breaks and lower the rates more compelling.
Finally, by minimizing our tax obligations, we help grow the economy.
I hate to break this to the president, but the government doesn’t create jobs; the private sector does. When taxpayers keep more of their money, they can buy more products and services, which creates jobs. Or they may choose save it, which allows companies to borrow that money and invest it, thereby creating jobs and growing the economy.
Tax avoidance is not a global problem, as Obama asserts. It’s a tool for fighting big-spending liberals.
For seven years, Obama has pushed, and often passed, higher taxes so he can redistribute that money to his supporters and cronies. When Americans—both individuals and corporations—engage in tax avoidance, they stymie his efforts. That’s what I call real economic patriotism.