States that do not have state income tax have the greatest growth rates. The reverse also holds true too; just look at the exodus from high-tax California to no-tax Texas. The consequence of the lack of state income tax in the Lone Star State is that you don't get a lot of services from your state government. But you create so much opportunity for wealth by attracting business.

Well, that argument fell on deaf ears in the state of "Taxachusetts" (aka Massachusetts) where voters balked when they had the chance to do away with the state income tax. There were union-paid political ads suggesting that doing away with the state tax would destroy prosperity because government wouldn't be able to provide services that people expect.

Meanwhile, neighboring New Hampshire -- an ultra low-tax state -- has had continuous economic growth. Do you think it's just by chance? No, people migrate to where they get a better deal.

For the longest time, the IRS has engaged in class warfare by forbidding those who make above $50,000/year from doing free e-filing. But that's about to change this coming tax season.

Some tax prepares have already jumped all over the coming change. TaxCut will provide free federal e-filing for all returns, all income levels. Clark hopes this will prompt their main competitor, TurboTax, to do the same. Currently, America has one of the lowest rates of e-filing among developed countries.

This new move should save the IRS a fortune. Previously, they had to have employees enter complicated tax returns for the super-rich by hand!

Have you looked at the competing tax proposals from McCain and Obama? McCain wants to make Bush's tax cuts permanent, while Obama wants to cut taxes on everybody except those who earn more than approximately $250,000.

Clark thinks both candidates are just trying to be elected president. Neither is willing to tell us what we really need to know: The federal budget deficit is approaching $500 billion by next year, which is more like $1 trillion when you factor in Social Security and Medicare.

The real question should not be whether McCain or Obama is better qualified to rearrange the deck chairs on the Titanic. The question should be what are you willing to give up to have lower taxes? That's the topic of Clark's poll this week. Vote and let us know!

Clark has a bias in favor of states that run a fiscally efficient house. He believes that's the way to position your state for growth and prosperity over time. Texas is one place that really fits the bill; there is no state income tax. That creates a favorable environment for businesses to set up shop. Let's face it, states compete with each other for employers and jobs just like nations.

Is it any wonder that the Lone Star State has more Fortune 500 companies than any other? The tax issue isn't the only determining factor, but Clark believes it's the most important one. That's why ultra-high tax state New York -- traditionally the center of business and finance -- has seen an exodus of major corporations for years. The Empire State's loss has been Texas' gain, as the latter has been a major job growth center for the last 8 years.

If you're a business owner, you want to go to a place where the government won't take too much of your paycheck. Look at talk radio, for example. Many hosts reside in Florida regardless of where their show originates. That's because Florida is also a no state income tax domicile. By comparison, New York City and state taxes can eat up some 11% of your paycheck.

One corollary of note: If you reduce taxes, you must take the bitter pill of also reducing spending. Part of our federal mess is that the president and Congress reduced taxes while increasing spending. If you want one, you've got to do the other.

Clark loves found money. When he and his associate producer Joel went to lunch today, they used a BOGO coupon for Whataburger that someone at KRLD gave them.

Right now, far too many Americans have left found money on the table when it comes to the federal government's economic stimulus payment. USA Today reports that 5 million veterans and retirees of all stripes have failed to do the simple paperwork required to get the $300. This is low-hanging fruit that they should pick.

Be sure to help out your elderly relatives if they haven't filed yet to get the payment. Even if they don't normally file taxes, this year they've got to do so. They just need to show that they owe no money, and then they'll get in the system and trigger a disbursement. It's not too late.

Don't panic if you're among those still waiting for your check in the mail. The IRS says to hold tight for a little bit longer.

The city of Vallejo, Calif., has gone bust. This San Francisco suburb, with a population of about 125K people, fell into a budget squeeze as tax revenues decreased dramatically because of the housing slump. Like many local governments, Vallejo didn't dial back on spending when the revenues decreased.

It's critical for citizens to let local politicians know that you can live with less government -- rather than having to pay higher taxes to maintain a familiar status quo. In fact, government has historically been "smaller" during much of our nation's history. It's only been during the last third of our history that spending spiraled out of control.

In related news, Clark recently read a Wall Street Journal article that detailed how banks are breaking the law by not paying backlogged HOA fees once they assume ownership of a foreclosed townhouse or condo. This is inexcusable. Congress is making noises about reining in this practice, but there's been no movement. Local government needs to put its foot down and pass punitive measures if banks don't do the right thing.

Clark recalls when one of his show staffers lived near a "ghost house." This property remained unsold and woefully unkempt for 2 years after foreclosure. Needless to say, it really depressed property values in the neighborhood. Again, local governments have to be vigilant in making sure banks properly maintain homes they've brought to foreclosure.

Just under 40% of people wait until the last possible minute to file their taxes. A smaller percent of people file for an extension. Clark often feels like there are 2 taxes: There's the tax you pay and then there's the success tax. If you do well financially, dealing with taxes becomes a pain. Clark's had the good fortune to be successful and his tax return was 58 pages long this year. That's just silly. GE, meanwhile, had a tax return that was 24K pages long!

John McCain has a proposal to simplify taxes that Clark likes. Under the plan, a new taxpayer coming into the system would be under a brand-new tax code. Current taxpayers could choose between the old and the new tax codes. McCain hasn't fully fleshed out his plan, but it seems that once a current taxpayer chooses to go for the new code, they'd be locked in. There's no going back.

The San Francisco Chronicle recently reported on what things were like in 1913 when the income tax was instituted and what they're like today. In 1913, the form came with 1 page of instructions; today it has 92 pages. In the old days, there was a flat tax of 7%; today we have multiple brackets.

Meanwhile, the IRS has tons more employees than other government agencies. It's a broken system. Need further proof? Look at the private collection agencies that are paid to collect taxes. They're a money-losing proposition. The funds they bring in are less than what the government pays them to collect.

Tax refund loans have declined 25% over the last two years, according to ConsumerAffairs.com. Today only 9 million people get ripped off this way each tax season. These loans are heavily advertised in low- and moderate-income neighborhoods and they come with exorbitant interest rates. Clark wishes the numbers were down to 0, but the trend is moving in the right direction. But it's not time to let your guard down just yet this tax season. Now comes word that refund loans are also being offered for your government rebates. Clark's advice is simple: Don't do it. Wait until your money comes either by direct deposit or in the mail.

