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Posts Tagged ‘IRS’

There are some fortunate people (in the Cayman Islands, BermudaMonacoVanuatuAntigua and Barbuda, and a few other places) who don’t have to pay income taxes.

The United States used to be in that lucky club. The income tax did not become a permanent blight upon the nation until 1913 (there was a temporary income tax during the Civil War and an attempted income tax in 1894 – ruled unconstitutional in 1895).

Indeed, this odious tax is a relatively new invention for the entire world. If my memory is correct, the first income tax was a temporary measure imposed by the United Kingdom to finance the fight against Napoleon. And the U.K. also was the first country to impose a permanent income tax (ironically, to help offset lower taxes on international trade).

In every case, politicians followed the same script. Income taxes originally were supposed to have low rates and only apply to the rich.

But it was simply a matter of time before small taxes on the wealthy became punitive taxes on everybody.

Since today is tax filing today for Americans, let’s take the opportunity to highlight two specific unfortunate consequences of the income tax.

First, it enabled the modern welfare state. You can see from the chart that the explosion of redistribution spending only occurred after politicians obtained a new source of revenue (a problem that was exacerbated in Europe when politicians adopted value-added taxes and were able to further increase the burden of government spending).

Needless to say, this is a reason to oppose an energy tax, a wealth tax, or a financial transactions tax. Giving politicians a new source of revenue is like giving alcoholics the keys to a liquor store.

Second, the income tax enabled costly economic discrimination. Prior to income taxes, governments largely relied on trade taxes and excise taxes, and those levies did not create many opportunities for mischief.

An income tax, by contrast, allows the government to impose all sorts of special penalties – either with discriminatory tax rates or with extra layers of tax on saving and investment – on people who generate a lot of economic output.

And it’s worth mentioning that the income tax also allows politicians to create all sorts of special credits, exemptions, deduction, exclusion, and other preferences (about 75,000 pages of them) for politically well-connected interest groups.

These penalties and preferences are both morally troubling (rampant cronyism) and economically damaging (back-door methods of central planning).

Let’s wrap up today’s column with this helpful reminder that the income tax is basically a penalty on productive behavior.

P.S. Politicians can play games with other revenue sources (i.e., special VAT rates or differential tariff burdens), but the income tax stands apart because it is capable of generating large amounts of revenue while simultaneously giving politicians considerable ability to pick winners and losers.

P.P.S. If you need some gallows humor to make it through tax day, go to the bottom of this column.

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I recently appeared on CNBC to talk about everyone’s favorite government agency, those warm and cuddly folks at the IRS.

Our tax system is a dysfunctional mess, but you’ll notice that I mostly blamed politicians. After all, they are the ones who have unceasingly made the internal revenue code more complex, starting on that dark day in 1913 when the income tax was approved.

But I don’t want to give the IRS a free pass.

I’ve cited IRS incompetence and misbehavior in the past, most notably when discussing political bias, targeted harassment, and other shenanigans.

And, as illustrated by these five examples, we can always cite new evidence.

Such as lack of accountability.

…a new report from the Cause of Action Institute reveals that the IRS has been evading numerous oversight mechanisms, and it refuses to comply with laws requiring it to measure the economic impact of its rules. Congress has passed several laws, including the Regulatory Flexibility Act and the Congressional Review Act, that require agencies to report on their rules’ economic impact to lawmakers and the public. …These good-government measures are meant to ensure unelected bureaucrats can be checked by the public. …the IRS has made up a series of exemptions that allow it to avoid basic scrutiny. The agency takes the position that its rules have no economic effect because any impact is attributable to the underlying law that authorized the rule.

Such as inefficiency.

Private debt collectors cost the Internal Revenue Service $20 million in the last fiscal year, but brought in only $6.7 million in back taxes, the agency’s taxpayer advocate reported Wednesday. That was less than 1 percent of the amount assigned for collection. What’s more, private contractors in some cases were paid 25 percent commissions on collections that the I.R.S. made without their help…the report stated, “the I.R.S. has implemented the program in a manner that causes excessive financial harm to taxpayers and constitutes an end run around taxpayer rights protections.”

Such as rewarding scandal.

The Internal Revenue Service (IRS) issued more than $1.7 million in awards in fiscal 2016 and early fiscal 2017 to employees who had been disciplined by the agency, a Treasury Department watchdog said. “Some of these employees had serious misconduct, such as unauthorized access to tax return information, substance abuse and sexual misconduct,” the Treasury Inspector General for Tax Administration (TIGTA) said in a report made public this week. …in fiscal 2016 and early fiscal 2017, the IRS had given awards to nearly 2,000 employees who were disciplined in the 12 months prior to receiving the bonus.

