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Archive for the ‘IRS’ Category

Remember Sleepless in Seattle, the 1993 romantic comedy starring Tom Hanks and Meg Ryan?

Well, there should be a remake of that film entitled Clueless in Washington. But it wouldn’t be romantic and it wouldn’t be a comedy.

Though there would be a laughable aspect to this film, because it would be about an editorial writer at the Washington Post trying to convince people to feel sorry for the IRS. Here’s some of what Stephen Stromberg wrote on Wednesday.

Congress has done some dumb things. One of the dumbest is the GOP’s penny-wise-pound-foolish campaign to defund the Internal Revenue Service. …its mindless tantrum against the IRS has produced for taxpayers: a tax season that was “by far the worst in memory,” according to the Taxpayer Advocate Service, an agency watchdog.

Before I share any more of the article, I should point out that the “Taxpayer Advocate Service” isn’t a watchdog. It should be renamed the “Government Advocate Service” since its main goal is to increase the IRS’s budget.

But I’m digressing. Let’s continue with Mr. Stromberg’s love letter to tax collectors.

The underlying problem is that Congress has asked the IRS to do a lot more, such as administering a critical piece of Obamacare, but the GOP Congress won’t give the agency the funding it needs to do its work. …But good luck convincing Republicans to fix the IRS’s entirely predictable and avoidable problems. Not when that would mean restraining the impulse to act on anti-tax orthodoxy, blind populist anger and scandal-mongering about the IRS mistreating conservatives. In fact, Republicans want to double down on their nonsense budgeting, proposing deep cuts to the IRS last month.

Oops, time for another correction.

Stromberg is cherry picking data to imply that the IRS budget has been savaged.

If you look at the long-run data, however, you’ll see that the IRS now has almost twice as much money to run its operations as it did a few decades ago.

And that’s based on inflation-adjusted dollars, so we have a very fair apples-to-apples comparison.

Stromberg also wants us to sympathize with the bureaucrats because the tax code has been made more complex.

The underlying irrationality is the same: The IRS doesn’t write the tax code or health-care law, but the agency must apply these policies and engage with people affected by them, so it is an easy scapegoat.

Part of this passage is correct, and I’ve specifically pointed out that the tax code is mind-numbingly complex and that politicians deserve an overwhelming share of the blame for this sorry state of affairs.

That being said, the IRS goes beyond the law to make the system worse, as we saw when it imposed a regulation that put foreign tax law above American tax law. And when it arbitrarily rewrote the Obamacare legislation to enable additional subsidies.

In other words, it deserves to be scapegoated.

But there’s a bigger issue, one that Stromberg never even addresses. Why should we give more money to a bureaucracy that manages to find plenty of resources to do bad things?

Never forget, after all, that this is the bureaucracy that – in an odious display of bias – interfered with the electoral process by targeting the President’s opponents.

And then awarded bonuses to itself for this corrupt behavior!

Even more outrageous, the Washington Examiner reports today that the IRS still hasn’t cleaned up its act.

A series of new revelations Wednesday and Thursday put the Internal Revenue Service back under fire for its alleged efforts to curtail…conservative nonprofits. …the Government Accountability Office uncovered evidence that holes in the tax agency’s procedure for selecting nonprofit groups to be audited could allow bias to seep into the process. …lawmakers exposed the lack of safeguards that could prevent IRS officials from going after groups with which they disagreed. Meanwhile, the conservative watchdog Judicial Watch released documents Wednesday that suggested the IRS targeted the donors of certain tax-exempt organizations.

Does this sound like a bureaucracy that deserves more of our money?

If you’re still not sure how to answer, consider the fact that the IRS also somehow has enough money in its budget to engage in the disgusting “asset forfeiture” racket.

The Wall Street Journal recently opined on this scandal.

…a pair of new horror stories show why Americans dread any interaction with the vindictive tax man. Khalid Quran owns a small business in Greenville, North Carolina. He emigrated to the U.S. in 1997, opened a convenience store near a local airport, and worked long hours to give his four children more opportunity. After nearly two decades, Mr. Quran had saved $150,000 for retirement. Then in 2014 the IRS seized his bank account because he had made withdrawals that raised red flags under “structuring” laws that require banks to report transactions of more than $10,000. Mr. Quran had made transactions below that limit.

