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Posts Tagged ‘Corruption’

The Export-Import Bank is noxiously corrupt example of crony capitalism.

It never should have been created. But that’s something we could say about most government programs.

So the real question is how to reverse the damage.

If we reform a big program such as Medicare, you can’t end it overnight. You have to deal with the reality that millions of people have made plans based on government policies. And even if those policies are wrong, you can’t pull the rug out from folks who did nothing wrong.

So it’s important to put in place appropriate and fair transitions when reforming a major program.

But that’s not an issue with the Export-Import Bank. It provides undeserved subsidies to big companies. Those big companies will be just fine without having their snouts in the public trough. The right thing to do, from both a moral and economic perspective, is to shut it down immediately.

Indeed, this should be a test as to whether supposedly pro-taxpayer politicians in Washington understand the critical difference between being pro-business and being pro-market.

But what about the argument that the Export-Import Bank is somehow a win-win for the American economy? I tend to automatically dismiss such claims for the simple reason that all sorts of companies in the private sector would do what the Ex-Im Bank is doing if it really was a money maker.

But with the issue heating up, it would be a good idea to examine this claim more closely. Fortunately, Matt Mitchell (no relation) of the Mercatus Center does an excellent job of explaining the dodgy economics of the Ex-Im Bank is this short video.

In some sense, Matt is channeling Frederic Bastiat, the great French thinker who said that a good economist looks at both direct and indirect consequences of policies (the “seen” and the “unseen”).

Matt shows that the negative indirect impact of the Ex-Im Bank is far larger than any putative benefits generated by handouts to politically well-connected firms.

Just like bailouts, s0-called stimulus, and green-energy programs all look bad when you examine all the costs and benefits.

For more information, I also recommend this superb video on why cronyism is so corrosive.

And if you want a humorous analysis, scroll to the bottom of this post and see what the Kronies have to say about the Ex-Im Bank.

Or just enjoy this Glenn Foden cartoon.

P.S. I shared six jaw-dropping examples of left-wing hypocrisy last month.

But maybe it’s time to create a special Hypocrisy Hall of Fame, because the Wall Street Journal reveals that we another member who would be a shoo-in for the award.

It seems that Warren Buffett was not being terribly sincere or honest when he said people like him should be paying higher taxes.

Now this is awkward for President Obama and Senate Democrats. …Warren Buffett’s Berkshire Hathaway is expected to help finance Burger King’s  pending acquisition of Canadian doughnut-chain Tim Hortons. The deal will allow Miami-based Burger King to claim Canada as its new legal home for tax purposes. Beltway Democrats had been hoping to use a recent wave of such corporate inversions as a campaign tool. The idea was to propose new taxes on the companies that move. Step two was to beat up Republicans who don’t agree to make the free world’s most punitive corporate tax system even more punitive. But now that Democratic tax hero Mr. Buffett has been spotted surfing on top of this wave, the political challenge has become more difficult.

Sort of makes you wonder whether Buffett endorses higher taxes for the self-interested reason that the political class will then give him a free pass on issues such as the Burger King inversion?

Shocking, just shocking, to think that rich leftists are hypocrites.

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I don’t like international bureaucracies because they generally push for policies that expand the burden of government and undermine economic growth.

But I recognize that there are some good people who work at these institutions and I’m always willing to acknowledge when they publish good research.

The IMF said that Greece had reached the tipping point where taxes were too high.

The World Bank put together a report showing how anti-money laundering regulations hurt the poor.

The United Nations acknowledged the Laffer-Curve insight that taxes can be too high.

The OECD admitted that income taxes undermine growth and that tax competition restrains the greed of the political class.

The European Central Bank found excessive government spending undermines economic performance.

We can now add some new research to that list. The World Bank has just published a new study highlighting the link between tax complexity and tax corruption.

You can peruse the entire report if you’re so inclined, but here are the key details from the abstract.

This paper seeks to find empirical evidence of a link between tax simplification and corruption in tax administration. …The study includes 104 countries from different income groups and regions of the world. The time period is 2002–12. The empirical findings support the existence of a significant link between the measure of tax corruption and tax simplicity, so a less complex tax system is shown to be associated with lower corruption in tax administration. It is predicted that the combined effect of a 10 percent reduction in both the number of payments and the time to comply with tax requirements can lower tax corruption by 9.64 percent….The positive link between tax simplicity and lower tax corruption has useful policy implications.