Like any good tightwad, Clark is concerned about how much of our money is being spent by state and local governments. The reality is there are many things that government does that people aren't willing to give up. That's the whole challenge in the raising taxes vs. cutting spending debate.

Virginia's conservative Loudoun County saw an enormous rise in tax revenues over the years and the government got used to spending all the money. Now tax revenues are declining. So is Loudoun tightening the reins to fit a decreasing budget? No, they're imposing a 20% tax increase on residents. This is not a pretty picture, but it could be repeated across the country if citizens don't demand belt-tightening on the state and local levels.

Some government functions -- such as police, fire and rescue -- are better not privatized. So there are tough choices to be made. You may want your local government to trim the budget, but where are you willing to see the pruning done? Meanwhile, Clark was horrified to learn that his community is considering a more than 50% increase in taxes. Likewise, Christa was recently having a refinance appraisal and the appraiser thought her high taxes were a mistake!

RIP-OFF ALERT: Clark is steaming because the IRS has spent $40 million to mail out propaganda to the American people about the economic stimulus payments (aka "the rebates"). But who among us didn't know about the rebates? What's the point in spending an extra $40 million on top of the $150 billion the government had to borrow to fund the rebates in the first place? This is yet another indication that the Politician Protection Act of 2008 (Clark's name for the stimulus package) is malarkey. The politicians want you to take the money; blow it to artificially prop up the economy; and then vote them back into office. But here's a better idea: Take it and pay down your debt. That's how you can make a real lasting impact on your financial house. The government is mortgaging your future, and you have to counteract that.

Clark is getting calls about a new kind of tax ID theft, plus a WTMJ listener recently told him her own disturbing story. The latest scam involves someone using your Social Security number to provide false tax info and apply for a refund as if they're you. Then when you go to file your taxes, you're told that you can't file twice. The ways people get our Social Security numbers are myriad, and there's not enough attention paid to this area. Another scam listeners are telling us about involves getting a notice from the IRS saying you owe money because you did not report all income for a prior tax year. What actually happens is that someone working illegally files a W-4 in your name and that income gets reported by the employer.

Clark has a somewhat radical suggestion that's a twofer: It deals with tax ID fraud and would eliminate the hiring of illegals. Clark recently joined the trusted traveler program and agreed to have his eyes and fingerprints scanned. This allows him to speed through security at select airports. Now Clark thinks it's reasonable -- in an era where nobody seems to know who we are anymore -- to be fingerprinted upon accepting employment or filing a tax return. Does this idea creep you out? Tell us by voting in our poll!

Clark has been on a slow burn about the IRS eliminating free tax prep and filing for those who make more than an adjusted gross income of $54K. Clark just doesn't get the class warfare angle. Why is it that the more money you make, the more you have to spend at a tax preparer -- just to give the money back to the government? There is one outfit out there still offering free federal tax preparation regardless of income -- TaxACT.com. There are additional charges for your state return. Please note that Clark has never used TaxACT.com and has no idea about their quality. He just loves that they're doing it for free.

Clark has been fielding a ton of calls about the economic stimulus payments. People have been really confused by the media coverage of these rebates that will be coming in late spring and early summer. That's why Clark has compiled his new plain English guide to the economic stimulus payments. When you visit this page, you'll see Clark opens with a blog-style posting in which he talks about his disapproval of the stimulus package. From a standpoint of fundamental economics, this package is sound and fury signifying nothing -- except it will feel like something when you get that check or direct deposit. Since he does disapprove, he wants to be sure you turn a negative into a positive by using your refund to pay down your debt. It's like following the first rule of medicine: Do no harm. Otherwise, this package may be an economic prescription that can potentially harm us as a country.

Clark recently spoke about the IRS free filing option and confused a lot of people in the process. He hopes to clear things up right now. First off, know that Clark prefers that you e-file because you're less prone to make errors thanks to software improvements. E-filing is free for those who make less than $54K/year, which is the majority of people. Note that the $54K cutoff pertains to adjusted gross income, so you may still qualify if you make in the $60K range.

IRS.gov offers a list of about 20 companies that will prepare your taxes and e-file them for free. You can even try your return with more than one company -- just be sure you don't file more than once! If you are not Internet savvy, free income tax prep is also offered offline by the AARP and the IRS. The latter's volunteer income tax assistance program can be reached at 1-800-906-9887.

Early in the primary season, a lot of GOP candidates were talking about changes to the tax code that would simplify things a lot. Clark hopes the candidate who makes it into office -- be it a Republican or a Democrat -- will put this idea to work. Remember the IRS is just the messenger; it's Congress that is the real culprit for our complex and confusing tax system.

Clark wants to update you on your friends at the IRS. There's some good news that pertains to the earned income tax credit which allows people who don't owe any federal tax to get a credit when they file. 20 million people are eligible for the EITC, but only around 5 million take advantage of it. You usually have to have kids to qualify for EITC, and your income can be up to about $40K. But if you don't have kids and you made an exceedingly low income, you may still be eligible. The EITC will give you up to $4,700 back in your pocket. You may also want to check IRS.gov to see if you meet the income requirements for free filing.

On the flip side, there's bad news for rich folks. The wealthy are being audited at near-record levels. Those who earn $100K are more likely to be audited than those who don't, while those who earn $200K are twice as likely to be audited compared to those who earn $100K. If you make $1 million or more, you have about a 10 percent chance of being audited. While that may not sound like a lot, the cost to comply with a field audit is in the tens of thousands -- even if you're completely innocent.

During a recent show, Clark explained why he doesn't like the refund loans pushed by many tax-prep chains. Now H&R Block has another offer called the Emerald Prepaid MasterCard that's an equally bad idea. This is basically a stored-value card that you take in lieu of getting a standard refund or a refund loan. This seems like a great idea -- until you get to the fees. You'll pay between $1.85-2.50 whenever you use an ATM, and that's in addition to whatever fee you're charged by the ATM itself. Clark has no idea who would benefit from this option. But this is the Super Bowl of tax return season for H&R Block and Jackson Hewitt. Everyone who overpaid wants to rush in to file at the chains and get money back as soon as possible. Special thanks to our listener Chuck for bringing this to Clark's attention.