So even though Mr. Quran did nothing illegal and even though it’s legal to make deposits of less than $10,000, the IRS stole his money.

Just like money was stolen from the Dehko family.

Here’s the other example from the WSJ.

Maryland dairy farmer Randy Sowers…had $62,936.04 seized from his bank account because of the pattern of his deposits, though the money was all legally earned. …Mr. Sowers told his story to a local newspaper…a lawyer for Mr. Sowers asked…“why he is being treated differently.” Mr. Cassella replied that the other forfeiture target “did not give an interview to the press.” So much for equal treatment under the law.

Yes, you read correctly. If you have the temerity to expose the IRS’s reprehensible actions, the government will try to punish you more severely.

Even though the only wrongdoing that ever happened was the IRS’s confiscation of money in the first place!

So let’s celebrate the fact that the IRS is being subjected to some modest but long-overdue belt-tightening.

Notwithstanding Mr. Stromberg’s column, the IRS is not a praiseworthy organization. And many of the bureaucrats at the agency deserve our disdain.

The bottom line is that IRS budget cuts show that Republicans sometimes do the right thing.

And maybe if there are continued cuts and the current tax system actually does become unenforceable at some point, maybe politicians could be convinced to replace the corrupt internal revenue code with a simple and fair flat tax.

P.S. Clueless in Washington won’t be the only remake out of DC if President Obama decides to go Hollywood after 2016. Indeed, I suspect his acting career would be more successful than mine.

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When I wrote about the media, it’s generally to criticize sloppy and/or biased reporting

But maybe I need to have a new category that features misleading headlines.

For instance, here’s a report by Fox Business News that grabbed my attention because of the headline. The story is about the arrest of an IRS bureaucrat.

The main reason I was startled by the story is that it didn’t seem at all newsworthy.

To be blunt, isn’t it the job of IRS employees to use our Social Security numbers to steal our money? That’s certainly what goes through my mind as I fill out my tax return.

So why was this bureaucrat arrested?

Was it for being a slacker, I wondered? The federal government confiscates about $3.5 trillion of our money each year, after all, which means the 95,000 IRS bureaucrats generate an average haul of more than $35 million. By contrast, $326 thousand is a mere pittance.

But then I read the story and realized that the story was about a completely different kind of theft. It appears that the bureaucrat was getting in on the nationwide scam of filing false claims to get EIC handouts.

An IRS employee who worked in the agency’s St. Louis, MO., office pled guilty this week to charges of tax fraud. Demetria Brown netted $326,000 in a fraud in which she stole taxpayer identities and created fake tax returns to steal refunds. …The scheme lasted seven years from 2008 to 2001.

So my first instinct was correct. There isn’t really anything newsworthy in that story. After all, nobody should be surprised that income-redistribution programs such as the EIC attract a lot of fraud. Nobody should be surprised that an IRS bureaucrat decided to take other people’s money (above and beyond the excessive salary the rest of us paid for). And nobody should be surprised that the other bureaucrats at the IRS were so incompetent that the scam was successful for seven years.

By the way, this isn’t the first time a thieving IRS bureaucrat generated a story with a misleading headline.

Speaking of which, here’s our second example of a headline that creates a completely false impression. It’s from a story in the Toronto Star.

Needless to say, I was completely shocked at first. After all, France is the nation where the national sport is taxation. It’s the country where taxes are so onerous that even the European Commission warns about over-taxation. It’s the nation where thousands of people have to pay more than 100 percent of their income to the tax authorities. It’s the country where high taxes are equated to patriotism. And it’s the nation that pushes tax policies that are so radical than even the Obama Administration sometimes says no.

So is it true? Is France going to become a Libertopia? The Galt’s Gulch of Europe?

But then my bubble burst. It turns out the story is about a technical shift in how taxes are collected.