There are a few caveats. While people have a greater incentive to rig the system when tax rates are high, the report only addresses this issue tangentially. This is a very unfortunate oversight.

Also, the data show that corruption is higher in developing nations, which is not terribly surprising. Though I think this might be unfair because corruption is narrowly defined so that it’s simply a measure of lawbreaking.

I suspect there are similar amounts of corruption in developed nations, but it takes the form of influence peddling and legislative favors. That’s definitely the mother’s milk of Washington’s sleazy insiders.

And if you look at this chart, this chart, or this chart, there’s no doubt that the internal revenue code is riddled with loopholes.

This video elaborates on the connection between bloated government and legal corruption.

And this video shows how our corrupt tax code could be fixed.

P.S. Just so you don’t think I’m getting soft-hearted about the World Bank, just remember that this is the bureaucracy that put together a tax “report card” that gave nations higher grades for having more punitive fiscal policy.

P.P.S. In the interests of fairness, I am a fan of the World Bank’s Doing Business Index.

P.P.P.S. I’ve written several times about overpaid bureaucrats and fat-cat lobbyists.

Well, here’s a look at per capita personal income in Washington, DC, compared to the rest of America.

You’ll notice that Washington got substantially richer during both Bush Administrations.

But it’s not just the District of Columbia. If you click on this map, you’ll see that a majority of America’s richest communities are the suburbs of Washington.

A lot of fat and happy people living directly or indirectly off your tax dollars.

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You won’t know whether to laugh or cry after perusing these stories that will be added to our “great moments in government” collection.

For instance, did you realize that American taxpayers were saddled with the responsibility to micro-manage agriculture in Afghanistan? You’re probably surprised the answer is yes.

But I bet you’re not surprised that the money was flushed down a toilet. Here are some excerpts from a report on how $34 million was wasted.

American agricultural experts who consider soybeans a superfood…have invested tens of millions of U.S. taxpayer dollars to try to change the way Afghans eat. The effort, aimed at making soy a dietary staple, has largely been a flop, marked by mismanagement, poor government oversight and financial waste, according to interviews and government audit documents obtained by the Center for Public Integrity. Warnings by agronomists that the effort was unwise were ignored. The country’s climate turns out to be inappropriate for soy cultivation and its farming culture is ill-prepared for large-scale soybean production. Soybeans are now no more a viable commercial crop in Afghanistan than they were in 2010, when the $34 million program got started… The ambitious effort also appears to have been undone by a simple fact, which might have been foreseen but was evidently ignored: Afghans don’t like the taste of the soy processed foods.

Sadly, this $34 million boondoggle is just the tip of the iceberg. It’s been said that Afghanistan is the graveyard of empires. Well, it’s also the graveyard of tax dollars.

…the project’s problems model the larger shortcomings of the estimated $120 billion U.S. reconstruction effort in Afghanistan, including what many experts depict as ignorance of Afghan traditions, mismanagement and poor spending controls. No one has calculated precisely how much the United States wasted or misspent in Afghanistan, but a…special auditor appointed by President Obama the following year said he discovered nearly $7 billion worth of Afghanistan-related waste in just his first year on the job.

I’m guessing that most of the $120 billion was squandered using traditional definitions of waste.

But using a libertarian definition of waste (i.e., money that the federal government should not spend), we can easily calculate that the entire $120 billion was squandered.

Let’s now discuss another example of American taxpayer money being wasted in other nations. I’ve written previously about the squalid corruption at the Export-Import Bank, but Veronique de Rugy of Mercatus is the go-to expert on this issue, and she has a new article at National Review about “a project in Brazil that, if it goes bust and the Brazilians can’t pay the American contractor, your tax dollars will end up paying for.”

And what is this project?

…an Export-Import Bank–backed deal to build the largest aquarium in South America…the taxpayer exposure is $150,000 per job “supported.” Some people in Brazil are rightly upset about this. The Ex-Im loan may have lower interest rates and better terms than a regular loan, but this is probably money the indebted and poor Brazilian government can’t afford. …a real problem with the Ex-Im Bank: On one hand, it gives cheap money to large companies who would have access to capital markets even in its absence. But on the other hand, it encourages middle-income or poor countries to take on debt that they probably can’t afford, whether the products purchased are “made in America” or not.