By the way, the IRS has a pattern of rewarding bad behavior.

Such as pursuing bad policy.

…for 35 years the Internal Revenue Service has exempted itself from the most basic regulatory oversight. …Tax regulations (like all regulations) have exploded in recent decades, and of course IRS bureaucrats impose their own policy judgments. The IRS has in recent years unilaterally decided when and how to enforce ObamaCare tax provisions, often dependent on political winds. In 2016 it proposed a rule to force more business owners to pay estate and gift taxes via a complicated new reading of the law. …Secretary Steve Mnuchin’s Treasury…department is inexplicably backing IRS lawlessness with a string of excuses.

Again, this is not the first time the IRS has interfered with congressional policy.

Such as stifling political speech.

The Internal Revenue Service infamously targeted dissenters during President Obama’s re-election campaign. Now the IRS is at it again. Earlier this year it issued a rule suppressing huge swaths of First Amendment protected speech. …The innocuously named Revenue Procedure 2018-5 contains a well-hidden provision enabling the Service to withhold tax-exempt status from organizations seeking to improve “business conditions . . . relating to an activity involving controlled substances…” The rule does not apply to all speech dealing with the listed substances, only that involving an “improvement” in “business conditions,” such as legalization or deregulation. …This is constitutionally pernicious viewpoint discrimination.

In other words, the bureaucrats didn’t learn from the Lois Lerner scandal.

Now that I’ve hopefully convinced people that I’m not going soft on IRS malfeasance, let’s look at the budgetary issue that was the focus of the CNBC interview.

Is the IRS budget too small? Should it be increased so that more agents can conduct more audits and extract more money?

Both the host and my fellow guest started from the assumption that the IRS budget has been gutted. But that relies on cherry-picked data, starting when the IRS budget was at a peak level in 2011 thanks in part to all the money sloshing around Washington following Obama’s failed stimulus legislation.

Here are the more relevant numbers, taken from lines 2564-2609 of this massive database in the OMB’s supplemental materials on the budget. As you can see, IRS spending – adjusted for inflation – has nearly doubled since the early 1980s.

In other words, we shouldn’t feel sorry for the IRS and give it more money.

To augment these numbers, I made two simple points in the above interview.

  • First, we should demand more efficiency from the bureaucracy.
  • Second, we should reform the tax code to eliminate complexity.

The latter point is especially important because we could dramatically improve compliance while also shrinking the IRS if we had a simple and fair system such as the flat tax.

Last but not least, here’s a clip from another recent interview. I explained that the recent shutdown will be used as an excuse for any problems that occur in the near future.

Standard operating procedure for any bureaucracy.

P.S. My archive of IRS humor features a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a Reason video, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a collection of IRS jokes, a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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On several occasions, I’ve shared horror stories of government brutality and asserted that all decent people should be libertarians.

If you still are not convinced, today we’re going to look at seven stories about so-called civil asset forfeiture, which is a sanitized term. Most people call it stealing.

Or “policing for profit.”

Let’s look at how this third-world scam operates, starting with a disgusting example of asset forfeiture from Reason.

Rustem Kazazi, an American citizen, was just trying to get on a plane to return to his native Albania last October, from Cleveland Hopkins International Airport. He was initially flying to Newark where he’d catch a connection to Albania. …Given facts about the Albanian banking and finance system and the advantages of cash there, he chose to turn his life savings into U.S. dollars and bring them with him to cover expenses related to the above house needs and his long stay rather than deal with bank transfers… Kazazi ran his carry-on luggage through the x-ray machine, like we all must. In that luggage was his life savings in cash, $58,100. There was zero attempt to be clandestine or smuggle-y about it. It was divided into three labeled and marked stacks of $100 bills, all in one envelope with $58,100 written on the outside.

Here’s how despicable bureaucrats reacted.

TSA agents noticed the money. …They called Customs and Border Patrol (CBP) on Kazazi, who took him off to a private room to grill him, as well as strip him naked… They kept his money, without telling him why, then tried to get him to just get on his flight without it. The receipt they handed him made no reference to the specific amount they’d confiscated. When he refused initially to just go on with his day as if he hadn’t just suffered a horrible crime, they escorted him out of the airport. …In December CBP finally formally informed him via a “Notice of Seizure” that they’d taken $57,330 from him, $770 less than he insists was actually taken. The Kazazis filed all the officially required forms and notices to proceed with trying to get their money back… CBP agents tried to finagle the Kazazis into withdrawing their demand for federal court action, but failed.

