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Archive for January 18th, 2011

Here’s another amusing email that landed in my inbox. Sort of the same theme as our joke about Canada.

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Dear American liberals, leftists, statists, social progressives, socialists, Marxists and Obama supporters, etc:

We have stuck together since the late 1950’s for the sake of the kids, but this latest election has made me realize that we should get a divorce. I know we tolerated each other for many years for the sake of future generations, but sadly, this relationship has clearly run its course.

Our two ideological sides of America cannot and will not ever agree on what is right for us all, so let’s just end it on friendly terms. We can smile and chalk it up to irreconcilable differences and go our own way.

Here is a model separation agreement:

–Our two groups can equitably divide up the country by landmass each taking an appropriate portion. We’re happy to give you New England and the West Coast. The good people of New Hampshire obviously will need some time to pack up and move to flyover country, and we’ll give the tenured professors in university towns ample time to relocate in your share of the country.

–We don’t like redistributive taxes and the IRS, so you can keep them.

–You are welcome to the left-wing judges and the ACLU.

–Since you hate guns and war, we’ll take our firearms, the cops, the NRA and the military.

–We’ll take the nasty, smelly oil industry and you can go with wind, solar and biodiesel.

–You can keep Oprah, Michael Moore and Rosie O’Donnell. You are, however,  responsible for finding a bio-diesel vehicle big enough to move all three of them.

–We’ll keep capitalism, greedy corporations, pharmaceutical companies, Wal-Mart and Wall Street.

–You can have your beloved welfare grubbers, food stamp recipients, homeless, hippies, druggies, and illegal aliens.

–We’ll keep the hot Alaskan hockey moms, greedy CEO’s, and rednecks.

–We’ll keep the Bibles and give you the networks and Hollywood.

–You can make nice with Iran and Palestine and we’ll retain the right to invade and hammer places that threaten us.

–You can have the peaceniks and war protesters. When our allies or our way of life are under assault, we’ll help provide them security.

–We’ll keep our Judeo-Christian values.

–You are welcome to Islam, Scientology, Humanism, political correctness and Shirley McClaine. You can also have the U.N. but we will no longer be paying the bill.

–We’ll keep the SUV’s, pickup trucks, and full-sized luxury cars. You can take every Subaru, Volvo, and Prius you can find.

–You can give everyone healthcare if you can find any practicing doctors.

–We’ll continue to believe healthcare is a product of the marketplace and not a right.

–We’ll keep “The Battle Hymn of the Republic” and “The National Anthem.”

–I’m sure you’ll be happy to substitute “Imagine”, “I’d Like to Teach the World to Sing”, “Kum Ba Ya” or “We Are the World”.

–We’ll practice trickle down economics and you can continue to give trickle up poverty your best shot.

–Since it often so offends you, we’ll keep our history, our name and our flag.

Would you agree to this?   If so, please pass it along to other like-minded liberals. In the spirit of friendly parting, I’ll bet you $10 (our new gold-backed dollar, not your QE15 dollar) which one of us will need help in 15 years.

Sincerely,

American libertarians, conservatives, traditionalists, constitutionalists, etc

P.S. Also, please take Ted Turner, Sean Penn, Martin Sheen, Barbara Streisand, &; Jane Fonda with you.

P.P.S.  And you won’t have to press 1 for English when you call our country.

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I’m not a big fan of the Internal Revenue Service, but I try not to demonize the bureaucrats because politicians actually deserve most of the blame for America’s complex, unfair, and corrupt tax system. The IRS generally is in the unenviable position of simply trying to enforce very bad laws.

But sometimes the IRS runs amok and the agency deserves to be held in contempt by the American people

Let’s look at a grotesque example of IRS misbehavior. It deals with a seemingly arcane issue, but it has big implications for the US economy, the rule of law, and human rights.

On January 7, the tax-collection bureaucracy proposed a regulation that, if implemented, would force American financial institutions to put foreign tax law above US tax law. Banks would be required to report to the IRS any interest they pay to foreigners, but not so the US government can collect tax, but in order to let foreign governments tax this US-source income.

This isn’t the first time the IRS has tried to pull this stunt. At the very end of the Clinton years, the agency proposed a rule to do the same thing. But the bureaucrats were thwarted because of overwhelming opposition from Capitol Hill, the financial services industry, and public policy experts. There was near-unanimous agreement that it would be crazy to drive job-creating capital out of the US economy and there was also near-unanimous agreement that the IRS had no authority to impose a regulation that was completely inconsistent with the laws enacted by Congress.