The government wants to shift to a system of automatic withholding, similar to that in Canada and much of the rest of the world. Employees in France currently pay taxes a year after their income is earned. Christian Eckert, France’s budget secretary, said Wednesday that the government will not double-tax workers in 2018, the year automatic withholding is to begin. So 2017 incomes could effectively be tax-free for regular salaries. Taxpayers won’t actually feel much of a difference though — they would still spend 2017 paying for the previous year.

Though this might create an interesting social science experiment.

Depending on how rigorously France decides to be with its definition of “regular salaries,” this might be an opportunity for long-suffering French taxpayers to figure out ways of delaying 2016 income until 2017 and accelerating 2018 income so it’s received in 2017.

This could be a particularly useful strategy for investors, entrepreneurs, and small business owners, all of whom (if they’re like their American counterparts) presumably have some control over the timing, level, and composition of their income.

But I suspect the French government already is contemplating ways of making sure that every possible penny is being taxed at the highest possible rate, so I won’t hold my breath.

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I realize it’s tax week and I should be condemning our convoluted tax code and oppressive IRS.

But I can’t resist getting diverted to another topic. It’s time to debunk the notion that there is rampant sexism in the private economy that causes women to by systematically underpaid.

I addressed the issue back in 2010, citing the solid work of Christina Hoff Summers. And I cited more of her work, as well as some analysis by Steve Chapman, when writing about the topic in 2012. The bottom line is that rigorous analysis finds that the so-called gender gap largely disappears once you consider factors such as occupational choice, hours worked, and education.

I’ll add my two cents to the discussion. For decades, I’ve been dealing with leftists who repeatedly tell me that business owners are consumed by greed and put profit above everything. Yet if women truly were making less money than men for doing equal work, then why aren’t these greed-filled business owners firing all their male employees and hiring women who will work for 80 percent of what it costs to employ men? Or 85 percent? Or 90 percent?

When I pose this question, my statist friends begin to mumble and stumble, but the clever ones eventually asset that business owners are not only soulless profiteers but also malign sexists. And the sexism apparently trumps the greed because they’re willing to employ men when equally competent women would work for less.

At that point, I usually ask them why entrepreneurs (presumably women and perhaps financed by rich leftists) don’t take advantage of a huge competitive opportunity by setting up rival businesses that could hire women for less money and lure customers away from the greedy sexist firms by charging lower prices.

I still haven’t received an answer to that question.

And that may explain why even one of President Obama’s top economic advisers basically admitted that equal-pay propaganda from the left is completely bogus.

Let’s dig into the data. Mark Perry of the American Enterprise Institute does a very good job of explaining why Equal Pay Day is based on nonsensical numbers.

…the bogus feminist holiday event known as Equal Pay Day…is a statistical fairy tale because it’s based on the false assumption that women get paid 23% less than men for doing exactly the same work in the exact same occupations and careers, working side-by-side with men on the same job for the same organization, working the same number of hours per week, traveling the same amount of time for work obligations, with the same exact work experience and education, with exactly the same level of productivity, etc. …The reality is that you can only find a 23% gender pay gap by comparing raw, aggregate, unadjusted full-time median salaries, i.e. when you control for NOTHING that would help explain gender differences in salaries… Most economic studies that control for all of those variables conclude that gender discrimination accounts for only a very small fraction of gender pay differences, and may not even be a statistically significant factor at all. …As the Department of Labor concluded in 2009, “The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.” They also concluded that “the raw wage gap should not be used as the basis to justify corrective action.”

By the way, all this data and research doesn’t mean sexism doesn’t exist. I’m sure it does, and it probably goes both ways.

I’m simply saying that unjustified discrimination in a competitive market economy is expensive. People who put prejudice above profits suffer. Which is why there’s so little actual evidence to support the feminist position.

Now let’s enjoy a bit of fun. It’s always amusing to expose statist hypocrisy.

The Obama White House claims to believe in so-called equal pay for equal work. But apparently that’s only a rule for us peasants.

And Hillary Clinton doubtlessly will regale us with speeches about equal pay over the next several months. Yet she didn’t practice what she preaches.