The good news is that the invaluable Institute for Justice has intervened.

Kazazi and his family today filed a formal motion for return of property…with the assistance of consistent civil-forfeiture-justice fighters from the Institute for Justice… Let’s hope the courts do the right, and legal, thing, demand CBP obey the law and return the stolen money.

And here’s a nauseating example of theft-by-government from Texas.

For nearly a decade, Anthonia Nwaorie dreamed of starting a medical clinic in her hometown in Southern Nigeria. Last October, the 59-year-old nurse was boarding a plane in Houston with medical equipment, supplies, and about $41,000 in cash — which had taken her years to save — when Customs and Border Protection officials stopped her. …Nwaorie said she was detained for hours. She missed her flight to Nigeria and the customs officers seized all her money. …CBP took the money because Nwaorie, a U.S. citizen since 1994 who lives in Katy, had not declared that she was taking more than $10,000 out of the country — a technical requirement that her lawyers say is not well-publicized…six months after her money was taken, Nwaorie has not been charged with a crime.

Once again, the great people at IJ are involved.

Lawyers at the Institute for Justice, an Arlington, Virginia-based public interest law firm, say her case demonstrates just how abusive the practice of civil forfeiture — which allows the government to take property that is believed to be tied to a crime — can be. ….the Institute for Justice filed a class-action lawsuit against the agency on Nwaorie’s behalf, demanding that CBP return her money without forcing her to sign any written agreement. They’re also asking a federal court in Houston to void all such agreements that might have been signed by others trying to get seized property back.

George Will opined about another reprehensible example from Texas.

On Sept. 21, 2015, Serrano drove to the Eagle Pass, Tex., border crossing, intending to try to interest a Mexican cousin in expanding his solar panel installation business in the United States. …they searched his truck — this was unusual for a vehicle leaving the country — and one agent said, “We got him!” …Having found five .380-caliber bullets in the truck’s center console — he has a concealed-carry permit but had no weapon with him — they handcuffed him and seized his truck under civil forfeiture, saying it had been used to transport “munitions of war.”

The heroes at IJ are on the case.

Assisted by litigators from the Institute for Justice (IJ), whose appearance on the West Texas horizon probably panicked the government into pretending to be law-abiding, Serrano wants to make the government less larcenous and more constitutional when it is enriching itself through civil forfeiture. …Serrano is suing for restitution but also seeking a class-action judgment on behalf of others who have been similarly mistreated. …Robert Everett Johnson is one of the IJ lawyers… Johnson says: “Imagine being detained at an airport checkpoint because you innocently forgot to take a tube of toothpaste out of your luggage. But rather than asking you to throw it out or put it in a plastic bag, the TSA agents told you they were seizing all of your luggage, including the toothpaste tube.” That happened to Serrano at the hands of a government — the one north of the border — that felt free to say, “You have no rights here.”

Here’s an example of this despicable practice from Wyoming.

Phil Parhamovich…had spent years restoring and selling houses, cars, and musical instruments, often clocking 12-hour workdays, to save up more than $91,000. And now it was all going to pay off: He would buy a music studio in Madison, Wisconsin… Then came the police stop… By the time it was over, police in Wyoming would take all of Parhamovich’s money — the full $91,800. Parhamovich, who has no criminal record, was not accused of or charged with a serious crime; he only got a $25 ticket for improperly wearing his seat belt and a warning for “lane use.” …state officials said they consider the cash “abandoned.” The state has even moved to forfeiture the money without notifying Parhamovich of the relevant court hearing until after it happened.

You won’t be surprised to learn who got involved to protect Parhamovich’s rights.

According to Parhamovich and his attorneys with the advocacy group, the Institute for Justice, this is another classic example of policing for profit and the problems it causes. Police initiated the stop for a minor traffic violation, but quickly escalated it further and further until they took a man’s life savings — all to use that money for their own law enforcement purposes.

This story has a happy ending (except for the fact that the cop isn’t in jail for stealing).

Wyoming lawmakers, citing this story, have now banned the roadside waivers that police used to wrongly take Phil Parhamovich’s $91,800. Previously, Parhamovich…got…his money back during a court hearing.

The IRS also participates in this thuggish racket, as reported by the Washington Post.