On the saving side of the ledger, interest rates and CD rates are dropping. However, some outfits like Countrywide are still paying good money. Countrywide currently is trying to attract CDs of $250,000 and above -- probably because they're in dire financial straits and need big infusions of cash. Clark is warning people to stay away from this offer. Should you choose to bring your money to Countrywide, keep it within the limits of FDIC protection at $90,000 or less. Otherwise, you may get wiped out in the event of a bank failure. Don't go chasing yield above the FDIC limit.

Have you ever taken a refund loan on your tax return? This option is heavily pushed by tax-preparation chains like H&R Block and Jackson Hewitt. About 12 million Americans go for this option every year. There are a couple of reasons why this is not a Clark Smart decision. First, you have to understand that the government is not giving you something when you get a refund on your taxes. You're the one who gave the government an interest-free loan all through 2007 by having too much withheld out of your paycheck. Second, the big tax-preparation chains will charge 100s of percent interest on the refund loans. So you're paying to get your own money back that you shouldn't have given to the government in the first place!

Many people use their tax refunds as a way to force themselves into saving money. But Clark recommends instead that you reduce your tax withholding to be even-steven. Then contact your credit union (or ING Direct, Emigrant, etc.) to set up automatic deductions for that exact windfall every pay period. The end result is that you'll build your savings and earn interest all year. Meanwhile, the IRS is seriously considering banning refund loans. But their motive is not to protect taxpayers. Rather they discovered that tax-preparation chains have been falsifying taxes to generate larger returns and more profit for themselves when they make refund loans. After the IRS announced its intentions, Jackson Hewitt lost around 25 percent of their stock value in a day. As if you needed something else to convince you that refund loans are a bad idea!

Why does New Hampshire have a higher rate of economic growth than neighboring states like Massachusetts or Vermont? Clark thinks the answer is obvious -- taxation. The Boston Globe's Robert Gavin recently penned an article lamenting the fact that Mass. has no job growth and the second worst economy in the United States. But the story has no mention of the fact that heavy taxation can cause economic decline. After all, they don't call the state "Taxachusetts" for nothing! Michigan is also suffering because they're always raising taxes too. When you do that, people vote with their feet and leave for greener pastures. Take the case of Derek Jeter. The Yankees baseball player is being sued by New York City and State because he had the good sense to move from the Empire State to Florida. In doing so, he fled a place where he was faced an 11.2 percent tax to a place where the tax is zero!

Clark has a recipe for Mass., Mich., NY and any other tax-happy states: Control and cut government spending where you can. Don't play Santa Claus to everybody. NY has a long tradition of the government helping everybody out whether the city is run by Republicans or Democrats. Look at Texas. The Lone Star State has passed NY to be the second most populous state in the nation. It's also has one of the lowest taxes in the nation. Most politicians lack the fortitude to say that in order to cut taxes, we should be cutting government spending. But the government can no longer be our sugar-daddy. You've got to cut the sugar!

Fred Thompson is one presidential hopeful who got off to a great start and then promptly disappointed a lot of people. But there have been two instances when Thompson really impressed Clark. The first was when he laid out his proposal for overhauling Social Security. Now Thompson's flat income tax plan has interested Clark. The idea itself is not new; we briefly had a flat tax back in 1986. Back then most Americans paid a flat fee of 15 percent, while the ultra-rich paid 28 percent. It was that easy and streamlined. Thompson is proposing 10 and 25 percent, respectively. This proposed flat tax would be voluntary. If you still want to subject yourself to the arcane current tax system, you'd be welcome to do so. Or you could switch and fill out your streamlined tax return in about a minute! There wouldn't be any changes year to year in how you're taxed. Many of the world's most robust economies have simple, clean and clear tax systems. Having transparency builds creditability and confidence. As an added bonus, people don't cheat as much on their taxes when there's a flat tax system. Clark wants to stress that this is not a political show, and this should not be construed as an endorsement of Thompson. Clark just likes that Thompson had the guts to propose a flat income tax.

As listeners know, Clark steers away from political talk on his show. But columnist Jonah Goldberg recently wrote an op-ed piece about government spending that really interested Clark. Goldberg analyzed how spending grew in the 25 years following Reagan's 1981 inauguration. During that time the U.S. population grew around 30 percent, yet government spending rose almost 90 percent after adjustments for inflation. The reason behind the surge in government spending growth is pretty simple really. Human nature dictates that there's a natural tendency to want a "free lunch" from the government. That's an inclination that goes beyond whether you live in a red or a blue state. We as a nation need to decide what we're about; so far we've been about wanting it all. We have become some of the highest taxers in the world, Clark says, and that's irrespective of party affiliation. So there's a question we must ask ourselves: Do we want to grow our economy and have more in the long run, or do we want to curtail growth in order to have more money to redistribute to people? Colorado has been particularly effective in controlling the growth of government spending with their Taxpayer's Bill of Rights, which limits spending to the growth in population plus inflation. There's a difficult balance to be struck here. Clark thinks we may be tying one hand behind our backs with our spending, and we're growing weaker and weaker compared to other capitalist economies.

If you are a regular churchgoer, you need to listen up to keep your finances in order. The government believed that people were routinely lying about their “walking around donations.” These include the money you drop into a Salvation Army kettle or what you put on a church collection plate. You now have to have a receipt for the smallest of donations, so churches are changing how they take donations. Churches are billing people regularly, and each year members get a statement showing how much they donated. It’s making churches a lot more money, as a result. Some churches have been doing this for years, but for some people it will be unusual. Just remember to always keep your receipts. When donating to the Salvation Army or Good Will, make sure that your donations are in good shape. Otherwise, you can’t claim them.

The free filing program from the IRS is available once again. So, who’s eligible? If your income is more than $60,000 a year, you might not qualify. So, it’s a good thing to figure out your adjusted gross income (AGI) before you start the process. Your AGI must be less than $52,000 a year to use the free program. That covers about 70 percent of all income earners. And there is a special rule that applies just for this year. You will get an extra tax break if you wait until after Feb. 3 to file. Waiting specifically benefits people who live in states with no state income tax. The IRS free tax filing has changed every year for the past three, so read the fine print carefully.