Yes, I realize we’re all shocked that politicians like Hillary prevaricate and dissemble.

P.S. Since this is tax season, I suppose I should close with a couple of relevant items.

First, we have an update to the infamous chart on the number of pages in the tax code.

Second, we have a new video from Reason TV about the “best tax code.”

Sadly, I don’t think my tax videos will ever be that entertaining.

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I’m not a fan of the IRS or it’s Commissioner, a partisan Democrat named John Koskinen. The agency has become politicized, interfering with America’s political process. Needless to say, I’m not shedding tears that the bureaucracy is no longer getting big budget increases.

By contrast, I oftentimes applaud Senator Ted Cruz. His shutdown fight against Obamacare was a net plus. He was one of the few 2016 candidates who took a strong stand against cronyism in Iowa. And he manages to retain a sense of humor in the fight against big government.

So it’s with considerable chagrin that I feel compelled to admit that IRS boss made a good point, at least from a technical perspective, when he criticized Senator Cruz on the topic of the flat tax.

Here’s the background. A story in Bloomberg quotes Senator Cruz about his goal for tax reform.

“Instead of a tax code that crushes innovation, that imposes burdens on families struggling to make ends meet, imagine a simple flat tax that lets every American fill out his or her taxes on a post card. Imagine abolishing the IRS,” Cruz said.

Now here’s an excerpt from a Politico report about Mr. Koskinen’s response.

IRS Commissioner John Koskinen poked holes in Republican presidential candidate Ted Cruz’s plan to abolish the IRS and create a simple flat tax so taxpayers could file their taxes on a postcard. Koskinen pointed out that even if taxpayers were to file their taxes on “a small card,” someone would have to collect the money and make sure the numbers filled out are actually correct. “You can call [tax collectors] something else than the IRS if that makes you feel better, but basically someone has to follow through on all of that,” Koskinen told reporters today after a speech at the National Press Club.

Koskinen is right. So long as the federal government intends to extract more than $3 trillion from taxpayers, there will be a tax-collection agency. That’s true even if you have a flat tax or a national sales tax.

Sure, you can rename the IRS, or even require states to collect the revenue instead, but none of that changes the fact that some coercive body will exist to take our money.

That being said, Cruz’s overall point surely is correct. The IRS in a flat tax world would be largely de-fanged. Indeed, the Tax Foundation estimated several years ago that compliance costs would drop by more than 94 percent if we replaced the internal revenue code with a flat tax. And, as pointed out in this video, the tax code today is even more complex, so the savings now presumably would be even larger.

So Koskinen may be technically correct, but only because he is focusing the conversation on the narrow issue of whether government will still have a tax-enforcement body.

But Cruz is correct on the big-picture issue of whether the IRS as it exists today will no longer exist.

Since we’re on the topic of tax reform, Amity Shlaes and Matthew Denhart, both with the Calvin Coolidge Presidential Foundation, have a column in today’s Wall Street Journal that is somewhat critical of the Rubio-Lee tax reform plan.

The authors start by pointing out that the defining characteristic of supply-side economics is lower marginal tax rates on productive behavior (work, saving, investment, risk-taking, entrepreneurship).

Signaling opportunity throughout the tax code has long been the basis of the philosophy known as supply-side economics, or “Reaganomics.” Reaganomics treats even individual wage earners as entrepreneurs. The marginal rate to which a worker is subject under the progressive tax schedule is crucial. A higher rate on the next dollar a worker earns discourages him from working more. The highest tax bracket is especially important as top earners produce the most and innovate the most. …That top marginal rate also functions as a symbol of how society rewards enterprise.

Their unhappiness with Rubio-Lee is due to the fact that their proposal does not contain big rate reductions for labor income to match the very good rate reductions for business and investment income.

…on the personal side their proposal drops the top marginal rate on individual income by a puny 4.6 percentage points, to 35% from 39.6%. …What’s more, Rubio-Lee lowers tax thresholds drastically. Singles with taxable income as low as $75,000 find themselves entering the 35% top bracket; for couples the top rate applies after $150,000. Currently, individuals don’t hit the 35% bracket until $411,501, and the same holds for couples.