Oh Suk Kwon, who left South Korea for America in 1976, served as a fleet mechanic in the U.S. Army. After four years in the military, decades of working in an electrical plant and as an auto mechanic, after raising the kids and seeing them off to their adult lives, Kwon finally bought a gas station in Ellicott City in 2007. It meant everything to him. Just a few years after he opened it, zealous government investigators…seized all of the station’s money on a hunch — and wiped the family out. No, they weren’t money launderers or terrorists or mobsters or tax evaders. The government found no evidence of criminal activity. …the gas station went under, and Kwon’s wife died amid the stress of it all…the agency won’t give Kwon his money back. …He’s heartbroken that the country he loves is treating him this way.

The story has additional examples.

…fervent investigations targeted scores of small businesses in Maryland. The best known of these was South Mountain Creamery… the creamery was accused of structuring — farmer Randy Sowers also said his bank teller told him to keep the deposits under $10,000 to cut paperwork — the farm’s entire operating budget was seized. …The government eventually found out that the cows weren’t drug mules and the chickens weren’t gangsters and allowed Sowers to sign a settlement agreement to get back half of about $60,000 that the IRS took. Sowers did it because he needed that money to keep the farm going. Another Maryland farmer, Calvin Taylor, had about $90,000 seized in 2011 after the government snagged him in a similar investigation. He couldn’t take the time to fight the charge, either, and agreed to a settlement where the government returned about $41,000.

Once again, the IJ people are fighting to protect people from rapacious government.

The farmers didn’t walk away from the fight. Backed by the libertarian Institute for Justice, Sowers, Taylor and others testified before Congress, petitioned and fought for three years to get their cash back.

The awful thugs at the IRS also stole money in Connecticut.

David Vocatura watched $68,000 disappear. He was at his family’s bakery in Norwich, Connecticut, when a squad of armed IRS agents filed into the store. The agents wanted to know if Vocatura and his brother Larry were trafficking drugs or running a prostitution ring. The brothers had no idea what they were talking about. …the IRS refused to believe Vocatura’s Bakery was operating on the up and up. Agents said the business raised red flags because of a series of cash deposits in sums under $10,000, the amount at which banks are required to report transactions to the federal government. …The agents had no evidence of other wrongdoing, but thanks to a controversial law enforcement tool known as civil asset forfeiture, they didn’t need any to seize every penny in the Vocaturas’ bank account… The IRS has…[been] subjecting David, 53, and his brother Larry, 69, to a series of increasingly aggressive legal maneuvers — including threats of significant prison time and additional fines — in an attempt to strong-arm them into permanently forfeiting their assets.

Naturally, IJ is riding to the rescue.

…the Institute for Justice, a libertarian public interest law firm, filed a lawsuit in U.S. District Court for the District of Connecticut on behalf of Vocatura’s Bakery, demanding that the IRS promptly return their money. …Hours after the suit was filed, the IRS said it would finally give the Vocaturas their money back.

But the jackboots in government are vindictively going after the family.

Peter S. Jongbloed, assistant U.S. attorney for the District of Connecticut, served the Vocaturas a grand jury subpoena calling for them to turn over every financial record from the six years between March 2007 and April 2013, so the agency could finally begin investigating the business’s tax and regulatory compliance. …“At this point, the government is in so deep, they’ve put these guys through three years of hell — and held onto their money for three years — and so they feel like they need to justify it,” said Robert Everett Johnson, an attorney for the Institute for Justice who is representing the Vocaturas. “So now they’re going to conduct this investigation into the bakery in some effort to try to find something that will make it look like they were doing the right thing all along.”

Let’s review one final example of banana-republic law enforcement, this time from Alabama.

The morning of June 29, 2010, began much like any other at FAR Computers in Ensley. Frank Ranelli, who has owned the computer repair business for more than two decades, was doing some paperwork in his windowless office when he heard loud banging on the front door. When he answered it, he was unaware that about 20 officers with the Homewood and Mountain Brook police departments were surrounding his store, some wearing flak jackets and carrying assault rifles. Within moments, a Homewood police sergeant had declared a room full of customers’ computers, merchandise and other items “stolen goods,” Ranelli recalled. …The police proceeded to confiscate more than 130 computers – most of which were customers’ units waiting to be repaired, though some were for sale – as well as the company’s business servers and workstations and even receipts and checkbooks. …Nothing ever came of the case. The single charge of receiving stolen goods was dismissed after Ranelli demonstrated that he had followed proper protocol in purchasing the sole laptop computer he was accused of receiving illegally. Yet none of the property seized by police that summer morning more than seven years ago has been returned to him.

The article references the stellar work of IJ.