Gee, aren’t we happy that some bureaucrats and politicians have decided to put us on the hook for a Brazilian aquarium.

But let’s try to make the best of a bad situation. Here’s a depiction of what you’re subsidizing. Enjoy.

Subsidized by American taxpayers

I hope you got your money’s worth from the image.

Perhaps I’m being American-centric by focusing on examples of bad policies from the crowd in Washington.

So let’s look at an example of government foolishness from Germany. It doesn’t involve tax money being wasted (at least not directly), but I can’t resist sharing this story because it’s such a perfect illustration of government in action.

Check out these excerpts from a British news report on over-zealous enforcement by German cops.

A one-armed man in Germany has received a full apology and refund from the police after an overzealous officer fined him for cycling using only one arm. Bogdan Ionescu, a theatre box office worker from Cologne, gets around the usually cycle-friendly city using a modified bicycle that allows him to operate both brakes – one with his foot. But on 25 March he was pulled over by a police officer who, he says, told him he was breaking the law. Under German road safety rules, bicycles are required to have to have two handlebar brakes. After a long argument at the roadside, the officer insisted that Mr Ionescu’s bike was not roadworthy and issued him with a €25 (£20) fine.

At least this story had a happy ending, at least if you overlook the time and aggravation for Mr. Ionescu.

Our last (but certainly not least) example of foolish government comes from Nebraska, though the culprit is the federal government.

But maybe “disconcerting” would be a better word than “foolish.”

It seems that our friends on the left no longer think that “dissent is the highest form of patriotism.” In a very troubling display of thuggery, the Justice Department dispatched a bureaucrat to “investigate” a satirical parade float.

Here’s some of what was reported by the Washington Times.

The U.S. Department of Justice has sent a member of its Community Relations Service team to investigate a Nebraska parade float that criticized President Obama. A Fourth of July parade float featured at the annual Independence Day parade in Norfolk sparked criticism when it depicted a zombie-like figure resembling Mr. Obama standing outside an outhouse, which was labeled the “Obama Presidential Library.” The Nebraska Democratic Party called the float one of the “worst shows of racism and disrespect for the office of the presidency that Nebraska has ever seen.” The Omaha World-Herald reported Friday that the Department of Justice sent a CRS member who handles discrimination disputes to a Thursday meeting about the issue. …The float’s creator, Dale Remmich, has said the mannequin depicted himself, not President Obama. He said he is upset with the president’s handling of the Veterans Affairs Department, the World-Herald reported. “Looking at the float, that message absolutely did not come through,” said NAACP chapter president Betty C. Andrews.

If you look at the picture (and other pictures that can be seen with an online search), I see plenty of disrespect for the current president, but why is that something that requires an investigation?

There was plenty of disrespect for the previous president. And there as also disrespect for the president before that. And before that. And before…well, you get the idea.

Disrespect for politicians is called political speech, and it’s (supposedly) protected by the First Amendment of the Constitution.

That’s even true if the float’s creator had unseemly motives such as racism. He would deserve scorn if that was the case, and parade organizers would (or at least should) have the right to exclude him on that basis.

But you don’t lose your general right to free speech just because you have unpopular and/or reprehensible opinions. And the federal government shouldn’t be doing anything that can be construed as suppressing or intimidating Americans who want to “disrespect” the political class.

P.S. Since we’re on the topic of politicized bureaucracy, we have an update to a recent column about sleazy behavior at the IRS.

According to the Daily Caller, there’s more and more evidence of a big fire behind all the smoke at the IRS.

Ex-IRS official Lois Lerner’s computer hard drive was “scratched” and the data on it was still recoverable. But the IRS did not try to recover the data from Lerner’s hard drive, despite recommendations from in-house IRS IT experts to outsource the recovery project. The hard drive was then “shredded,” according to a court filing the IRS made to House Ways and Means Committee investigators.

Gee, how convenient.

I used to dislike the IRS because of the tax code. Now I have an additional reason to view the bureaucrats with disdain.

P.P.S. One last comment on the controversy surrounding the parade float. Racism is an evil example of collectivist thinking. But it is also reprehensible for folks on the left to make accusations of racism simply because they disagree with someone.

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I thought TARP was the sleaziest-ever example of cronyism and corruption in Washington.