So why aren’t there big reductions in tax rates for households to match the very good reforms for businesses? The answer, at least in part, is that “Rubio-Lee also raises the child credit” and this consumes a lot of money, in effect crowding out lower marginal tax rates.

As a result, you get big economic benefits from the reforms to business taxation, but the child credits don’t have any impact on incentives to create wealth, expand jobs, or boost income.

The nonpartisan Tax Foundation recently estimated that Rubio-Lee would increase economic growth so that by 2025 the economy would be 15% larger than otherwise, almost entirely due to business tax cuts. The effect of the child credit on growth is reckoned at zero. 

But imagine if Rubio-Lee took their good tax reform plan and made it better by replacing the child credit with lower rates? And then made it even better by getting rid of additional tax preferences such as the healthcare exclusion?

Shlaes and Denhart quote me in their column as pointing out that if Rubio and Lee made their plan into something akin to the flat tax, the tax rate could be under 20 percent.

Dan Mitchell of the Cato Institute notes that if Rubio-Lee dropped all the preferences it contains, old and new, the plan could drop its top income-tax rate to 20% or lower.

I confess that I don’t have up-to-date estimates to confirm my assertion, but the Clinton Treasury Department back in 1996 estimated that the flat tax rate in a revenue-neutral world would be 20.8 percent.

But since the Rubio-Lee plan is a very large tax cut, amounting to more than $4 trillion over 10 years, combining that amount of tax relief with the flat tax surely would allow the rate to be well below 20 percent.

By the way, none of this should be interpreted to suggest that Rubio-Lee is bad tax policy. It’s a huge improvement over the current system. As I wrote last month, it’s a very good tax reform plan. It is especially good about fixing some of the worst features of the current tax code, such as worldwide taxation, depreciation, and double taxation.

But that doesn’t mean it is as good as the flat tax, which does everything good in Rubio-Lee, but also has a low rate for households and fewer tax preferences.

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With tax day fast approaching, it’s time to write about our good friends at the Internal Revenue Service.

One of the new traditions at the IRS is an annual release of tax scams. It’s know as the “dirty dozen” list, and while it may exist mostly as a publicity stunt, it does contain some useful advice.

And that’s true of this year’s version. But I worry that the IRS is looking at a few trees and missing the forest.

The Washington Examiner was kind enough to let me write a cover story on the “dirty dozen” list. Here’s my effort to add some context to the discussion.

…our friends at the Internal Revenue Service have a relatively new tradition of providing an annual list of 12 “tax scams” that taxpayers should avoid. It’s an odd collection, comprised of both recommendations that taxpayers protect themselves from fraud, as well as admonitions that taxpayers should be fully obedient to all IRS demands. Unsurprisingly, the list contains no warnings about the needless complexity and punitive nature of the tax code. Nor does the IRS say anything about how taxpayers lose the presumption of innocence if there’s any sort of conflict with the tax agency. Perhaps most important, there’s no acknowledgement from the IRS that many of the dirty dozen scams only exist because of bad tax policy.

In the article, I list each scam and make a few observations.

But I think my most useful comments came at the end of my piece.

…maybe the tax system wouldn’t engender so much hostility and disrespect if it was simple, transparent, fair, and conducive to growth. And that may be the big-picture lesson to learn as we conclude our analysis. When the income tax was first imposed back in 1913, the top tax rate was only 7 percent, the tax form was only two pages, and the tax code was easily understandable. But now that 100 years have gone by, the tax system has become a mess, like a ship encrusted with so many barnacles that it can no longer function. …the bottom line is that the biggest scam is the entire internal revenue code. The winners are the lobbyists, politicians, bureaucrats and insiders. The losers are America’s workers, investors, and consumers.

In other words, if we actually want a humane and sensible system, we should throw the current tax code in the garbage and replace it with a simple and fair flat tax.

And that’s exactly the message I shared in this interview with C-Span.

Here are a few of the points from the discussion that are worth emphasizing.

The current tax code benefits Washington insiders, not the American people.

