Expatriate Owl

A politically-incorrect perspective that does not necessarily tow the party line, on various matters including but not limited to taxation, academia, government and religion.

Friday, July 06, 2012

Why the Tax Collector Needs to be Kept Honest

Theodore Warshaw was one of Bernard Madoff's victims.  Warshaw died in 2006, and the executors of his Estate filed an Estate Tax return with the New Jersey Division of Taxation, on which they reported the value of his Madoff investments to be $1,463,733.  After the Madoff scam became public, the executors filed a claim for a refund, contending that the true value of Warshaw's investment with Madoff was zero.

The case went to the Tax Court of New Jersey, which issued a decision on the matter.

What is notable in that decision is Footnote 1, reproduced in its entirety as follows:

"n. 1  Although the Director contends that he has 'insufficient information or knowledge to form a belief as to the truth of Plaintiff's statement that in December 2008 Bernard Madoff was exposed as engaging in the largest Ponzi scheme in U.S. history', the Court finds that in December 2008 the Madoff Ponzi scheme became public. The Director also claims that he has insufficient knowledge to admit that in March 2009, Madoff pled guilty to eleven Federal charges in Federal District Court. The court finds that this is evidenced in Trustee Picard's Interim Report as provided by Plaintiff in its papers."

Having once been in the employ of the Internal Revenue Service, I can fully appreciate the excesses to which a tax collector -- ANY tax collector -- can gravitate.  That is the nature of the taxation function, even with the most ethical of tax personnel.

This is why giving too much power to the taxation function is very dangerous.

Which is precisely why the individual health insurance mandate penalty in Obamacare needs to be repealed.

Quis custodiet ipsos custodes?


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