The Wall Street bailout rewarded politically well-connected companies, encouraged moral hazard, and ripped off taxpayers. Heck, it was so bad that it makes the sleaze at the Export-Import Bank seem almost angelic by comparison.

But I may have to reassess my views.

One of the provisions of Obamacare allows the White House to give bailouts to big health insurance companies. You’re probably wondering why these big firms would need bailouts. After all, didn’t Obamacare coerce millions of people into becoming involuntary customers of these companies? That should give them lots of unearned profits, right?

But here’s the catch. The President wasn’t being honest when he repeatedly promised that Obamacare would reduce premiums for health insurance. And since the Democrats don’t want consumers to get angry about rising costs (particularly before the 2014 elections), they want health insurance companies to under-charge.

Avik Roy of Forbes explains in greater detail how the White House is coercing health insurance companies to limit premium increases before the mid-term elections. Here are some excerpts.

Hidden in the midst of a 436 page regulatory update, and written in pure bureaucratese, the Department of Health and Human Services asked that insurance companies limit the looming premium increases for 2015 health plans. But don’t worry, HHS hinted: we’ll bail you out on the taxpayer’s dime if you lose money. …The White House is playing politics with Americans’ health care—and they’re bribing health insurance companies to play along. The administration’s intention is clear: Salvage the 2014 midterm elections. …Technically, the regulations don’t force health insurance companies to tamp down their premium spikes. But the White House isn’t asking nicely. …Under Obamacare, insurers are so heavily regulated that they have to play nice with the bureaucrats who call the shots. …If insurance companies don’t give in, regulators have powerful ways to make life hard for them. A shrewd CEO doesn’t need to look far to see what might happen if his company opts out.

But before you feel sorry for Big Insurance, remember that these corrupt companies supported Obamacare and fully expect to get bailed out by taxpayers. Here are some blurbs from an article last month in the Weekly Standard.

Most Americans don’t think it’s their job to bail out insurance companies who lose money under Obamacare, but that’s exactly what’s poised to happen. Obamacare’s risk-corridor program — which President Obama has been using as a slush fund to placate his insurance allies and keep them quiet about his lawlessness — shifts financial risk from insurers to taxpayers. According to the House Oversight Committee, health insurers expect Obamacare’s risk corridors to net them nearly $1 billion, at taxpayer expense, this year alone. …It was a win-win that would boost Obamacare in its early days — to the benefit of those who’ve gained extraordinary power at the expense of Americans’ liberty, and of those whose product has become mandatory for Americans to purchase.

In other words, we have a stereotypical example of Mitchell’s Law. Government screws up something, and then uses that mess as an excuse to impose more bad policy!

This Lisa Benson cartoon is a perfect summary of what’s happening.

P.S. If you’re in the mood for some dark humor, here’s the federal government’s satirical bailout application form.

P.P.S. Switching to a different topic, it’s time for me to rectify a mistake. When I first created the Moocher Hall of Fame last year, I didn’t include the “Octo-moocher” as a charter member. After all, having 14 kids while living on the dole didn’t seem particularly noteworthy.

But now we’ve discovered that she could afford her kids. She just wanted other people to pick up the tab.

Octomom Nadya Suleman pleaded no contest Monday to a single count of misdemeanor welfare fraud for failing to disclose income she was receiving from videos and personal appearances while collecting more than $26,000 in public assistance funds to care for her 14 children.

This may not be as impressive as the deadbeat who got handouts while living on a $1.2 million yacht, but still worthy of membership.

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I periodically share polling data. This is because public opinion research (if done honestly) provides insights on the degree to which people are either well informed, uninformed, or misinformed.

And that kind of information is useful for policy wonks like me since it shows where we need to re-double our efforts to educate the American people.

And some of the best polling data today comes from the periodic Reason-Rupe survey. They ask fair questions (i.e., they’re trying to discover what people actually think rather than doing “push polls” designed to produce pre-determined results) and they ask interesting questions.

But that doesn’t mean I always like the answers. Reason-Rupe just did a major survey of Americans between ages 18 and 29. Perhaps I’m being a glass-half-empty person, but I’m not overly encouraged by the answers from these so-called millenials.

Heck, I’m tempted to say that the voting age should be raised to 30.

Is this because of how they voted in the past two elections?

