The Market Ticker

Ok folks, sit down because this one is going to piss a lot of people off.

I am faxing this Ticker to the IRS. Yes, to the Internal Revenue Service.

Why?

Because I believe they need to collect the taxes actually due, and as someone who's paid my share for an awfully long time (and a big share it is), and as I finish up my 2007 1040 (which is the size of a damn book, with a check attached that is giving me writer's cramp filling out), I've gotten increasingly pissed off at the people who have exploited the system not only to get us into this housing bubble, but also to force my tax rates higher.

Hillary, Obama, McCain - you all need to listen to this as well, and yes, you're getting a copy of this in your fax "inbox" also.

We all know that "Stated" income and asset loans were a mainstay in the "housing bubble."

Well, who took those loans out?

Two groups of people:

• Those who were lying about their incomes. They are W2 folks who actually pay their taxes on what they really owe, but lied to lenders in order to get into a house they can't afford. Those people are defaulting left and right and will continue to. I have no sympathy for them.
• Those who are cheating the IRS, that is, they are cheating you and I.

Let me explain.

I have spent a good part of my life earning my living either from 1099 work or "SE" work (self-employed under some sort of structure, whether it be a Sub-S corporation, an LLC, etc.) I have also had plenty of years where I was a W2 employee, including those when I ran my Internet Provider (which was an ordinary "C" Corp.)

In each and every case I could prove my income, and it matched what I reported on my taxes. In the early 1990s I bought a townhouse in Chicago when I was a "hybrid" employee, earning most of my money via pass-income from what was at the time a "Sub-S" corporation, with some "W2" contribution.

I took out a full-doc mortgage and was asked for (and provided) both corporate and personal balance sheets and my personal tax returns. They substantiated my income, against which I had paid taxes, and the loan was approved.

I believe the IRS needs to go after these Stated Income folks.

God knows we need the revenue right now. We have $9 trillion and counting in public debt and everyone is clamoring for a bailout (which will be disaster if it happens, as I've outlined multiple times.)

We just added $165 billion in additional deficit (which will turn directly into debt) via handouts in the "stimulus" program.

I'm willing to bet the IRS can collect all of that and more through this program.

Please understand one thing folks - there is no statute of limitations on willfully understated income. The statute of limitations on a mistake is 3 years, but on a willful failure to pay that does not apply. Yes, the IRS can come after you 5, 10, even 20 years later, and while they can jail you for that sort of thing its usually far more productive to bankrupt you instead (its hard to get money out of someone sitting in a jail cell)

So here's my proposal:

The IRS should subpoena all loan servicers and originators for all "stated income" loans, then match each and every one against tax returns. If there is a discrepancy in claimed income then those persons should be audited, starting with the performing loans.

For those people where the IRS scores a "hit" on the first examination, they then need to go back through that person's entire tax file and see for how long - in both directions - the deception on income reporting goes!

While many of these people will turn out to have overstated income to defraud lenders, a good number of them, especially those loans that are performing, are going to be people who are cheating the IRS!

We can call it "The Deficit Reduction Act of 2008."

I like it.