About six month ago, Clark told you about a lame idea from the IRS to turn over collection of unpaid taxes to private collectors. You might think this was done as a way of being more efficient at collecting taxes, but it was actually a way to pay off to political organizations. The sad part is that it’s going to cost the IRS $61 million in fees and commissions and the agency is only going to earn $56 million. In other words, this move is going to cost taxpayers money. The Government Accountability Office found that the program doesn’t have good protection against out-of-control collectors. In fact, the program is so poorly planned that you won’t be able to tell whether you’re getting a call from a legitimate collector or a crook. The IRS says it will send out a letter, telling people their debt has been turned over to a collection agency. But how hard is it to create an official-looking letter. Yes, people should pay taxes that they owe. But, what we really need to is fix the current tax system.

Have you heard about the new tax law that donated goods can only be deducted from your taxes if they are in good condition? Well, the problem is that the IRS has not defined what “good condition” is. Clark wanted to know if the new law will affect your decision to donate goods. He asked that question in a poll and people had an interesting response. About 60 percent said they would give just as they always have. About 20 percent said they would think twice about it. And the other 20 percent said they would stop giving all together. The statute came about because people were basically giving junk to Salvation Army and Good Will and then deducting it off their taxes. This week’s poll is about your mortgage. What kind of mortgage do you have? Clark would like to know.

If you owe money to the IRS, you should know that the agency is now hiring private collectors to get your money. Clark is opposed to this happening. He worries about our privacy and the confidentiality of our information. He worries about scamsters trying to act like the IRS. So, he wants you to know a few things before this program ramps up. You won’t get e-mails from the IRS. If you do, you know it’s a scam. Also, this program is not supposed to take away any of your rights. But if you do owe money to the IRS and you get a phone call, don’t divulge any information or have a conversation over the phone. Secondly, money should be sent to the U.S. Treasury, not the collection agency. So, if a collector tells you to send the money to his or her office, you know something is up. And, if you owe money, come up with a plan and start paying now so you don’t have to deal with collectors.

Many states are holding “sales tax holidays” because it’s back-to-school time. Depending on the state, that means backpacks, clothing and school supplies are all available with not sales tax. A lot of states are running huge budget surpluses, so this is a politically popular way of raising money without changing taxes long-term. But, is it a deal? Except for basic clothing, be careful buying clothes before your kids are back in school. Kids want to fit in and wear the latest fashions, and clothes are not on sale right now. So, it can cost you a lot. Worse yet, what if your kid gets to school and the fashions don’t fit in? The Clark Smart way to approach it is to wait until your child is back in school. They can size up what kids are wearing and, by the time you’re ready to buy, prices have gone back down. What about school supplies? Unless your child’s school issues a list of exactly what he or she needs, don’t buy things ahead of time. Backpacks, in particular, should be purchased later. Retailers mark up backpacks a significant amount before school. With many textbooks, it’s the same material from edition to edition. So, you can save about 90 percent buying a previous edition. Professors and even some students don’t like this idea, but it can be done if you want to save.

When the IRS says you owe additional money and need to pay up, most people roll over and play dead. It seems like the right thing to do, right? Well, yes. But did you know you can fight to lower what you owe. According to the GAO, people who appeal what they owe win 40 percent of the time. Those are good odds, but most people never follow through. This becomes more important when you learn that the number of people being audited is going up about 20 percent each year. If you have a “S corp” the odds are even greater that you’ll be audited. So, take a chance. Just make sure you keep good records and take those with you when defending your case.

A proposed tax law about to go into effect has both some positives and negatives Clark wants to tell you about. First of all, there is a new gift for 2010 that could be potentially great for you. If you have money in an IRA or 401k from an old job, you can now convert that to a Roth. You will pay the tax bill over 2011 and 2012 and then it grows tax free. That means that if someone has a $50,000 converted IRA and they give it as an inheritance, it will have an ultimate value of $41 million. That’s $41 million TAX FREE! Why would Congress do this? It’s all in an effort to make the budgets appear like they’re giving people a break now. People will make up for it in 2011 and 2012, when they pay tax. But it’s still a great deal for consumers. You will want to discuss with your accountant whether you should do a non-deductible IRA. In addition, there is a “kid tax,” a punitive tax that affects children who have inherited money. It used to affect kids up to age 15, but it’s been raised to 18. It basically punishes kids who have jobs. If they save too much on what they earn, they will be subject to the kiddy tax. There are ways to get around it, but talk to your accountant. One way is to transfer money from that account to a 529 plan. Read more on the bill here.

The General Accounting Office recently conducted a study and found that tax preparation firms make tons of makes on our income tax returns. Who's really at fault? Hear Clark's view.

The IRS is throwing people in jail for not paying taxes and encouraging people who haven't to send their returns in. Clark thinks everyone is responsible for paying taxes, but there are serious problems with our corrupt tax system. Hear Clark talk about it. Just remember to disable your pop-up blocker in order to hear.

Today is a big day in the world of taxes. The voters of Colorado have decided to reform TABOR – The Taxpayer Bill of Rights. Clark has been a big fan of this act for about the past 10 years because it dealt with restrictions on government, especially state government. When it was passed, the law imposed strict limits on government spending and growth based on inflation. It shrunk the share of government in the state of Colorado, which was a great thing. But the restrictions became too tight and the citizens of Colorado decided to increase taxes on themselves by about $700 million a year. So, there will still be strict rules, but it won’t be as restrictive. Clark thinks the idea was great in practice. He agrees that we need to limit the strength of government and its ability to grow, and he thinks more states need some kind of enforceable limits.

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In other news, President Bush’s tax panel has submitted its proposal for changes to the country’s tax code. It would change the way we’re taxed in that it’s a simpler code with just a few tax brackets. Most people would pay 15 percent on income. Some would pay as much as 30 or 33 percent. The plan also reduces the mortgage interest deduction. But people will be taxed less, so it kind of evens out. Several groups are going to get hit hard, though. Single folks, those over 65 years old and those living in areas with inflated housing prices are among them. Clark would be happier if we went to a completely different system all together, so we’ll keep you posted on what happens.

