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What Is It With Rich People?


Why is it that so many people with more money than God have a seeming inability to pay their fair share of taxes? It's almost as if when your bank balance reaches a certain level, the integrity portion of your brain just goes away!

Be it CEO's, politicians or just plain folks, money seems to have a corrupting influence on many people's morals. The old saying is "money is the root of all evil." I always thought it was more like the "lack of money was the root of all evil." Now I'm thinking I was wrong.

The New York Times is now reporting that Caroline Kennedy has "housekeeper" tax problems. This seems to be a big problem and why? Let's assume for the sake of discussion she's paying her housekeeper $150K (and what are the chances of that?) we're talking no more than $15K in taxes...Is that REALLY such a huge amount of money for her?

Even if this particular story turns out to be untrue, there seem to be more and more stories about the rich avoiding taxes, and I just don't get it.

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That sort of thinking is why you're not rich. Remember that Leona Helmsley quote: "We don't pay taxes. Only the little people pay taxes ..."

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LOL Tru dat!

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Somebody's gotta unearth the made-for-TV Leona bio with Suzanne Pleshette; I think they called it "Queen of Mean." Priceless. Good double feature with the Cybil Sheppard/Martha Stewart portrayal.

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I have no real interest in going into this subject since "rich" is an ill-defined concept. However, stilli, you know little of the tax code if you think that someone who earns $150K owes only 10% taxes. In fact, very few people in this country are in a 10% tax bracket. Moreover, in NY, you would also be paying state *and city* taxes.

This goes back to one of my central points: before one starts discussing an issue with a point of view, they should at least be aware of the rudimentary facts. It's quite more probably that someone earning $150K in a salary is paying 45% of more of their income in taxes (total). NYC is a very expensive place to live and the cost of living needs to factored in as well.

None of this justifies violating the law, etc. However, it's important to ground the discussion in reality before proceeding. For example, if a person's total tax burden is only 10%, you would find most perfectly willing to pay that money. The reason you find "rich" people complaining about taxes is that the percentage is usually much higher than that. That is an important insight into the base of your discussion.

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You are misreading her argument. Stilli is talking about the employer withholding tax rate for nannies which in general is about 10% depending on earnings (and is required by law). (This doesn't include the maount that should be withheld from the check for the employee's taxes which is also about 10%)

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I think you are correct, my mistake.

Actually, the 10% is really from SSI and Medicare/Medicaid... .and as a Kennedy, one should be very happy to pay these things off, especially since her father was pushing for them. ;-)

However, if the nanny is not on salary, then the nanny needs to pay the self-employment tax (15%) covering these items.

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At least in California, regardless of whether you are on salary, or an hourly employee, the employer is responsible for 7.5% towards Social Security, and an additional 7.5% comes out the employee's wages. If you are self-employed, you pay the whole 15% yourself. Included in the 10% figure I used is an additional few % for misc. items that are the employer's responsibility.

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Yes, once Dij pointed it out, I suspected I misread your comment. Sorry about that.

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It's not about rich people. It's about poor people. Like housekeepers. If you declare your housekeeper, then you and the housekeeper both pay that 7.5% for social security. But what if the housekeeper comes to you and says "I'd rather not pay that 7.5%, so please don't report my employment." Now, if you don't think that's fair for you to save that 7.5% too, what if you increase the housekeeper's pay by 7.5%, so you're not saving a thing?

Then it's entirely about the housekeeper getting more of her or his money - at least in the short run, since this subtracts from social security later. So this isn't about lowering your own taxes, but about lowering taxes and raising income for the poor. And it's about honoring the housekeeper's request.

Honestly, haven't you ever paid a tradesman in cash, leaving it to his or her decision whether to report the income for taxes? This is only a shade different from that. And if you're paying your housekeeper in cash, this is very close, since once you pay the 7.5% you're telling the IRS just how much cash you've paid them. When you have someone fix your roof and pay in cash, do you write the IRS to be sure they pay their income tax on it? Even if you know they're struggling to pay their family's expenses?

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It's a pretty good rule of thumb that if someone coming to your home wants to be paid in cash, there's something fishy. Since we have something to lose if it comes back to bite us in the butt, we don't do that (other than when we hired teenaged baby sitters back in the dark ages before the government wanted a cut of that action, too.)

Having a canceled check for services like that protects us, and if the person will accept a check, increases the likelihood they have a legitimate business. Gone are the days when you can give a guy a bag of groceries for shoveling your walkway...in a way, it's too bad.