Young Americans (ages 18-29) have shifted markedly left in their voting behavior over the past decade. …by 2008, 66 percent voted for Barack Obama, as did 60 percent in 2012.

Nope, that’s not why I’m distressed about millenials. It’s hard to blame voters for turning against the GOP after eight years of Bush’s big-government paternalism. Moreover, both McCain and Romney held a lot of statist views, so I didn’t view the 2008 and 2012 elections as a rejection of libertarianism or small-government conservatism. The Reason-Rupe experts have a similar assessment.

The Republican Party—which rhetorically lays claim to free markets, limited government, and fiscal responsibility—found itself lacking credibility… The Republican Party’s policy mishandlings tainted not just its own brand, but those who share its rhetoric. Messengers selling free markets and limited government under the GOP banner have found it more difficult to reach a trusting audience.

At most, millenials were guilty of believing the nonsensical hype that Obama was some sort of post-partisan leader.

So why, then, am I distressed about the Reason-Rupe poll results? Mostly because millenials appear to be scatterbrained.

We’ll start with the good news. In some ways, they seem very sensible.

…millennials are not statists clamoring for government management of the economy. Quite the opposite. Millennials are still free marketeers—they like profit and competition, they prefer capitalism over socialism… There has been a surge in the share of millennials who think government is wasteful and inefficient… Most also think government agencies abuse their power… Millennials say hard work brings success, as older generations do. They also believe in self-determination and say that individuals are and should be primarily responsible for both their successes and failings, even if this leads to unequal outcomes. Millennials are concerned about growing income inequality, but they prefer a competitive, merit-based society that rewards personal achievement over one with little income inequality. …nearly three-fourths of millennials support “changing the Social Security program so younger workers can invest their Social Security taxes in private retirement accounts.”

But before you conclude millenials have their heads on straight, let’s look at these results.

A plurality of millennials says there is more government should be doing… the cohort still favors social welfare spending and a variety of government guarantees. …Millennials are more favorable toward socialism than they are to a government-managed economy, even though the latter is arguably less interventionist. …Millennials are far more likely than Americans over 30 to identify as liberal. While only 14 percent of Americans over 30 call themselves liberals, 25 percent of millennials do the same. …They support raising taxes to increase financial assistance to the poor, they think government should guarantee access to health care, and a slim majority favors guaranteeing access to college. …American millennials agree government should spend more to help the poor even if it leads to higher taxes. …Nearly seven in 10 say government should guarantee health insurance and a living wage. …The plurality of millennials (48 %) think people usually get rich at the expense of others, a zero-sum view of wealth in society.

So does this mean young voters are statists?

Perhaps, but the most accurate conclusion is that they simply don’t know enough to give consistent answers.

A 2010 CBS/New York Times survey found that when Americans were asked to use their own words to define the word “socialism” millennials were the least able to do so. Accord to the survey, only 16 percent of millennials could define socialism as government ownership, or some variation thereof, compared to 30 percent of Americans over 30 (and 57% of tea partiers, incidentally).

So maybe we should raise the voting age to 30.

Or at least have a rule that says you can’t vote until you have a job and are paying taxes (that might be a good rule for all ages!).

Now that we’ve tried to figure out how millenials are thinking, let’s look at the entire population.

And let’s focus on just one issue: How many Americans think corruption is widespread in government.

The good news is that Gallup found that a record number of Americans recognize that the public sector is a sleazy racket for the benefit of bureaucrats, lobbyists, contractors, politicians, cronies, interest groups, and other insiders.

By the way, I like these results, but they don’t necessarily mean that people want to shrink government. As we saw with the data on millenials, it’s possible for people to favor more government even though they think that it is corrupt, wasteful, and inefficient.

But at least (I hope) this means that they are susceptible to the common-sense message that shrinking government is the most effective way of reducing corruption.

Last but not least, I’m not sure this qualifies as an opinion poll, but it does deal with responses to questions.

It turns out that “unattractive” people are most likely to donate to the Occupy Wall Street movement.

A new series of studies from Stanford researchers has found that people who feel “unattractive” are more likely to donate to the Occupy movement. …participants were then asked to rate their own attractiveness… Finally, after watching a short video about the Occupy Movement, participants were asked if they would like to donate their compensatory $50 lottery ticket to the movement. Researchers found that those who perceived themselves to be less attractive were almost twice as likely to donate to Occupy.