The IRS has had a deal with several tax preparation firms that allow people to file their taxes for free online. It saves the IRS a ton of money and gives those companies a lot of publicity. But the IRS has decided to do away with this program. It has instead formed an alliance with these firms and decided that only people making less than $50,000 a year can file for free. So, if you make more than $50,000, you will have to pay to file electronically at the IRS Web site. Clark thinks this stinks. The IRS makes more money off people who make more money because of all the work that goes into their complicated returns. Tell us what you think about it in our latest poll.

Our tax code is such a mess that even the brightest among us can’t figure it out. Some people are working hard to change our tax code, which disrupts our economy and wastes billions of dollars. They’re trying to figure out how to prevent us from spending all kinds of money on this. Our current tax code is very disruptive these days with all kinds of idiotic loopholes and caveats. Plus, all of the incentives are set up to spend, not save. So, the idea of a flat tax has been popular lately. A national sales tax, or “fair tax” is another idea. They would allow for tremendous growth over time. The sales tax would be very high and some industries would be furious, but over time it would be great. If you don’t have much money, there could be a tax much like President Nixon came up with decades ago. It was coined the “negative income” tax and it would allow low income people to get a rebate for the sales tax they paid. Those are some new ways of looking at the tax code. But we distort our economy and stunt its growth with the current tax code.

Have you filed your taxes yet? Or are you one of those choosing to wait until the last minute. The good news is that this year about 75 percent of people can file their taxes for free simply by going to the irs.gov Web site. There are tons of companies and organizations partnering with the IRS to make this offer available for free. And people are really taking to it. Approximately 60 to 70 percent of people filed electronically this year, which blows the doors off any statistics from the past. If you are still not sure about filing electronically, you can always mail in your return as always. The U.S. Post Office is the obvious answer for most people who do this, but the lines can get out of control as Tax Day nears. You may want to consider using other services such as FedEx, UPS or DHL. These are much more convenient and possibly less expensive. Find the IRS service address if you're using one of these private mailers here. And never, ever pay for a “Rapid Return,” which will cost you a huge chunk of your return.

We’re coming down to the wire for tax day 2005. So, what do you do if you’re not ready to file? Well, you don’t go hide in a cave somewhere. If you can’t file the forms just yet, you want to file an extension. Find that (Form 4868) at irs.gov, and you have an automatic extension until August. If you expect to owe money, it’s a good idea to send in some money. You can always pay more later. But remember that failure to file is 10 times worse than failure to pay. So, what if you can’t pay anything? You just file form 9465, which is a request to pay the IRS in installments. If you offer to pay the money in less than a year, the IRS will almost certainly accept that. The IRS won’t turn down your money. It costs about $40 to do.

Cheating on taxes has become an epidemic in the United States. One in six dollars that we’re supposed to pay to the IRS is not being collected because people are lying and cheating on their taxes. Even worse, the people who are not cheating are subsidizing the people who do to make up for that loss. Human behavior plays a part in whether people cheat for sure. But, so does the tax code itself. Citizens think the tax code is unfair, confusing and subject to special interest. All of these opinions are true, not to mention the fact that the IRS doesn’t even understand the tax code. People call to get help on their taxes, and 20 percent of the time the answer is wrong. Clark thinks a “fair tax” system would be the way to go. It would be much easier to understand and would be bi-partisan. We had a system like that in 1986, but it didn’t stick. The way to make it stick, in Clark’s opinion, is to put roadblocks in place when someone is trying to change the law. If the law were more transparent and open, it would also prevent more people from cheating.

This is the first week that many people start compiling paperwork for their federal income tax return. Over the next four weeks, those expecting refunds will get their returns done and sent off. The likely timeframe for returns is about 10 days if you file electronically and between 12 and 16 weeks if you file through the mail. But it’s not necessary to file through the mail for most taxpayers because electronic filing is free for nearly everyone now. That’s right. Clark wasn’t as clear as he could have been about this last year, so he wants you to know about it for sure this year. This is the third year that that IRS is offering free e-filing. To find out if you are eligible and which organizations you can choose, go to irs.gov. Each of them has different rules for when you can file, how old you have to be and what your income must be. Also, these companies are allowed to market products to you in return for giving you free e-filing. So, why pay if you can do it for nothing!

What is wealthy? In the United States, if your income - as an individual or a family - is above $100,000, you are considered wealthy. The average family income in the U.S. is about $40,000. So, double that and you are rich, by the federal government’s definition. Ironically, for many years, the IRS enforcement efforts were geared toward people making less than $30,000. That means that people who make the least amount of money were being audited more often than anyone. Therefore, the amount of money these people owe is much less than what someone who makes more would pay. In fact, the labor the government has to pay will cost more than what they will get in return. Well, the IRS is finally figuring this out. The number of audits done on wealthier taxpayers is about to increase. Audits of the wealthy are up 40 percent, according to the IRS. And, audits of corporations are going up, as well. On another tax note, one in six people think it’s okay to cheat on their taxes. So, if you’re thinking about it, don’t do it. It’s not ethical. Not to mention the fact that the chances of getting caught are on the rise. People need to perceive the system as fair to live within it, and right now people do not. We need serious tax reform to accomplish that. But until that happens, pay your taxes and you will have nothing to worry about.

What is wealthy? In the United States, if your income - as an individual or a family - is above $100,000, you are considered wealthy. The average family income in the U.S. is about $40,000. So, double that and you are rich, by the federal government’s definition. Ironically, for many years, the IRS enforcement efforts were geared toward people making less than $30,000. That means that people who make the least amount of money were being audited more often than anyone. Therefore, the amount of money these people owe is much less than what someone who makes more would pay. In fact, the labor the government has to pay will cost more than what they will get in return. Well, the IRS is finally figuring this out. The number of audits done on wealthier taxpayers is about to increase. Audits of the wealthy are up 40 percent, according to the IRS. And, audits of corporations are going up, as well. On another tax note, one in six people think it’s okay to cheat on their taxes. So, if you’re thinking about it, don’t do it. It’s not ethical. Not to mention the fact that the chances of getting caught are on the rise. People need to perceive the system as fair to live within it, and right now people do not. We need serious tax reform to accomplish that. But until that happens, pay your taxes and you will have nothing to worry about.