Alabama’s laws, however, still provide the state’s citizens with few protections from the practices, earning the state a “D- for its civil asset forfeiture laws” in a November 2015 report by the Institute for Justice, a Virginia nonprofit advocacy law firm. Alabama laws stack the deck against victims of asset forfeiture by establishing a “low bar to forfeit” and not requiring a conviction to do so; offering “limited protections for innocent third-party property owners”; and letting “100% of forfeiture proceeds go to law enforcement,” the report stated. …In a time of increasingly tight budgets for many law enforcement agencies, seizing property offers an opportunity for them to increase revenue without politicians having to raise taxes.

The good news (relatively speaking) is that some states are trying to curtail this evil practice.

The bad news is that cops in some states have figured out how to steal regardless.

In theory, New Hampshire has reformed its asset forfeiture laws. The state passed a bill in June 2016 to keep police from seizing and keeping people’s property unless those people have been convicted of a crime. And yet New Hampshire Public Radio reports this week that the state’s cops are still trying to keep stuff seized from people who have been accused but not actually convicting of criminal behavior. …when the reforms were passed…there was a big loophole. The U.S. Justice Department’s “Equitable Sharing” program allows local law enforcement agencies to partner with the feds for busts, then funnel the forfeiture through the looser federal program, which doesn’t require convictions, back into the local police budgets. Doing this allows them to skirt any state-level restrictions on asset forfeiture.

In other states, the establishment is going nuts trying to preserve their shady scam.

…a local prosecutor and police officer say the state will be welcoming violent drug cartels if a Republican lawmaker gets his way. State Sen. Kyle Loveless has been trying to muster support this year for a bill that would reform a controversial law enforcement tool known as civil asset forfeiture. …Loveless sees this as a fundamental violation of people’s rights to due process and property and says the lax standards have gotten innocent people in Oklahoma caught in the civil asset forfeiture net. On Thursday, he sparred with Tulsa County District Attorney Steve Kunzweiler and Eric Dalgleish, a major at the Tulsa Police Department, over the merits of his bill to require a criminal conviction to permanently take someone’s property. …Kunzweiler, the district attorney, said the extra level of protection was unnecessary and that raising the bar for forfeiture would effectively roll out a welcome mat to ruthless drug traffickers from Mexico. …Dalgleish later said that cartels were keeping a close eye on Loveless’ legislation and even lobbying for its passage.

Shame on Kunzweiler and Dagleish. What reckless and dishonest demagoguery.

And three cheers for Sen. Loveless, who deserves a lot of love for putting the principles of the Constitution first.

Sadly, the Trump Administration is on the side of theft-by-government, which is especially disappointing since there was a small move in the right direction during the Obama years.

P.S. Just like intrusive and ineffective money-laundering laws, wretched asset forfeiture laws are largely the result of the foolish War on Drugs. One bad policy generates another bad policy. Lather, rinse, repeat.

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For the past 30 years, I’ve been criticizing both the tax code and the IRS. Which raises an interesting chicken-or-egg question about who should be blamed for our nightmarish tax system.

Should we blame IRS bureaucrats, who have a dismal track record of abusing taxpayers? Or should we blame politicians, who have been making the tax code more onerous ever since that dark day in 1913 when the income tax was adopted?

In this exchange with Stuart Varney, I take an ecumenical approach and blame both.

As you can see, I am slightly conflicted on this debate.

There are plenty of reasons to condemn the IRS, and not just because of what I mentioned in the interview about its deplorable campaign to suppress political speech by Tea Party organizations.

Yet there is an equally strong case to be made that politicians are the real problem. They are the ones who created the tax system. They are the ones who make it more complex with each passing year.

And they are the ones who constantly give more power and money to the IRS in hopes of generating more cash that can be used to buy votes.

Indeed, the most important thing I said in the interview is that the IRS budget has dramatically increased over the past few decades. And that’s after adjusting for inflation!

So while I’m surely not a fan of the IRS, I’m probably even more critical of politicians since they’re the ones responsible for the bad laws that empower bureaucrats.

But that doesn’t really matter because the solution is the same regardless of whether one blames politicians or the IRS. Throw the tax code in the garbage and replace it with a simple and fair flat tax (or, if there are ever sufficient votes to undo the 16th Amendment, replace the internal revenue code with a national consumption tax).*

Let’s close with some humor. First, here’s a painful reminder (h/t: Reddit‘s libertarian page) of the relationship between taxpayers and politicians, though it’s worth noting that they want to grab your income regardless of whether there’s a lot or a little. In other words, the taxpayer could be holding a minnow and nothing would change.

