Taxing Times

‘Beware: your government is about to become dangerous. It is about to become California’

On the Contrary Taxation UK Politics US Politics

Apologies; this dreary story will seem to have nothing to do with you. In the little picture, it might best be written off as too-bad-for-her. But in the big picture, it could soon be showing at a cinema near you. 

In 2006, my accountant put the address of his California office on my US federal tax return. I queried this choice. He assured me that an American address would facilitate fielding postal queries from the Internal Revenue Service in the event that I was travelling. Reluctantly, I acceded to employing this so-called “address of convenience”. That was a mistake.

Subsequently, the accountant closed that Santa Monica office; so much for receiving post. More crucially, the economic world as we knew it has collapsed, along with the once thriving state of California, where popular referenda severely restrict increases of state income tax. Burdened by a huge proportion of America’s illegal immigrants, who draw heavily on state services, and no longer raking in cash from a now-burst real estate bubble, California is strapped. That makes California dangerous. 

A few months ago, I heard from a former partner, from whom I’ve been parted for eight years; we were in touch because our split was amicable. Although we’d never even filed a joint return, California’s tax authorities had enterprisingly tracked down my old boyfriend, and were apparently firing off repeated bills in my name to Mystic, Connecticut (where I have never lived). There was a California address on my 2006 tax return; ergo, I owed them a substantial cut of my earnings for that year.

Now, legally this is a no-brainer. I live in London. I didn’t set foot in California in 2006 and derived no income from the state. The smallest little child could see that the addresses of the taxpayer and the accountant on the return’s cover page were identical. So I don’t owe California a dime. But the legalities are theoretical. The bills are real.

Despite numerous attempts to stanch them, those bills have kept coming. Ever more threatening, each is for more money — bloated with yet more fees and interest charges. Repeated attempts to at least get these unwarranted bills sent to the correct address have also been ignored, and my ex’s wife has become quite reasonably irate that reminders of her romantic predecessor continue to pop up in their Mystic postbox. 

My current accountant has informed me unconcernedly that, oh, so big deal, this unpaid tax bill will probably ruin my credit rating. If the bill were from the federal government, of course, the IRS could reach in like the hand of God and simply remove the money from my bank account. Less omnipotent, California’s computer instead keeps blithely, mindlessly spitting out its demands for escalating amounts of money, to the wrong address, even to the wrong country. Were I in a more charitable humour, I’d pity California for lavishing its scarce resources on postage and printing bound to earn the near-bankrupt state no further income.

What has this story to do with you? We’ve heard relentlessly about the UK’s unsustainable deficit and national debt. About how taxes are destined to rise. Translate: your government is about to become dangerous. Your government is about to become California. Seemingly benign rhetoric about closing up tax “loopholes” may appear to pertain only to those evil rich people. But since “rich” in Britain means anyone earning over about £40,000, an even stricter, even more inflexible tax regime would easily pertain to plenty of middle-income families. 

It was an arbitrary, capricious and rigid tax code this last February that drove Andrew Joseph Stack, a software engineer whose consulting business that law had rendered unviable, to plough a private plane into the headquarters of the IRS in Austin, Texas, killing one federal employee and himself. Indeed, I’ve considered hiring a similar craft to implode the capitol in Sacramento, and by this point my ex’s wife in Mystic might cheerfully join me in the cockpit.

Frighteningly even for compliant taxpayers, the more desperate our public finances, the more government morphs to merciless predator, with no motivation to be responsive or to correct its own mistakes. It is in California’s interest to hire underlings to comb through old federal tax returns for California addresses. It is not in California’s interest to hire yet more underlings to respond to protesting correspondence or to remedy errors, so it doesn’t. In the face of bureaucratic stonewalling, punters are helpless. For to whom does one turn to rectify erroneous tax bills? The state.

If this story bores you, I’m betting you’ll hear a lot more of them in the next few years.