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Originally published in the June 15, 2003 issue of the

STICK AND CARROT

July 14, 2003

Out of curiosity, I run my old 2002 TurboTax (the results attached below) for a fictitious 2 + 2 (a married couple with two kids) family with a total annual income of $21,100. To my great surprise, although I made them free of any tax withholdings, it turned out that they qualified for a federal tax refund of $1,074. Of course, that does not include the additional child tax credit of up to $1,000 per child for low income families that is being currently deliberated by the U.S. Congress, which, if passed, would increase the "refund" for the above family to up to about $3,000 on the 0 (zero) taxes they paid.

As much as one can be delighted or outraged with this form of federally mandated charity, it must also have its unavoidable long-term impact on this nation. Since our free society, and embedded in it market-driven American economy, correctly responds to fiscal stimuli, Americans will get the message and move in the direction of carrot, while avoiding the stick as much as possible. My prediction is that, if the current taxation policy is continued, during next 10 years the percentage of American residents eligible for the carrot (i.e., a "refund" on the taxes they didn't pay) will increase, while the percentage of those who deserve the stick (carry a bulk of the tax burden, that is) will shrink. That, obviously, will have its devastating effects on the quality of life in the U.S. and will further worsen already visible dysfunctionality of publicly funded institutions.

That rewarding failure (giving away to the poor) and punishing success (taxing the rich) discourages progress in a society that is based on the idea of free enterprise, is only half of the bad news that comes from the current federal tax system. The other half comes from our federal government's inability, or unwillingness, to control American borders and, as a result, to foresee how many prospective beneficiaries and of what nationality will take advantage of the federally sponsored giveaway program. Here is what a couple of illegal aliens who sneaked thorough the American porous border can do. Have two kids right away, with pre- and post-natal care provided free, compliments of American taxpayers. (This, in addition to other benefits will, due to currently prevailing misinterpretation of the 14th Amendment, make you the "parents of American citizens".) Out of all "under the table" wages that you have received, make sure to report $21,100 to the IRS This will make you not only eligible for a handsome "refund", but also will make you belong to the category of "taxpayers", or, in other words, persons fully eligible for free public services, social security protection, Medicare, and other goodies funded from the actual taxpayers money.

It is estimated that currently at least half a million of "migrants" a year is illegally crossing the American-Mexican border in the North direction, in search for a carrot, or a better life, if you will. Now, it doesn't take a rocket scientist to figure out what will happen to this number (hint: it will skyrocket) when the news of even bigger carrot, a federal income tax "refund", spreads South of the border. If you were a poor, uneducated Mexican you had to be stupid, or unable to jump the border, to not take an advantage of it. So, they will. And the American underclass, eligible for these benefits, will keep growing until that system collapses unable to support indefinitely increasing number of those who cannot support themselves. And for those who naively hope that the poor masses of border jumpers and their numerous children will learn how to succeed in America, just look at the alarming high school dropout rates among descendants of Mexican "migrants" (a.k.a. "Hispanics").

I suggest that the name of the "1040" federal form be changed to the "U.S. Individual Income Tax and Welfare Form" to better reflect its actual purpose. Moreover, it should contain a clear indication that the "welfare" part (a.k.a. "refund") applies to everybody who has managed to put his/her foot on American soil. At least then we will know what are the rules of the dangerous game the Feds and the IRS are playing.

Check the math yourself - and get angry.

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