Maybe I should add this image to my archive of IRS humor, which already features a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a Reason video, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a collection of IRS jokes, a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

*In my libertarian fantasy world, we would return to the limited government created by the Founding Fathers, thus eliminating the need for any broad-based tax.

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I realize that we’re in the midst of an important tax battle in Washington and that I should probably be writing about likely amendments to the Senate tax bill.

But long-time readers know that I’m bizarrely preoccupied by international tax issues (I would argue for very good reasons since global tax competition is a way to discipline greedy politicians and because I want the power of governments to be constrained by national borders).

So I can’t resist commenting on a Washington Post story about the tax implications of the upcoming wedding of Prince Harry and Meghan Markle.

It may seem like a modern fairy tale, but the upcoming wedding of Britain’s Prince Harry to American actress Meghan Markle will come with some mundane hurdles. Perhaps most inconveniently for the British royals, this transatlantic partnership could end up involving the United States’ Internal Revenue Service.

Most readers probably wonder how and why the IRS will be involved. After all, Ms. Markle no longer will be living in the United States or earning income in the United States after she marries the Prince.

But here’s the bad news (for the millions of Americans who live overseas, not just Ms. Markle): The United States imposes “worldwide taxation,” which means the IRS claims the right to tax all income earned by citizens, even if those citizens live overseas and earn all their income outside of America.

…there already has been widespread speculation that the union of Prince Harry and Markle eventually could result in some British royal children wielding American passports. But there’s a big obstacle in the way: American tax laws. …The United States’ citizenship-based taxation system is unusual: Only Eritrea has a similar system. It’s a relic of the Civil War and the Revenue Act of 1862, which called for the taxing of U.S. citizens abroad.

Here’s what this means for the royal family.

Markle’s American citizenship could open up the secretive finances of the royal family to outside scrutiny. If she remains a U.S. citizen, Markle will have to file her taxes to the IRS every year. And if she has more than $300,000 in assets at any point during the tax year — a likely scenario, given her successful acting career and her future husband — she will be expected to annually file a document called Form 8938 that will reveal the detail of these assets, which could include foreign trusts. …Although Markle’s tax information would not become public once sent to the United States, it would leave the royal family open not only to IRS review but also the risk that the information could leak, said Dianne Mehany, a tax lawyer at Caplin & Drysdale.

So what’s the solution if the royal family wants to avoid the greedy and intrusive IRS?

Ms. Markle will need to copy thousands of other overseas Americans and renounce her citizenship.

…the royal family employs some of the country’s best tax consultants. …”My guess is that she’ll be pressured by the Royal family to renounce [her U.S. citizenship], even if she’d rather not,” Spiro added. In many ways, that solution may be the simplest. And if Markle does give up her citizenship, she won’t be alone. Treasury Department data show that 5,411 people chose to expatriate in 2016 — a 26 percent year-over-year increase and potentially a historic high — and experts expect that number to keep rising because of the increasing tax burdens placed on U.S. citizens living abroad.

And it’s embarrassing to acknowledge that the United States has a very barbaric practice (used by evil regimes such as Nazi Germany and Soviet Russia) of extorting funds from Americas who are forced to give up citizenship.

She…would be subject to a potentially considerable exit tax.

This is adding injury to injury.

But Ms. Markle can be comforted by the fact that she’s not an outlier. Because of America’s bad worldwide tax regime (and especially because of FATCA, which makes enforcement of that bad system especially painful), an ever-growing number of overseas Americans have been forced to give up their citizenship.

Maybe as a wedding present to Prince Harry, American politicians can junk America’s terrible worldwide tax regime. That doesn’t require dramatic change, but why not fix a bunch of problems at once? I’ll simply point out that the flat tax is based on the common-sense approach of territorial taxation (governments only tax economic activity inside national borders).

P.S. This issue also impacts America’s Olympic athletes.

P.P.S. And Santa Claus as well!

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It’s that time of year. Those of us who wait until the last minute are rushing to get tax returns filed (or extensions submitted).

So it’s also a good time to remind ourselves that there is a better way.

Economists look at the tax system and focus on the warts that undermine growth.

Other people focus on the immorality of the tax code.

Most of these problems have existed for decades and are familiar to people who have the misfortune of working for tax reform.

But every so often, policy wonks like me get surprised because we find out that things are even worse than we thought.

For instance, here are some excerpts from a very disturbing article in The Hill about the IRS’s we-don’t-care attitude about fraudulent use of Social Security numbers.