And while we don’t have any research on this issue, I’m going out on a limb and asserting that folks who donate to America’s best think tank are beautiful, charming, debonair, suave, virile, and popular.

P.S. But as you can see here, here, here, here, here, here, and here, the Occupy protesters did generate some good political humor, so they’re not all bad.

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The internal revenue service has allowed itself to become a tool of the White House. To be more specific, bureaucrats at the tax-collection agency sought to undermine a free and fair political process by stifling political speech. And now the IRS is lying about its activities and trying to cover its tracks.

This should be deeply horrifying to all Americans, regardless of political affiliation or philosophy.

Particularly since the partisan Democrat appointed by Obama to head the IRS refuses to even apologize for the agency’s rogue behavior.

There are several appropriate responses to the IRS scandal, including some genuine budget cuts. But you probably won’t be surprised to learn that some people think the IRS instead should be rewarded with even more money.

Here are some excerpts from a column in today’s Washington Post.

…this is an especially strange time to stick up for the agency, given the suspicious disappearance of a few thousand key e-mails that Congress wants to see. But right now, the IRS desperately needs a champion. …the IRS has been laboring…with fewer resources. Since 2010, when Congress first began hacking away at discretionary spending, the bureau’s funding has fallen 14 percent, in inflation-adjusted terms… These cuts have come even though the agency’s responsibilities and workload have increased, thanks to new laws such as the Affordable Care Act and the Foreign Account Tax Compliance Act… Now House Republicans want to hobble it even more. Last week, the House Appropriations Committee voted to slash the bureau’s budget by another $340 million.

It’s true that both Obamacare and FATCA grant new powers and obligations to the IRS, but we can solve that problem by repealing those misguided laws.

But since that won’t happen while Obama is in the White House, let’s consider whether “fewer resources,” “hobble,” and “hacking away” are accurate ways of describing what’s been happening to the IRS’s budget.

The Office of Management and Budget has detailed tables showing spending by agency. And if you look at the administrative portions of IRS spending (culled from lines 2491-2533 of this massive database), it turns out that spending has increased dramatically over time.

Yes, it’s true that IRS spending has declined slightly since 2010, but the agency’s budget is still about twice as big as it was 30 years ago. And these numbers are adjusted for inflation!

In other words, it’s very misleading to focus merely on the post-2010 budgetary data (just as Krugman was being deceptive when he looked only at post-2007 data when writing about Estonia’s economic performance).

Looking at the historical data reveals that the IRS budget is much bigger than it’s been in the past.

There are a couple of additional points in the column that deserve some attention. The author argues that people who care about the budget deficit should be delighted to give more money to the IRS because it produces a “darn good return on investment.”

If you care about narrowing the budget deficit — as Republicans generally say they do — gutting your chief revenue- collection agency makes little sense. …The IRS generates way more money than it spends, after all. For every dollar appropriated to the IRS in the 2013 fiscal year, the agency collected $255, according to the national taxpayer advocate’s office. That’s a darn good return on investment.

Wow, what a scary mindset. Based on this thinking, why don’t we simply give the government carte blanche to seize our bank accounts? After all, they could probably collect hundreds of thousands of dollars for every dollar spent. That would be an even better “return on investment.”

As an aside, this is an example of why I get so agitated when supposed fiscal conservatives focus on deficits and debt. It creates an opening for people who want to push bad policy. But if you focus on the real problem of government spending, that problem disappears.

But I’m digressing. Let’s get back to the column. There’s one other point that cries out for correction. The author claims that a bigger IRS budget will reduce tax evasion and that this will keep tax rates from going higher.

Some of that money comes from going after tax cheats, and…rampant tax evasion has a tendency to drive statutory tax rates higher so that the government can extract more money from those poor saps still obeying the law.

The only problem with this assertion is that it is grossly inconsistent with the facts.

We have very powerful evidence that politicians lowered tax rates during periods when there were substantial flows of money to so-called tax havens.

Why? Because they felt competitive pressure to implement less onerous tax rates in order to keep even more money from escaping.

And now we have strong evidence that tax rates are going up as opportunities to escape bad tax policy have decreased.

Why? Because the politicians now feel that taxpayers have fewer escape options.

To summarize this post, the IRS needs and deserves more money in the same way that Charles Manson needs and deserves a group hug.