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2 + 2 = 5.....

Just want to see if CT catches my error....

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lol!

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In what respect, Charlie?

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DOH! Ha ha ha ha ha, also.

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Apparently not.

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It's 12.6% if I remember right, but yes, split in half between employee and employer. It's also not specific to California: FICA is a Federal tax.

Self-employed individuals (including contract for hire deals) must pay this tax by filing a Schedule SE.

Social security (FICA) tax stops out at a ceiling, currently near $100k, which makes it quite regressive. That is, if you currently earn $40k, and go out and do a work-for-hire that pays you $100, you must pay $12.60 in FICA taxes on that, keeping just $87.40 of the $100. But if you earn $150k, and go out and do a work-for-hire that pays $100, you get to keep the entire $100. (Of course there are other taxes as well; my actual marginal rate when I did the Schedule SE in the 1990s was about 40%, i.e., I kept $60 per $100 of work-for-hire money. That included the 12.6% FICA tax, the ~8% Calif state tax, and whatever the Federal tax rate was, and excluded the savings created by deducting state taxes from Federal taxes.)

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Thanks, Dij...I have been trying to post a comment stating exactly that, but have had a malfunctioning submit key...grrrrrrr

I have been an employer for 20 years, and DO understand the tax code.

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I do not know the answer to this question either.

It could be that there are personal relationships involved (not like Vitter or Spritzer) with 'illegal' immigrants who do the domestic chores. Pay them as independent contractors, when, in fact, by definition they cannot be ICs because they work at the same place all the time, i.e. the home.

There seems to have been a culture developed among the high brows with regard to domestic help. I think it has more to do with immigration issues and personal relationships. Not withholding per se.

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Here's the thing though: The _love_ of money is the root of all evil, not the money its self. Avarice after all is a mortal not venial sin.

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You scare me on that one CL. Mortal sins keep you in Hell forever and ever. Venial may only mean a few years in Purgatory. Not Wyoming.

oops, I think the Pope got rid of Purgatory.

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"oops, I think the Pope got rid of Purgatory."

I think you misspelled "Canada"

Hope that helps!

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I was always taught that they were venal sins, but venial seems to have caught on.

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Venial is what I was taught. Venal, I think, applies to overall sin.

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I thought venal had something to do with playboy magazine when I was in my teens. I just read it for the pictures, if I recalled and became rather venal.

Is there a Venal Equinox?

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I think Playboy and Penthouse made me ferral, not venal.

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Was it Limbo that got cancelled a few years ago ?

From the Latin 'Limbus' meaning 'border' or 'edge'

Not related to the dance 'Limbo'

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Stilli, I have the same issues with Geithner. I respect the Warren Buffett approach - those who are blessed with much should pay their fair share of taxes.

http://freakonomics.blogs.nytimes.com/2008/05/01/taxes-warren-buffett-and-paying-my-fair-share/

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Me. too, Dij...There is just something even more wrong when public officials are avoiding taxes...

I have a hard time believing that Geithner is the ONLY man for the job as was reported on csnbc this morning...

I believe we should all be paying every penny we owe, and not one penny more. The really rich have loopholes far beyond anything the rest of us even know about...they for sure should be paying all the regular stuff...

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Noblesse Oblige. To whom much is given, much is expected.

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I thought the Pope got rid of Limbo, not Purgatory.


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Both. I should verify that. And the new El Papa is more traditional, which means immune from what is really going on in the world. He has reinstituted some rites of old.

I do not think he brought them back. The problem with the concept of purgatory was that from the Middle Ages on purgatory was a money maker whereby the priest or friar or nut would sell indulgences.
At any rate, the Church has always been about five hundred years before the times, she simply removed purgatory from the litany.

Limbo was silly. You know, like when you are a kid and your dog got sick and mommy told you that the dog was given to a farmer and is very happy running in the fields?

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test

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Must be so testy?

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This is an outstanding post, stillidealistic!

Short, sweet, to the point! Kudos. :)

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Be it CEO's, politicians or just plain folks, money seems to have a corrupting influence on many people's morals.

Well, here's a burning question: Do rich people in fact have any morals?

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Well, I'm guessing that many of them (unless they inherited it) did in the beginning....

Good to see you, Blow!

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Excellent post, still. ;-)

Caroline Kennedy's behavior throughout this unnecessary drama has been 100 percent informed by her wealth and celebrity: Only a rich person could/would do what she did in pursuit of a political appointment.