During the campaigns this year, candidates put out a lot of different ideas about how businesses and individuals are taxed. Some suggested that for long term economic reform, we need to eliminate corruption in the income tax system. Yet, people who said this were trashed for saying so. The truth is that we, as a country, have to get away from our current tax system. The lifeblood of our country flows from those people who are willing to start new enterprises. Yet, these people hesitate taking that leap when they don’t know what they’re going to pay in taxes. Individuals, as well, need to know they are not going to get sideswiped when doing their taxes. Over the next several years, many taxpayers could be hit with what’s known as the AMT, or alternative minimum tax. Basically, if the tax gods think you haven’t paid enough in taxes using the traditional tax code, they get you in a bear trap known as the AMT. In addition, figuring out your taxes is nearly impossible because it’s so confusing. Clark is a big fan of a flat tax because it would not allow any games or gimmicks. Based on your income, you’re in a certain bracket and you pay a certain percentage. It’s that simple. Today’s tax code is filled with games because it’s possible to buy off politicians to get certain “preference items” passed. Those items corrupt the tax code and the money has to be paid some other way, increasing the deficit. The other option would be to pay a national sales tax. In some countries, there are both. Clark is not in favor of that. But having one or the other should be something we can discuss in this country.

Clark has taken a lot of calls lately about companies that claim to resolve financial problems with the IRS. You may have seen these ads on late night television. They offer to solve all of your problems for a flat fee, and some are asking for upwards of $7,000. The truth is that people are wasting tons of money on these phonies. For the past 15 years, the IRS has had what’s called the “Offer and Compromise” program. It allows people who owe taxes to work out a deal with the IRS on what they owe. People can get into complicated situations and they can’t pay their taxes. But the IRS will work out a payment plan with you. All of these ads on late night televisions have conned people into thinking that the IRS will not accept their offer and to let the companies do it for them. . So what is the acceptance rate? It’s about 18 percent. That’s because people are making offers that will be accepted. So, if anyone tells you he or she can wave a magic wand and make your debts go away, they are lying.

Clark has long been an advocate of a modified flat income tax system. It happened 18 years ago, and it was quite successful. So, Clark thinks it can happen again. It’s basically a very simple income tax system that taxed people on two levels - 15 percent or 28 percent. Before that, we used to tax up to 70 percent of someone’s income. If you were a high income earner, the Feds would take 70 percent of their cut. States would take their share, too, if someone had a successful year. Then, we simplified it in 1987 and it worked out well. But within several years, corruption interfered and legislators started messing with the code to create “preference items.” Corporations would get certain breaks in the tax code, so Congress had to make up for those breaks by raising taxes for everyone else. It doesn’t work. If our country made it easier and simpler, people would not play games with their money and would probably file more consistently. Clark thinks we should go back to a modified flat tax system. And if anyone wanted to make changes, it would require a two-thirds vote in both houses. It would make it harder to change things. Also, a flat tax helps do away with class warfare that is currently going on. It would be much healthier for the country.

Clark mentioned a while back that everyone focuses on what the Feds are doing with our taxes. But the states are actually taking more money out of your taxes, while the Feds are taking less. There have been state income taxes increases in several states and sales tax increases in almost every state that has them. But the real snake in the grass is the increase local and state governments have given to property taxes. As property values increase, these governments realize they can get more of your money. These governments are supposed to “roll back” taxes when values get higher and taxes get out of hand, but they have not been doing that. So, in some states, citizens have passed initiatives that will cap or restrict the amount of property tax elected officials can charge. Clark is very much in favor of that. But politicians don’t want to give up their power. So, in many states they have outlawed the chance for citizens to put these initiatives on the ballot. People need to realize that some of their very own elected officials are restricting their rights by doing this. You can change that if you get to know more about the politics in your area.

Politicians are sticking it to us with rising property taxes. According to a recent analysis, property taxes are up just under 25 percent in the past four years. The Wall Street Journal shows that just in the past two years taxes are up more than 10 percent. School districts, special tax districts and local governments are all reaching into our pockets. The trouble is that people’s salaries are not increasing at the same rate. Many politicians are using rising assessments as a way of doing hidden tax increases. You may remember there was a property tax revolt known in 1979 as Proposition 13. We are going to see sons and daughters of this revolt doing the same thing this year. You will see it either at the ballot box or with initiatives that will change how property is assessed. The sad part is that the people really getting clobbered by these assessments are senior citizens. More and more seniors are carrying mortgages, and some are struggling to put food on the table. They may not know there is special property tax relief for seniors in their area. So, if you are concerned about your parents look around. And tell those politicians how you feel about increased property taxes by voting against them!

Clark is happy to pay income tax, gas tax and sales tax, if it’s what the state and the community require. At the same time, he hates our country’s tax burden. Some states levy much higher taxes than others, according to Kiplinger’s Personal Finance Magazine. The publication recently charted out the 10 states with the worst tax burdens, and topping the list is Bridgeport, Conn. Second worst is New York City, followed by Portland, Maine, Baltimore, Maryland and Washington D.C. In sixth place is Chicago, seventh worst is Atlanta, and No. 10 is Los Angeles. These states have the highest property taxes, sales tax, and state and local taxes, according to Kiplinger’s. The state with the lowest tax burden is Cheyenne, Wyoming, which has one-sixth the burden of Bridgeport. In fact, Wyoming has no state income tax, no personal property tax, and one of the lowest gas taxes in the nation. After Cheyenne is Houston, followed by Jacksonville, then Memphis, Sioux Falls, Las Vegas, and Anchorage. The average person living in Cheyenne, Wyoming will have $10,000 more in his or her pocket at year’s end than the average Bridgeport resident. The country’s growth usually floats to areas with the lowest tax burdens, and the majority of these places have no state income tax. Many high-income earners move to Florida because there is no state income tax. Clark says that if you want economic growth in your community, you have to fight the size of your state and local government. If Clark were in charge, there would be no state income tax anywhere!