But I’m not optimistic about fixing the tax code, in part because the crowd in DC would lose some power.

We’ll never get good tax reform unless there’s genuine entitlement reform to restrain the growing burden of government spending.

The flat tax and national sales tax are basically different sides of the same coin.

If you want class-warfare tax rates on the rich, keep in mind that high rates don’t necessarily translate into more revenue.

The no-tax-hike pledge is a vital and necessary component of a strategy to restrain government.

Itemized deductions benefit the rich, not the poor.

If you care about poor people, focus on growth rather than inequality.

We should mimic Hong Kong and Singapore, not France and Greece.

P.S. I wrote last week that the Senate GOP put together a budget that is surprisingly good, both in content and presentation. A reader since reminded me that the Chairman of the Senate Budget Committee was a sponsor of the “Penny Plan,” which would lower non-interest outlays by 1 percent per year.

Since Mitchell’s Golden Rule simply requires that spending grow by less than the private sector, Senator Enzi’s Penny Plan obviously passes with flying colors.

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Like many taxpayers, I personally get upset with the Internal Revenue Service when I file my taxes.

But I probably get angrier than the average taxpayer. That’s because I have first-hand knowledge of the waste and fraud in the federal budget, so it galls me that so much of my income is being diverted to the open sewer of Washington.

But I also want to be fair. It’s politicians who have created our monstrous tax code. And it’s politicians who have created the bloated spending programs that undermine our prosperity.

So they deserve most of the blame.

That being said, we shouldn’t let the IRS off the hook.

Never forget, after all, that this is the bureaucracy that – in a disgusting display of bias – interfered with the electoral process by targeting the President’s opponents.

And then awarded bonuses to itself for this corrupt behavior!

So when Neil Cavuto asked me whether the IRS deserved a bigger budget, you can see I was not exactly sympathetic.

There are two points from the interview that deserve a bit of elaboration.

First, I pointed out that the IRS budget is far bigger than it was 30 years ago, even after adjusting for inflation.

So the notion that the tax collectors are suffering from “savage” budget cuts is utter nonsense.

Not surprisingly, the IRS and its defenders like to compare today’s budget with the amount that was spent right after the faux stimulus, when every bureaucracy was gorging on other people’s money.

But as I explained in the interview, that’s very misleading.

Second, we have the bigger issue of how to deal with an ever-more sclerotic tax code and and never-ending demands for more money out of Washington.

Assuming one thinks turning America into Greece is an acceptable or desirable outcome, the IRS will need more money.

But this is precisely why I said at the end of the interview that we should say no. Simply stated, giving the IRS a bigger budget almost certainly means a continuation of bad policy.

But maybe, just maybe, if the IRS budget is held in check, the politicians will conclude that we need tax reform and spending restraint. Remember, when all other options are exhausted, politicians sometimes do the right thing.

By the way, I’m not the only person who is upset. George Will also is irked with the Internal Revenue Service and wrote a powerful indictment of the corrupt bureaucracy for the Washington Post.

He starts by observing that the slimy and biased Lois Lerner will probably get away with her crimes thanks to Obama Administration stonewalling and obstruction of justice.

 Lois G. Lerner…, as head of the IRS tax-exempt organizations division, directed the suppression of conservative advocacy groups by delaying and denying them the exempt status that was swiftly given to comparable liberal groups. …through dilatory and incomplete responses to subpoenas, and unresponsive answers to congressional questions…Lerner’s name now has an indelible Nixonian stain, but there probably will be no prosecution. If the administration’s stonewalling continues as the statute of limitations clock ticks, Roskam says, “She will get away with it.” …Many thousands of Lerner’s e-mails that supposedly were irretrievably lost have been found, but not released. The Justice Department’s investigation, which was entrusted to a political appointee who was a generous contributor to Barack Obama’s campaign, is a stone in the stone wall.

It’s discouraging that Ms. Lerner won’t be held accountable for criminal actions, but Will points out that at least Congress has the ability to engage in real oversight to hopefully deter further misbehavior.

