More Senseless and Overbearing Government

Any bureaucrat involved in a stunt like this deserves to be fired.

To think, these are the folks we’re expecting to keep us safe from terrorism!

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H&R Block and the IRS: An Unholy Alliance to Ransack Taxpayers

The late George Stigler, winner of the Nobel Prize in economics, is famous in part because of his work on “regulatory capture,” which occurs when interest groups use the coercive power of government to thwart competition and undeservedly line their own pockets. A perfect (and distasteful) example of this can be found in today’s Washington Post, which reports that the IRS plans to impose new regulations dictating who can prepare tax returns. Not surprisingly, the new rules have the support of big tax preparation shops such as H&R Block and Jackson Hewitt, which see this as an opportunity to squeeze smaller competitors out of the market. The IRS and the big firms claim more regulations are needed to protect consumers from shoddy work, but this is the usual rationale for licensing laws and other government-imposed barriers to entry and the Institute for Justice repeatedly has shown such rules are designed to benefit insiders rather than consumers. Tax preparers do make many mistakes, to be sure, but that is a reflection of a nightmarish tax code, and the annual tax test conducted by Money magazine showed that even the most-skilled professionals – such as CPAs, tax lawyers, and enrolled agents – were unable to figure out how to correctly fill out a hypothetical family’s tax return. But since the IRS routinely makes major mistakes as well, perhaps the moral of the story is that we need fundamental tax reform, not IRS rules to create a cartel for the benefit of H&R Block and other big firms. Would any of this be an issue if we had a flat tax or national sales tax?

The Internal Revenue Service plans to test, register and screen people who get paid to prepare tax returns, stepping into a virtually unregulated business on which millions of Americans depend for crucial financial services. …the moves could increase the cost of having tax returns prepared. …Starting with the 2011 tax season, the IRS plans to require paid preparers to register with the agency.  …The new testing and education standards will exempt certified public accountants, lawyers, and tax practitioners known as “enrolled agents,” who are cleared to represent taxpayers in dealing with the IRS… Tax prep giants H&R Block and Jackson Hewitt expressed support for the requirements announced Monday. Under the new rules, H&R Block “won’t be competing against people who aren’t regulated and don’t have the same standards as we do,” said Kathryn Fulton, senior vice president for government relations. …Citing a gap in the agency’s plan, Fulton said the IRS should impose the same rules on unpaid preparers of tax returns. …In field tests, the IRS noted Monday, tax-return preparers often gave bad advice. In a 2006 study in which employees of the Government Accountability Office posed as taxpayers and visited outlets of tax prep chains, all 19 preparers made mistakes, the IRS reported. …It is unclear how much of the blame rests with the tax code’s confusing nature, a perennial target of politicians’ criticism. Do regulated professionals such as CPAs perform better than their unregulated counterparts? The IRS commissioner said the agency does not have the data to answer that question.

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Higher Tax Rates Causing More Problems in London

With Barack Obama planning big tax rate increases in America, it’s useful to see how that policy is working in the United Kingdom. According to the Mayor of London, the answer is not very encouraging. Many successful entrepreneurs and investors are fleeing for other nations, and now companies are joining the rush to the exit. The Daily Telegraph reports:

Boris Johnson, the London Mayor, has suggested that he is deeply troubled that Goldman Sachs is considering moving parts of its business out of Britain following the Government’s 50pc tax on bonuses. “I am extremely anxious about rumours in the City that seem to confirm that the recent knee-jerk and ill-thought-out tax grab by the Government to punish bankers is causing some of our most important institutions to consider their options,” Mr Johnson told The Daily Telegraph. “This should act as a strong wake-up call to our leaders that their policies could seriously threaten our competitiveness with long-term consequences for both London and the UK economy,” said the mayor amid growing speculation that London could face a mass exodus of City workers in the wake of the bonus tax. Goldman Sachs is the latest investment bank to review its London operations, joining broker Tullett Prebon which told its staff it would give them the option of moving overseas to avoid the tax. …Goldman, which paid £1.1bn in corporation tax last year, has launched an internal review of London operations which could see its proprietary trading desk and foreign exchange business relocating to Switzerland or Dubai.

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