Clark hates paying taxes, but he knows it’s something he must do. We are all required to pay taxes as citizens. But when some people choose not to pay taxes, everyone who does must make up the difference. It’s not fair to people who obey the rules. You may remember in colonial times when people were put on public display if they broke the law. Governments shamed people as a punishment. And apparently it’s a trend that is coming back. According to Wired magazine, there are 13 states that have launched sites listing names of people who owe taxes. They have names such as “CyberShame,” Delingknet” and “Debtor’s Corner.” These get a lot of publicity from TV and newspapers, especially when there are famous people on the list. People love looking up names on these sites, so delinquent taxpayers are more willing to pay instead of being exposed. In the state of Georgia alone, people owe $1.6 billion. The site has only been up for two months and already Georgia has made $1.2 million. That’s pretty effective.

Clark has been at war with the National Audit Defense Network for years because the organization claims to employ former IRS “insiders” who can teach you the tricks of the avoiding paying taxes. In actuality, they charge you a ton of money for a package of services. It’s at least $1,500 for the services. And when you try to get your money back through its “guaranteed refund policy,” they won’t refund peoples’ money. Now, the company has been accused of helping people cheat on their taxes. The federal government is trying to get the list of all NADN customers, who may have cheated on their taxes. The IRS will audit anyone who was a customer to see whether they were involved in any of the company’s tactics. These include taking a tax credit for the disabled, claiming a fake home business and any other criminal enterprises. So, if you were ever a customer of this company and you think you may have gone along with the cheating, start setting some money aside because you’ll probably owe. Tax avoidance is legal; tax evasion is not. There is an important distinction. Showing you legal ways to reduce your taxes is fine. But cheating the government by misusing the tax code is not fine. Clark would like to see a different tax code in place, but that is something we must change through politics and laws.

When you move to a new state, do you consider how much you will be paying in taxes? At this time of year, a lot of stories appear about the cost of living and the cost of owning a business in various states. According to the Wall Street Journal, the states with the highest tax burden are 6) Wisconsin, 5) Rhode Island, 4) Hawaii, 3) Ohio, 2) Maine and 1) New York. In New York, the government takes 13 percent of everything you make. Most of the others are in the 11 to 12 percent range. The states with the lowest tax burden are - from highest to lowest - Wyoming, Florida, Texas, Tennessee, Delaware, New Hampshire, and Alaska, which taxes you the least of any other state. The average tax burden in Alaska is 6 percent. It’s a big consideration for people who are deciding where to retire. People who are in their income earning years don’t think as much about it because they’ve got money coming in. If you own a business, it’s a bigger issue. In fact, people are leaving some states, such as California, because they can’t afford to own a business there. It's something to consider!

Clark has always talked about how bad rapid refund loans are because people end up paying 400 to 600 percent interest to get their own money back from the IRS. The ads are everywhere for these things, and people continue to buy into it. Now, there is another twist to this already troublesome problem. Thieves have been going into tax preparation offices, posing as someone else and stealing the rapid refund checks that come into the system. The Chicago Police say they are being overwhelmed by this scam. Apparently, they have no way to verify identity, and the IRS has no procedure in place to ensure returns are legitimate. The Chicago Tribune profiled someone whose money was stolen from a Jackson Hewitt Office two years in a row. She went to have her taxes done and was told they had already been filed. He went back a year later and the same thing happened at another office. This is another reason why these refund loans should be eliminated. And if they are not eliminated, the tax preparation firm preparing them should be responsible if someone’s refund is stolen and identity swiped. There is currently no method to stop this form of identity theft, and that is frightening.

This time of year Clark tends to read the trade journal, Budget and Tax News. Yes, this news can be pretty dull, but Clark likes to know the background of subjects that people might call about. And, in the most recent edition, he read a story about the IRS and how often the agency gives out the wrong information. A survey by the Inspector General found that the IRS gives wrong answers 20 percent of the time that people call. Another 15 percent of the time they don’t get proper background from people when giving an answer. But here’s the kicker: even if the IRS gave you the wrong information, you are still at fault if you make a mistake on your return. What this means is that the tax code is too complicated for even those who administer it to understand. That is the bigger issue in Clark’s opinion. Donald Ratajczak, an economist and author, recently wrote about how hard it has become to do his own taxes. He said that, as people become more sophisticated, they start to feel so burned out by the tax code that they become less interested in investing. Clark thinks we need a much simpler tax system much like the one we had 18 years ago. We had just two tax brackets: 15 percent and 28 percent. And, with those two, almost all of the gimmicks went away. Then people started messing around with the code and getting “tax preferences” that would benefit a specific industry or business. Now, the tax code is the most complicated it’s ever been.

The IRS is coming back to life after being in a stupor for about five years. You probably remember the IRS Congressional hearings of 1998, when agents told horrific stories of taxpayer abuse and employee mistakes. The agency went through a quiet time and now the pendulum has swung in the other direction. Things people got away with in the past may get them in hot water in the future. So, whether you have done your taxes or not, the odds that you will be audited have increased. If you’re one of the lucky Americans with a family income of more than $100,000 a year, the audit rate for you is rising exponentially. Even if you have nothing goofy on your return, the odds still increase. But the IRS doesn’t want to play ugly. They want to play smart. So they have released a list of the “dirty dozen” flags that could get you audited. The first is if you have a lot of deductions, if you have some kind of tax shelter, if you have odd business arrangements or investments, if you have a home business and you have a lot of expenses from that business, and if you get tips as your primary income. Others include rental expenses and being audited in the past. For the full list, click here. If you have a year when one of these comes up, don’t play cute with your return that year. Do everything by the book. And if you plan to do an “Offer and Compromise,” get help from a CPA.

Clark has an office in the home and he uses it all the time. However, he does not deduct it from his taxes because his home office is not considered a principal place of business. So, that makes it ineligible. About 30 million people have offices in the home, working full or part time. And people often wonder if they can deduct it. The first question to ask is if you are working from home for the convenience of your employer. If so, you are eligible. For example, all of the reservation agents for the airline, JetBlue, work out of their homes. There is no reservations office. So, all of those agents qualify. The IRS used to disallow the majority of these home office claims. But now, even if you have part time use of an area, you may be able to deduct a portion of your home. The IRS has a form to help you calculate home office deductions. You may be able to include things like homeowner’s insurance, utilities, repairs and even things like your property tax and mortgage interest. You must have a real business with real revenue, though. Don’t just make it up.

