Hamill: Trust your gardener — perhaps not your congressman

The New York Times has a column written by an ethics expert. The ethics writer got a tax question recently, and I want to start by weighing in on that issue.

A gardener wanted to be paid in cash. The question writer seemed to have a problem with that.

In particular, it was said that the cash payment was intended to allow the gardener to avoid paying taxes.

So, the ethicist was asked whether the person posing the question should refuse to make a payment in cash.

The ethicist noted that there might be alternative explanations. For one, the gardener might not have a bank account and wished to avoid a check-cashing fee.

Of course, none of us knows the gardener’s reasoning. But my first thought is why the cash payment would create an opportunity for tax evasion.

I’ve shocked you with my naivete, haven’t I? Surely, cash income creates an opportunity for tax evasion.

Well, yes, it does. But assume the alternative of paying the gardener with a personal check. There is no information reporting to the IRS of such payments.

The requirement to issue someone a Form 1099 to report payments arises only if the payment was made in the pursuit of a business.

Paying your personal gardener for work done around your house will not require any information reporting to the IRS.

Many people have all of their income reported to them by a third party, with the same reporting sent to the IRS.

Wage income, interest income, dividend income, stock and bond sales and redemptions, social security payments and retirement payments are all reported to you and the IRS.

The best opportunities for evading taxes are for those with income sources not reported to the IRS.

Well, that’s cash, you say! Yes, but so is a payment made by personal check to the gardener. Neither is reported to the IRS.

Payments that must use the banking system may create a trail to follow. Perhaps the IRS could follow this trail to a tax evader.

Demands for banking records, made by subpoena, are unusual. If there is a need to reconstruct someone’s income such a demand might be made.

Income reconstruction might interest the IRS where someone reports, say, $50,000 of income but lives a $500,000 income life.

Al Capone was caught by income reconstruction. A gardener is unlikely to live a lifestyle that would pique the interest of the IRS.

The point? Those among us who have income reported to the IRS have little room to cheat. Those without reported income, be it cash or check, have opportunities.

The ethicist could have answered that the cash payment almost certainly has little to do with the gardener’s tax evasion opportunities. Both cash and checks create that opportunity.

Up next, I’ll address Congress’ evasion. Not of income taxes, but of responsibility for fiscal discipline.

The Congressional Budget Office, or CBO, pegged the deficit for the first half of the 2025 fiscal year (October through March) at $1.3 trillion.

That’s up from fiscal year 2024. Congress is aiming to renew the 2017 tax law. CBO estimates this to cost $4.6 trillion over 10 years.

Congress plans to add $1.5 trillion of new deficit with additional tax cuts. Many people think $4.6 trillion plus $1.5 trillion equals $6.1 trillion.

What fools. The new math says that the $4.6 trillion is really zero. That’s because the continuation of the existing law costs nothing. Just same old, same old.

And if Congress somehow comes up with $1.5 trillion in spending cuts, then $1.5 trillion new tax cuts minus $1.5 trillion new spending cuts equals zero new deficit.

Comparing the first half of fiscal year 2024 to the first half of fiscal year 2025, revenues were up 3% and costs up 10%.

But now, we are told, costs will drop. And $4.6 trillion in old tax cuts that keep on rolling cost nothing. So why not have more tax cuts!

Some people think Congress is playing “three-dimensional chess,” and we mortals just don’t understand it.

Chess great Garry Kasparov said, “Chess helps you to concentrate, improve your logic. It teaches you to play by the rules and take responsibility for your actions.”

I suspect that Mr. Kasparov would not describe the actions of our Congress as any type of chess.