Not only do rich people like Kennedy overflow with chutzpah, but they are permitted to. The peasant classes, like Sarah Palin and Rod Blagojevich, are usually shunned when they behave with the same chutzpah: in other words, when they overreach beyond their economic bracket, when they don't know their "place."

I don't know if your question has to do with individual morality exactly, or if it has more to do with how our society is structured: inequality is built into our system. Our society permits rich people to behave differently, and creates the formula that money equals power.

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Sara Palin's been behaving badly even without the corrupting influence of great wealth. But maybe on could argue Sara Palin has been behaving the way she think the rich behave, which would still tie in to what you're saying about the rich.

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SP, nouveau riche?

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Well...everybody is informed by something I guess, but shouldn't Coleman be added to the wannabe list along with Palin and Blago?

On the other hand it works the other way sometimes too. An acquaintance, female, is one of the wealthiest people in town and is often the target of bad behavior by townspeople who make assumptions like "what's she so upset about, she has more than enough and can afford it anyway".

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I'm so happy to be seeing you around more! Your point about the inequality being built into the system...I hope we're able to "remodel" it out. There are so many instances in this country where money gets you a different brand of whatever it is (justice, health care, etc.) and it doesn't quite mesh w/ my ideal of what this country has the capability of being.

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"money gets you a different brand"... which in effect shows that it's not the money, but the power value of it, that's what people want to hang onto.

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Exactly!

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I think Caroline Kennedy was not well-suited to be a Senator. Speculating on what her tax problems related to housekeepers or nannies is something better left to the brilliant pundits, who love to guess out loud on teevee.


Does anyone here know specifically what her tax problems are, or even if she has a tax problem? I didn't think so.

BTW, I have had some "tax problems." Once I gave the wrong social security number for one of my dependent sons. Turned out the guy was 42 years old and his name didn't match. The letter that came was very official and no-nonsense about my possible fraud in claiming this dude as though he were 7 years old.

I had another tax problem when I did my taxes myself sans Turbo-Tax. Turned out I had to pay the AMT, but I didn't get that after reading and re-reading the directions 10 times. That letter was also very stern. I called, and after being hung up on a few times, I finally got someone who walked me through it, and then I agreed I owed another $72.

Last year I had another tax problem. I refuse to e-file, because why should I make it easier for them to audit me? I am sooooo smart, I forgot to sign my tax return. Oh, I signed the one I kept for my records, but not the one I mailed in.

So, you see girls and boys --- tax problems come in all shapes and sizes, and figuring out what Caroline's are is just too haughty for my taste.

Why not wait. Why not find out? Wait for facts? What a concept!

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That IS true! The only real exercise I'm getting lately is jumping to conclusions! :-) But it was in the paper...doesn't that make it true? (heeheehee!)

But, even taking Caroline out of this...the premise still stands that way too many of the wealthy are gamin' the system, and I wish they'd stop.

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Yeah. Don't you wonder how much the guy who drove Merill Lynch into the ditch and got 68,000,000 dollars for 9 month's "work" is paying in taxes? I'll bet it is less than you or me!

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I just saw on Huffpo that he got himself an $82,000 area rug and some $28,000 drapes for his office right before ML went under!

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I got my own post on this. TRICKLE DOWN

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With those kinds of tax problems YOU should be Treasury Secretary.

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Not well suited to be a senator?? Hah,

Odds are a random pick at a homeless shelter would have more qualifications!!!

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This could only happen if Caroline paid the housekeeper out of personal petty cash instead of having her private banker pay the housekeeper.

In that case, the private banker would not have included the payment records in the material that he turned over to Caroline's CPA for tax filing.

The idea that Caroline would have any role in filing taxes is not credible.

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That's for sure, or a role in anything which required brains and had a positive outcome!!!

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Once you've got a little money you start to believe that you should have everything you want at the price you want it and since your money can get you out of most problems you just don't worry about these little details that only surface if you get involved in some public business like becoming an elected official. Even elected officials (rich or not) start very soon after election to begin to feel invulnerable and that no problem can really cause them all that much trouble because of their connections and so on. Just ask Rod Blagojevich.

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Good to see you, buddy. (after the wars yesterday)

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Thanks! You too! Been very busy.

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I am guessing that it is hard to pay taxes on help that isn't even suppose to be here in the first place? Don't know if this is the case, but I bet it plays into it in a lot of instances. How do you go about paying in taxes on illegal immigrant labor?

Enjoy.