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Are you thinking about doing your taxes at one of the H&R Block stores in Wal-Mart? Think twice about it. A Pittsburgh Post Gazette reporter said that your information is not private. The reporter was repeatedly able to get social security numbers, date of birth and other information off these forms. H&R Block officials said it was “hard to believe” that this was true. She said the forms are kept private and are not in plain view. What do you think?

It’s tax time again and many people may have already filed and gotten their returns. Good job! But if you haven’t done your taxes because it’s too daunting, Clark has some tips for you. Because of the tax law changes that have happened, you can make a number of mistakes if you’re not careful. If you don’t want to hire a CPA like Clark does but you need some extra guidance, a tax software package may be for you. The tax expert at the Wall Street Journal spent weeks putting Turbo Tax and TaxCut through their paces. The bottom line is that TaxCut is excellent for people doing a simple return, and it only costs $10 after a rebate. But if you have a home office, rental properties or if you sold mutual funds, you will want a specialty software package from Turbo Tax. Check out the options with our TurboTax Guide.

Did you know that there is a book in circulation that the federal government is trying to have banned? It’s written by a man named Irwin Schiff, who claims that people don’t need to pay income taxes. The Feds have asked the U.S. Circuit Court of Appeals to get involved and have even asked for a list of people who have bought the book. The Feds want the IRS to check the list to see if they are paying taxes. That is scary stuff. Clark believes it is our civic duty to pay taxes, but he thinks what the government is doing is wrong. If you want to buy a book and believe what’s written in it, you should be able to.

Almost 13 million people paid monstrous junk fees for refund loans last year, according to the IRS. All told, people paid nearly $1 billion in fees to get their own money back. These numbers blow Clark away. Interest rates on these loans are usually between 200 and 600 percent. And some don’t even let you know they are loans. These companies promise that people will get their money back in a few days. Consumers get so excited by the fever pitch that they buy in. But what they may not know is that if you file electronically the normal way, you may wait just one week more – and you won’t have to pay a dime. So, it’s really not worth it to get money seven days earlier. So, when you’re sitting there with a tax preparer and he or she says the company can arrange for you to receive the refund immediately, run! They act like they are doing you a favor. All you need to do is sign on the dotted line. But it’s no favor! Also, if you’re getting a big refund, it means you are having too much withheld from your paycheck. You’re giving an interest free loan to the government. All you need to do is go to your human resources department and adjust the amount you’re withholding.

We’re facing a time in modern American history when governments at all levels are facing tremendous pressure. The federal government has massive deficits and is virtually alone in its ability to spend money it doesn’t have. Most states have to close the budget gap. And you’ve probably heard about the new California governor who is trying to solve the $15 billion problem with bonds. Oregon has also faced enormous budget pressures for the past couple of years. School teachers have had to work for free for weeks at a time because of the budget shortages. Citizens there just had the opportunity to increase taxes to balance the budget, and overwhelmingly they decided not to. Voters in Oregon can even vote by mail, which Clark thinks would be great to roll out across the country. The vote was 60 percent to 40 percent, which is considered a landslide. For a second time, citizens said they would rather see a reduction in what the government does than pay more taxes. It means there will be cuts in school spending, medical care, police and fire of about half a billion dollars over the next two years. Clark thinks they made a smart decision. It is really hard to reign in the size of government, and most people vote time and time again to raise taxes. But along with the decision not to raise taxes comes the responsibility of telling citizens that services won’t exist. And that means cutting fat. We need to decide what we think the role of government should be and act on it.

Did you know that the income tax is a hoax? Well, not really. But some confused and potentially dangerous people out there think it’s true. This topic comes up every year around tax time because certain people believe income taxes are unconstitutional. And they tell everyone this, trying to persuade people to join them in the crusade. The idea that paying taxes is unconstitutional is false. How would we pay for the federal government without taxes. And until an edict comes down from the U.S. Supreme Court saying different, you owe what you owe. So pay it. You don’t do yourself any favors by hiring a consultant or reading books on this. You’re just helping people get rich who don’t deserve it.

We’re in an era when mortgage rates are in the 4 to 5 percent range, and car loans are 4.75 to 6 percent. So, why would anyone pay 200 to 700 percent on a loan? Usually, it’s because people are money hungry. Over the next three months, people will give up huge amounts of money in “fees” because they want their tax return back as quickly as possible. Typically, these companies claim you’ll get your return back in three days, which sounds very appealing. But they charge you an exorbitant interest rate to do so. You’d be much better off to file the normal way and wait 10 or 12 days and get the full amount back. Besides, you shouldn’t be getting a very big tax refund anyway. If you’re expecting one, it means you’re giving an interest-free loan to the government. You need to reduce your withholding through your employer so you’re getting a very small refund or breaking even on your taxes. The people who will spend money on these loans have a hard time saving money. Why not use a payroll savings plan and invest automatically in a savings bond or CD. You are not allowed to touch the money for at least a year, and you don’t have to borrow money to get your own money back.

After being asleep at the switch for years, the IRS seems to finally be waking up. In recent years, the IRS has failed in its duty to make sure that people don’t cheat on their taxes. You’ve probably heard in the news about all of the illegal IRA rings and tax shelters that have gone unnoticed and unpunished for years. Basically, the IRS has been so short-staffed that people have pretty much gotten away with whatever they want. Now, the pendulum is swinging. The IRS is already auditing more people. And starting in 2005, the IRS will hire thousands of people to go after tax cheats. So, if you’ve been cutting corners on your taxes, Clark advises you not to do so moving forward. The greatest focus now is on the prior three years of returns. So, if you’re thinking you will continue to get away with what you’ve been doing, you are wrong. One of the main reasons people cheat on their taxes is that the tax code is so confusing. And it gets even more confusing as your income rises and the complexity of your taxes increases. And, that is not the IRS’s fault. It’s the fault of Congress and our elected officials. They created the current confusing tax code to benefit big corporations and special interest groups that contribute to their campaigns. The bottom line is that we need to create a simpler tax code. The IRS is going to start making examples of people again, and some of those people may have just made an honest mistake. So, making the code more understandable would eliminate a lot of problems. Clark wishes Congress would show some leadership and integrity by creating a tax code that taxes us either on what we spend or what we earn, but not both.