Here’s one last bit of humor to augment the cartoons I’ve already included. It’s PG-13, so don’t read too closely if you get easily offended.

P.S. Wouldn’t it be wonderful if we could junk the tax code and replace it with a simple and fair flat tax? That would eliminate almost every possible conflict with the IRS and also take away the agency’s discretionary power.

Not a bad fantasy to have, at least for a policy wonk.

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I’ve posted more than 3,500 items since I started International Liberty. And if you look at the earliest posts, way back in April of 2009, you’ll find that one of the very first of them made the link between big government and big corruption.

My premise was very simple. When government is very large, with all sorts of power to provide unearned wealth via taxes, spending, and regulation, then you will get more sleaze.

Sort of like the way a full dumpster will attract lots of rats and roaches.

A story in Fortune reports that government corruption at the state level is very costly.

…corruption is everywhere, in one form or another. And it’s costing U.S. citizens big time. A new study from researchers at the University of Hong Kong and Indiana University estimates that corruption on the state level is costing Americans in the 10 most corrupt states an average of $1,308 per year… The researchers studied more than 25,000 convictions of public officials for violation of federal corruption laws between 1976 and 2008 as well as patterns in state spending to develop a corruption index that estimates the most and least corrupt states in the union.

Most Corrupt StatesHere’s the list of the 10-most corrupt states. At first glance, there doesn’t seem to be a pattern.

Southern states are over-represented, it appears, but that’s obviously not an overwhelming factor since Georgia, South Carolina, Arkansas, and Texas (among others) didn’t make the list.

But it turns out that there is a factor that seems to be very prevalent among corrupt states.

The researchers also found that for 9 out of the 10 of the most corrupt states, overall state spending was higher than in less corrupt states (South Dakota was the only exception).

The authors suggest an attack on corruption could lead to a lower burden of government spending.

Attacking corruption, the researchers argue, could be a good way to bring down state spending.

I don’t disagree, but I wonder whether there’s an even more obvious lesson. Maybe the primary causality goes the other direction. Perhaps the goal should be to lower state spending as a way of reducing corruption.

Returning to the analogy I used earlier, a smaller dumpster presumably means fewer rats and roaches.

That’s not the only interesting data from the study. Fortune also reports that infrastructure projects and bloated bureaucracies are linked to corruption.

The paper explains that construction spending, especially on big infrastructure projects, is particularly susceptible to corruption… Corrupt states also tend to, for obvious reasons, simply have more and better paid public servants, including police and correctional officers.

I’m not surprised by those findings. Indeed, I would even argue that a large bureaucracy, in and of itself, is a sign of corruption since it suggests featherbedding and patronage for insiders.

For more info on the size of government and corruption, here’s a video I narrated for the Center for Freedom and Prosperity. It’s several years old, but the message is even more relevant today since the public sector is larger and more intrusive.

P.S. Speaking of corruption, there’s actually a serious effort on Capitol Hill to shut down the Export-Import Bank, which has been a cesspool of corruption and cronyism.

P.P.S. Switching to a different topic (though it also fits under corruption), we have another member for our potential Bureaucrat Hall of Fame. Or maybe this person belongs in a politician-ripping-off-the-system Hall of Fame.

Here are some of the details from an Irish news report and you can judge for yourself.

Ireland’s outgoing European Commissioner, Maire Geoghegan-Quinn, is entitled to a total €432,000 EU pay-off over the next three years to help her adjust to life after Brussels. …EU commissioners leaving office are entitled, subject to certain conditions, to a “transitional allowance” over three years varying between 45pc and 65pc of salary. Mrs Geoghegan-Quinn’s entitlement amounts to 55pc of her salary, or €137,000 per year.

Huh?!? A transitional allowance? For what? That’s more than $500,000 in American money.

Is it really that difficult to end one’s term as an overpaid European Union Commissioner?

But what really makes Ms. Geoghegan-Quinn an inspiration to other bureaucrats (and a nightmare for taxpayers) is that she’ll also have her snout buried deeply in Ireland’s public trough.

And from this autumn, she can also resume collecting her Irish TD and ministerial pensions totalling €108,000 a year – giving her total pension entitlements worth over €3,000 a week.

Though to be fair, she’s simply doing what other politicians already have done. Not only in Ireland, but also in America.

Government has become a racket for the benefit of insiders.

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