One place to begin is with the evidence — anecdotal but, in the context of proven IRS corruption, convincing — of other possibly punitive IRS behavior toward Republican contributors and other conservative activists. This justifies examining the IRS’s audit selection process.  …Next, there should be hearings into the illegal disclosure of taxpayer information about conservative individuals and groups to the media and to liberal officials and groups.

And just in case anyone is tempted to feel sorry for the IRS, don’t forget that the bureaucracy continues to disregard the law.

Or, in some cases, to arbitrarily change the law.

…the IRS’s lawlessness has extended to its role in implementing the Affordable Care Act. The act says that federal subsidies shall be distributed by the IRS to persons who buy insurance through exchanges “established by the State.” …The court probably will rule that the IRS acted contrary to law. If so, the IRS certainly will not have acted contrary to its pattern of corruption in the service of the current administration.

Yup, he nailed it. A corrupt agency serving the interests of a corrupt White House.

P.S. Since we’re talking about taxation today, here’s a video from the oldie-but-goodie collection.

I can’t vouch for the veracity, but I gather this fellow was very upset by high property taxes.

As you might guess, my sympathies are with the Marquis de Maussabre.

Just as I applaud French entrepreneurs, American companies, Italian boat owners, Spanish movie patrons (and porn aficionados), California citizens, Greek shop owners, Facebook millionaires, Norwegian butter buyers, New York taxpayers, Bulgarian smokers, foreign cab drivers, New Jersey residents, Australian film stars, and everyone else who does their part to limit the amount of tax revenue flowing to governments.

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I’ve periodically cited the great 19th-century French economist, Frederic Bastiat, for his very wise words about the importance of looking at both the seen and the unseen when analyzing public policy.

Those that fail to consider secondary or indirect effects of government, such as Paul Krugman, are guilty of the “broken window” fallacy.

There are several examples we can cite.

A sloppy person, for instance, will think a higher minimum wage is good because workers will have more income. But a thoughtful analyst will think of the unintended consequence of lost jobs for low-skilled workers.

An unthinking person will conclude that government spending is good for growth because the recipients of redistribution have money to spend. But a wiser analyst will understand that such outlays divert money from the economy’s productive sector.

A careless person will applaud when government “creates” jobs. Sober-minded analysts, though, will wonder about the private jobs destroyed by such policies.

It’s time, though, to give some attention to another important contribution from Bastiat.

He also deserves credit for the pithy and accurate observation about government basically being a racket or a scam.

And what’s really amazing is that he reached that conclusion in the mid-1800s when the burden of government spending – even in France – was only about 10 percent of economic output. So Bastiat was largely limited to examples of corrupt regulatory arrangements and protectionist trade policy.

One can only imagine what he would think if he could see today’s bloated welfare states and the various ingenious ways politicians and interest groups have concocted to line their pockets with other people’s money!

Which brings us to today’s topic. We’re going to look at venal, corrupt, wasteful, incompetent, and bullying government at the federal, state, and local level in America.

We’ll start with the clowns in Washington, DC.

Remember when the unveiling of the Obamacare turned into a cluster-you-know-what of historic proportions?

Well, the Daily Caller reports that the IRS has just signed an Obamacare-related contract with an insider company that recently became famous for completely botching its previous Obamacare-related contract.

Seven months after federal officials fired CGI Federal for its botched work on Obamacare website Healthcare.gov, the IRS awarded the same company a $4.5 million IT contract for its new Obamacare tax program. …IRS officials signed a new contract with CGI to provide “critical functions” and “management support” for its Obamacare tax program, according to the Federal Procurement Data System, a federal government procurement database. The IRS contract is worth $4.46 million, according to the FPDS data.

Just one more piece of evidence that Washington is a town where failure gets rewarded.

And CGI is an expert on failure.