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Maybe we can ask all those agri-business entities who do it all the time.

We need to fix immigration, but that's another topic. My question for the country on that is, why did we close Ellis Island, and, since we did, where did they put the replacement?

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stilli,

On the other hand it works the other way sometimes too. An acquaintance, female, is one of the wealthiest people in town and is often the target of bad behavior by townspeople who make assumptions like "what's she so upset about, she has more than enough and can afford it anyway".

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Much of this discussion is moot.

Caroline Kennedy doesn't deserve to be appointed to a seat since she didn't vote in the general election in 1994 -- which included the same senatorial seat.

No amount of apologizing can get away from the fact that some view the US as an emerging oligarchy. It's time to fight that at every place it rears its head.

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Last time I checked this wasn't a post about whether or not she deserved to be Senator, but rather why many rich people feel the need to avoid paying taxes...

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Here's your answer: no one likes paying taxes. Including people of all income brackets. The "rich" part of your comment might as well be replaced by "why do many white people feel the need to avoid paying taxes...?"

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I guess I am not making my point clearly enough...when you can clearly afford ALL of the necessities of life, and many or most of the extra special goodies, and still have lots and lots of money left over, why, in addition to using creative accounting to avoid paying taxes, would you still cheat on them?

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Right on!!!! You tell em like it is!!!

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Whether by cheating or with government encouragement, the wealthy are reneging on a central tenet of our social contract: that those who benefit disproportionately from the system should pay disproportionately more.

Conservatives maintain that that this philosophy inhibits investment and thus discourages growth, and that using the money to fund a welfare state encourages po' folk like you and me to avoid good honest labor. Both sides of this argument are a crock.

Paraphrasing Obama, a nation cannot prosper long if it favors only the prosperous. Weaseling your way out of your fair contribution to our nation's prosperity is, in the long run, cutting off your nose to spite your face. Too bad the greedy rarely take the long view.

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Excellent point, blue...well stated.

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Right, especially when you see that those people who are getting huge tax breaks are using it to buy themselves toys and houses and things that already exist; NOT to create new jobs. There simply is no evidence to back up the notion that their tax breaks are being used to employ new people! That happened in the 20th century, when railroads, steel, auto, and other industries were just starting. Now those industries are dying and nothing is there to take their places.

Obama wants to start a new "green" industry, but if he is expecting to get help from people who feel entitled to get multi-million dollar bonuses for presiding over the death of their work-force, he needs to rethink some things.

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Well said. Your point also applies, albeit in slightly different context, to Scott Winship's post on opportunity.

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Stilli, there is not enough substance in this rumour to make a determination of fact yet. Consider these two exceprts from the article

one person close to the governor said that her candidacy had been derailed by problems involving taxes and a household employee, but declined to provide details.

A Democratic operative with ties to Mr. Paterson said the governor told Ms. Kennedy last week that she was the choice but that he would use the next few days to do "a little misdirection to keep the suspense up."

Now this from the same authors the day before:
Ms. Kennedy did not elaborate, but a person who spoke to her suggested that her concerns about the health of her uncle, Senator Edward M. Kennedy, who suffers from brain cancer and was hospitalized after a seizure on Tuesday, contributed to her decision.

Ms. Kennedy believed that the job was hers if she would accept it, the person said, but aides to Mr. Paterson would not comment on whether that was true.

Her decision appeared to catch the governor off guard, throwing the Paterson administration into confusion and setting off conflicting news media reports.

Nicholas Confessore and Danny Hakim, "Kennedy Drops Bid for Senate Seat, Citing Personal Reasons", New York Times, January 21, 2009

Unpaid taxes for employed domestic help, who do not have documentation allowing them to work lawfully in America, is often an overstated civil wrong anyway. If their employers were to properly fill-out the required tax forms, they expose themselves to possible prosecution, as well as expose their employee to possible deportation. It's a negative sum transaction, no matter which way it's played, but the potential for inflicting harm is much greater, when obeying the tax code. There are many immigrants in America without documentation, who provide for themselves, are only seeking life and liberty, while pursuing their own happiness. There are many undocumented immigrants in America who have valid safety concerns about being deported back to their country of birth, yet do not fall under the INS umbrella of political refugee.