But like a zombie, this IRS regulation has risen from the grave.

I’m not sure what is most upsetting about this proposed rule, but there are five serious flaws in the IRS’s back-door scheme to turn American banks into deputy tax collectors for foreign governments.

1. The IRS is flouting the law, using regulatory dictates to overturn laws enacted through the democratic process.

Ever since 1921, and most recently reconfirmed by legislation in 1976 and 1986, Congress specifically has chosen not to tax interest paid to non-resident foreigners. Lawmakers wanted to attract money to the U.S. economy.

Yet rogue IRS bureaucrats want to impose a regulation to overturn the outcome of the democratic process. Heck, if they really think they have that sort of power, why don’t they do us a favor and unilaterally junk the entire internal revenue code and give us a flat tax?

2. The IRS has failed to perform a cost-benefit analysis, as required by executive order 12866.

Issued by the Clinton Administration, this executive order requires that regulations be accompanied by “An assessment of the potential costs and benefits of the regulatory action” for any regulation that will, “Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.”

Yet the IRS blithely asserts that this interest-reporting proposal is “not a significant regulatory action.” Amazing, we have trillions of dollars of foreign capital invested in our economy, perhaps $1 trillion of which is deposited in banks, and we know some of which definitely will be withdrawn if this regulation is implemented, but the bureaucrats unilaterally decided the regulation doesn’t require a cost-benefit analysis.

During a previous incarnation of this regulation, the IRS’s failure to comply with the rules led the Office of Advocacy at the Small Business Administration to denounce the tax-collection bureaucracy, stating that “…there is ample evidence that the impact of the regulation is significant and that a substantial number of small businesses will be impacted.”

3. The IRS is imposing a regulation that puts America’s economy at risk.

According to the Commerce Department, foreigners have invested more than $10 trillion in the U.S. economy.

And according to the Treasury Department, foreigners have more than $4 trillion in American banks and brokerage accounts.

We don’t know how much money will leave America if this regulation is implemented, but there are many financial centers – such as London, Hong Kong, Cayman, Singapore, Tokyo, Zurch, Luxembourg, Bermuda, and Panama – that would gladly welcome the additional investment if the IRS makes the American financial services sector less attractive.

4. The IRS is destabilizing America’s already shaky financial system.

Five years ago, when the banking industry was strong, the IRS regulation would have been bad news. Now, with many banks still weakened by the financial crisis, the regulation could be a death knell. Not only would it drive capital to banks in other nations, it also would impose a heavy regulatory burden.

How bad would it be? Commenting on an earlier version of the regulation, which only would have applied to deposits from 15 countries, the Chairman of the Federal Deposit Insurance Corporation warned that, “[a] shift of even a modest portion of these [nonresident alien] funds out of the U.S. banking system would certainly be termed a significant economic impact.” He also noted that potentially $1 trillion of deposits might be involved. And a study from the Mercatus Center at George Mason University estimated that $87 billion would leave the American economy. And remember, that estimate was based on a regulation that would have applied to just 15 nations, not the entire world.

So what happens if more banks fail? I guess the bureaucrats at the IRS would probably just shrug their shoulders and suggest another bailout.

5. The IRS is endangering the lives of foreigners who deposit funds in America because of persecution, discrimination, abuse, crime, and instability in their home countries.

If you’re from Mexico you don’t want to put money in local banks or declare it to the tax authorities. Corruption is rampant and that information might be sold to criminal gangs who then kidnap one of your children. If you’re from Venezuela, you have the same desire to have your money in the United States, but perhaps you’re more worried about persecution or expropriation by a brutal dictatorship.

There are people all over the world who have good reasons to protect their private financial information. Yet this regulation would put them and their families at risk. The only silver lining is that these people presumably will move their money to other nations. Good for them, bad for America.

Let’s wrap this up. Under current law, America is a safe haven for international investors. This is good news for foreigners, and good news for the American economy. That’s why it is so outrageous that the IRS, unilaterally and without legal justification, is trying to reverse 90 years of law for no other reason than to help foreign governments.

By the way, you can add your two cents by clicking on this link which will take you to the public comment page for this regulation. Don’t be bashful.

One last point. The Obama Administration says this regulation is part of a global effort to improve tax compliance. But unless Congress changes the law, the IRS is not responsible for helping foreign tax collectors squeeze more money out foreign taxpayers. Moreover, the White House has been grossly misleading about U.S. compliance issues (as this video illustrates), so their assertions lack credibility.

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