A joint Senate Finance and Judiciary Committee staff report in June 2014 found that Turning Point Global Solutions, hired by HHS to review CGI’s performance on Healthcare.gov, reported they found 21,000 lines of defective software code inserted by CGI. Scott Amey, the general counsel for the non-profit Project on Government Oversight, which reviews government contracting, examined the IRS contract with CGI. “CGI was the poster child for government failure,” he told The Daily Caller. “I am shocked that the IRS has turned around and is using them for Obamacare IT work.” Washington was not the only city that has been fed up with CGI on healthcare. Last year, CGI was fired by the liberal states of Vermont and Massachusetts for failing to deliver on their Obamacare websites. The Obamacare health website in Massachusetts never worked, despite the state paying $170 million to CGI.

For a company like this to stay in business, you have to wonder how many bribes, pay-offs, and campaign contributions are involved.

Now let’s look at an example of state government in action.

Kim Strassel of the Wall Street Journal has a column about a blatantly corrupt deal between slip-and-fall lawyers and the second most powerful Democrat in the Empire State.

New York Assembly Speaker Sheldon Silver was last week arrested and accused by the feds of an elaborate kickback scheme. …Mr. Silver is alleged to have pocketed more than $5 million in a set-up in which he directed state funds to the clinic of an asbestos doctor, who in turn provided him with patients who could be turned into jackpot plaintiffs. Weitz & Luxenberg, a class-action titan, paid Mr. Silver huge referral fees for these names, off which the firm stands to make many millions. …when the Silver headlines broke, Weitz & Luxenberg founder Perry Weitz said he was “shocked”… The firm quickly put the Albany politician on “leave.”

A logical person might ask “on leave” from what? After all, he didn’t do anything.

But he did do something, even if it was corrupt and sleazy.

…here’s the revealing bit. Queried by prosecutors as to what exactly the firm did hire Mr. Silver to do—since he performed no legal work—Weitz & Luxenberg admitted that he was brought on “because of his official position and stature.” In other words, this was transactional. Weitz & Luxenberg gave Mr. Silver a plum job, and Mr. Silver looked out for the firm—namely by blocking any Albany bills that might interfere with its business model.

So workers, consumers, and businesses get screwed by a malfunctioning tort system, while insider lawyers and politicians get rich. Isn’t government wonderful!

Just one example among many of how state governments are a scam. Perhaps now folks will understand why I’m not very sympathetic to the notion of letting them take more of our money.

Last but not least, let’s look at a great moment in local government.

As we see from a report in USA Today, a village in New Jersey is dealing with the scourge of…gasp…unlicensed snow removal!

Matt Molinari and Eric Schnepf, both 18, also learned a valuable lesson about one of the costs of doing business: government regulations. The two friends were canvasing a neighborhood near this borough’s border with Bridgewater early Monday evening, handing out fliers promoting their service, when they were pulled over by police and told to stop. …Bound Brook, like many municipalities in the state and country, has a law against unlicensed solicitors and peddlers. … anyone selling goods and services door to door must apply for a license that can cost as much as $450 for permission that is valid for only 180 days. …Similar bans around the country have put the kibosh on other capitalist rites of passage, such as lemonade stands and selling Girl Scouts cookies.

Though, to be fair, it doesn’t seem like the cops were being complete jerks.

Despite the rule, however, Police Chief Michael Jannone said the two young businessmen were not arrested or issued a ticket, and that the police’s concern was about them being outside during dangerous conditions, not that they were unlicensed. “We don’t make the laws but we have to uphold them,” he said Tuesday after reading some of the online comments about the incident. “This was a state of emergency. Nobody was supposed to be out on the road.”

But the bottom line is that it says something bad about our society that we have rules that hinder teenagers from hustling for some money after a snowstorm.

Just like these other examples of local government in action also don’t reflect well on our nation.

Let’s close with my attempt to re-state Bastiat’s wise words. Here’s my “First Theorem of Government.”

And if you think what I wrote, or what Bastiat wrote, is too cynical, then I invite you to check out how politicians are bureaucrats are squandering money on Medicare, the Veterans Administration, the Agriculture Department, Medicaid, the Patent and Trademark Office, the so-called Consumer Financial Protection Bureau, the National Institutes of Health, Food Stamps, , the Government Services Administration, unemployment insurance, the Pentagon

Well, you get the idea.

Which is why this poster is a painfully accurate summary of government.

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