…illegal immigrants…use other people’s social security numbers (SSNs) to get jobs and then file their taxes with their IRS-issued Individual Taxpayer Identification Numbers (ITINs). Although the tax returns contain false W-2 information, the IRS continues to process them, and the agency does not notify the people whose SSNs were used. …Koskinen said that in such cases “it’s in everybody’s interest to have them pay the taxes they owe.” …Rep. Dave Brat (R-Va.)…told The Hill on Friday that he was “shocked” and “horrified” by Koskinen’s response. …House Freedom Caucus Chairman Jim Jordan (R-Ohio)…said Friday that Koskinen’s comments about illegal immigrants’ tax returns are “just one more example of why Koskinen is doing such a poor job and should be impeached.”

As a quick aside, I’d be very curious to get some confirmation about Commissioner Koskinen’s assertion that illegals are net taxpayers. I wouldn’t be surprised to learn instead that they are a net drain because of “earned income tax credit,” which is a form of redistribution that gets laundered through the tax code.

But setting that aside, it’s completely outrageous that the IRS doesn’t let taxpayers know that their Social Security numbers have been stolen.

Congressman Jordan (and George Will) are right. There should be consequences for a government official who treats taxpayers with contempt.

Though Koskinen does deserve some credit for honesty about tax reform, as reported by the Washington Free Beacon.

IRS Commissioner John Koskinen told lawmakers on Wednesday that implementing a flat tax would be simpler than the current tax system and would save the agency a lot of money. …Rep. Blaine Luetkemeyer (R., Mo.) asked Koskinen whether a flat tax policy would save the agency money. …”clearly if you had a two-page form or a one-page form where you got rid of all the deductions and everything else and people just paid…a flat tax…it would be simpler for taxpayers and it would be much simpler for us,” Koskinen said. …Luetkemeyer asked Koskinen for more specifics about how much of the IRS’ current budget of $11.2 billion could be saved if a flat tax were implemented. “…it would be a lot,” Koskinen said. “It’d clearly be a sea change, a difference in the way the place operates.”

To call the flat tax “a sea change” is an understatement. As explained in this video, research from the Tax Foundation shows that the compliance burden of the tax code would fall by more than 90 percent.

And the economy would grow much faster since a key principle of the flat tax is that revenue should be collected in the least-damaging manner.

Though if you’re worried that a flat tax is too timid and you would prefer no broad-based tax for Washington, Mark Perry of the American Enterprise Institute shared this wonderful image.

Which is why October 3, 1913 may be the worst day in American history.

Some people claim that it would be impossible to have a modern society without an income tax.

Well, the Cayman Islands, Bermuda, and Monaco are very modern, and all those jurisdictions enjoy great prosperity in large part because there is no income tax.

And we could enjoy the same freedom and prosperity in the United States. But only if we reduced the size of the public sector.

In other words, we could free ourselves of the income tax if we could somehow get rid of all the programs that were created once the income tax gave politicians a big new source of tax revenue.

The challenge is convincing politicians to give up their ability to buy votes with other people’s money.

Incidentally, this is why we should be stalwart in our opposition to the value-added tax. The experience with the income tax shows that politicians will expand the burden of government spending if they obtain any significant new source of revenue.

Let’s close with a somewhat amusing look at how tax compliance works in India. Here are some blurbs from a story in the Wall Street Journal.

For five years, real-estate developer Prahul Sawant ignored government orders to pay his taxes. Then the drummers showed up, beating their instruments and demanding he cough up the cash. Neighbors leaned out windows and gawked. Within hours, a red-faced Mr. Sawant had written a $945 check to settle his long-standing arrears. Shame is the name of the game as India’s local governments try new tools to collect taxes from reluctant citizens. …Thane’s municipal commissioner, Sanjeev Jaiswal, is resorting to public embarrassment of tax scofflaws. …Since the drummers started work early this year in this suburb of Indian commercial capital Mumbai, property-tax revenue has jumped 20%, said Mr. Jaiswal.

It’s also safer for the tax bureaucrats to rely on drummers.

Tax collectors in Vitawa-Kalwa are glad the drummers, and some security officers, are touring the neighborhood with them. “When the staff show up to collect tax alone, people get angry and beat them up,” said S.R. Patole, the assistant commissioner, who is responsible for revenue in the area.

And if drummers don’t work, the municipal commissioner has a back-up plan.

Mr. Jaiswal…plans to deploy groups of transgender women, known in India as hijras, to perform mocking dances to shame tax delinquents. Hijras are widely believed to be able to impose hexes.