One of my sisters employed an undocumented Salvadoran immigrant as a live-in housekeeper/nanny for several years. She lived in a 1 bedroom guest house during the week. On week-ends, her daughter (a documented immigrant) would drive inland, and take her mom back to her place in LA. She was a widow facing impoverishment in El Salvador, and her daughter had arranged to have her move up to LA several years before. My sister got the woman registered in English and basic citizenship classes, then pressured her to continue them. After her English had become adequate, my sister sought out a competent immigration attorney, and helped pay the fees to get this woman lawful documentation. She was a pleasant, enjoyable woman, who took her duties as my niece's and nephews' nanny seriously. They recieved a great benefit from the relationship: all three are conversant in Spanish (although not Castillian), a skill with great potential rewards, both personal and financial in modern day California.

Immigration concerns are only black and white superficially. It is a travesty when any hard working immigrant in America gets labeled as "Illegal". It is antithetical to the Dreamtime America.

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Why did your sister have to pressure the woman to continue taking the classes?

There is certainly a "gray" economy in terms of illegal farmworkers that most Americans are not aware of (yet it does keep the price of food down). However, it's interesting to see here that the "rich" (and by "rich" I mean people who are wealthy enough to hire domestic help -- a live-in nanny!) decide that for their personal domestic uses, it's okay to circumvent legal situations.

This reminds me of those who choose not to register for the selective service or not to pay taxes because they "don't agree" with the law -- but are shocked there are consequences when caught.

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Not having sufficient services to welcome immigrants is the problem. It is OUR problem. But the agri-business types favor it to enable them to pay 3rd world wages here in the US. The immigration attorneys like it oo, because there are a lot of fees to get people legalized.'

Again, where did they replace Ellis Island?

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Yeah Pseudo. That is what I was trying to point out but you do it much better. Couple this with the personal attachment to domestics and it is a mess.

When the rich are finally audited, the IRS computer spits out a question as to what happened to a couple hundred grand for four domestics. Not that the rich were stupid enough to deduct but they could have been that dumb.

On another note, I will use Fathead Dobbs' term of illegal alien. I always feel I am doing it tongue in cheek but it is just flat out wrong and there are so many facets to the issue concerning a particular immigrant, that this black/white determination by demagogues like Dobbs that it always misses the mark.

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That is true, Ant...Her story just got me thinking...straw that broke the camel's back type thing...My last sentence said that even if "this" story isn't true, there seems to be a lot of it going on...

The "illegal" or "undocumented" situation is a whole 'nuther can of worms... It's sad, and yet another example of a problem that has no easy solution. Your sister sounds like a wonderful person.

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"Illegal immigrant" means exactly what it means. If you sneak into this country, you're here illegally.

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But if you seek out or import illegal immigrants to reduce your labor costs you're an entrepreneur.

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Yes, a crooked entrepreneur.

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Sadly, many "entrepreneurs" nowadays make "crooked" to be virtually synonymous.

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Where else do you hear,

"If you're not cheating, you're not trying!"

Or

"It's all legal until you get caught."

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Think students in schools.

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It is time to put aside childish things.

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My son's big one in high school was, "if you don't get caught, it didn't happen." He's discovered as an adult that it isn't true!

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Yes, I well recall telling our son: "Look, right now it's just your parents enforcing things. But one day it's going to be society. And they're not going to be as easy to argue with as your parents."

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It's not always a matter of cheating. Tax time is bad enough even for those who can file a 1040A. For those of us who have to do Schedules A through Z along with 84&frac1/2; numbered forms, it's easy to forget some. I don't know about other people, but I tend to throw a pile of forms at my accountant, and if I lost one, he will have no idea, and later I will get a letter from the IRS saying "tell us why we shouldn't collect $9000 from you right now".

(Yes, I really got one of those, a few years after I moved out of California. After the heart attack :-) I had a local tax preparer re-work everything with the missing info added. Result: no extra tax owed at all, just a change in carryforward numbers.)

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I agree with your point. But I don't think it applies to Geithner, for a couple of reasons.

(1) He'd probably have been better off blaming some nameless accountant. But he blamed TurboTax. And did it incompetently to boot.

(2) This was more than just one year's taxes he owed.

As for me, I keep all my tax stuff in a labeled accordion folder. My accountant always buys me a Christmas gift. :)

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Our accountant wants to hire my husband! We have a fairly complicated return and he dots and crosses everything that needs to be dotted and crossed...

Legitimate mistakes can be made... I'm sure we don't have ALL the info, but it certainly appears that if Geithner's problem was a mistake he may not be bright enough for the job... I mean, when you are audited and and have to pay up for 2 years that should trigger in your mind that you did the same thing for 2 earlier years...maybe not, but I'm just sayin'...

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