I’ll have to add this story to my collection of “great moments in tax enforcement.”

For what it’s worth, I’m on the side of the taxpayers because of the Indian government’s legendary ability to waste money.

P.S. If you’re a late filer and need some humor to get through the day, here’s my collection of IRS-related jokes: A new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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The good thing about being nonpartisan is that I can freely criticize (or even praise) policy makers without giving any thought to whether they have an R or D after their name.

That doesn’t mean Republicans and Democrats are the same, at least with regards to rhetoric. The two big political parties in the United States ostensibly have some core beliefs. And because of that, it is sometimes very revealing to identify deviations.

Democrats supposedly believe the rich should pay higher taxes and that low-tax jurisdictions should be persecuted, yet many Democrat bigwigs utilize tax havens.

Republicans supposedly believe in smaller government, yet many of them decide to get rich by lobbying to expand the size and scope of Washington.

Democrats supposedly believe there’s a big gender pay gap, but Obama’s top economic adviser said such numbers are fake and Hillary gave higher pay to men in her office.

Let’s now add to the list.

The IRS has stonewalled and treated Congress with contempt. The bureaucrats have disregarded the law to advance Obama’s hard-left agenda. They have used their power to help Obama’s reelection campaign. And IRS employees even donate lots of money to Democrats.

Given all this, you would think Republicans would be doing everything possible to punish this rogue bureaucracy. Even if only because of self interest rather than principles.

Yet GOPers decided, as part of their capitulation on spending caps (again!), to boost the IRS’s budget. I’m not joking. The Hill has a report with the sordid details.

The spending bill…provides an increase in funding to the Internal Revenue Service, a rare win for an agency that has been on the outs with congressional Republicans. The $1.1 trillion omnibus provides an additional $290 million for the IRS, an increase of 3 percent over the last fiscal year.

What’s especially discouraging is that Congress was on track to reduce the IRS’s bloated budget.

…the outcome for the IRS in the omnibus could have been far worse. A bill advanced by the House Appropriations Committee earlier this year that would have slashed IRS funding by $838 million, while a bill passed by the Senate Appropriations Committee would have reduced funding by $470 million. Instead, the spending package gives the IRS a nearly $300 million bump.

This is yet another piece of evidence that budget deals crafted behind closed doors inevitably produce bad numbers and bad policy.

And it’s certainly another sign that Republicans truly are the Stupid Party.

Just in case you think I’m being unfair to either GOPers or the IRS, let’s look at some recent developments. Here are the best parts of an editorial on unseemly IRS behavior from the Washington Examiner.

President Obama’s IRS repeatedly los[es] hard drives loaded with data related to scandals at the agency. To lose one might be regarded as suspicious happenstance; to lose two looks like conspiracy. The most famous case is that of Lois Lerner, whose division became notorious for targeting conservative groups applying for nonprofit status. Her computer hard drive malfunctioned before that scandal broke, around the same time Congress was looking for information on a separate IRS targeting scheme aimed at conservative donors. …The newest case of IRS hard drive trouble happened last April, but came to light only this month. …the IRS has notified the Justice Department that it erased a hard drive after being ordered not to do so by a federal judge. In this case, the missing communications are those of a former IRS official named Samuel Maruca in the Large Business and International division. He is believed to have been among the senior IRS employees who made the unusual and possibly illegal decision in May 2014 to hire the outside law firm Quinn Emanuel to help conduct an audit of Microsoft Corporation.

And here’s some shocking (or maybe not so shocking) information from the Daily Caller. The IRS’s new ethics chief (wow, there’s an oxymoron) has a track record of illegally destroying records.

The new head of the Internal Revenue Service’s (IRS) ethics office once oversaw the illegal shredding of documents sought by the federal tax agency’s inspector general (IG), and allegedly retaliated on the colleague he believed snitched on him about it.

Yup, he sounds like the kind of guy who deserves a bigger budget.

Let’s close with some very good advice from the Washington Examiner.

In the nearly three years since the targeting scandal was revealed, it has become clear that it was just a symptom of a much deeper problem at the IRS — a culture that lacks accountability, rewards failure, and persecutes the innocent. …it needs a thorough housecleaning, not…bonuses.

Too bad Republicans decided the entire IRS deserved a big bonus.

P.S. From my archives, here are some examples of the bureaucrats who will benefit from a bigger IRS budget.

P.P.P.S. And since we’re recycling some oldies but goodies, here’s my collection of IRS humor, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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When someone says “IRS,” my Pavlovian response is “flat tax.”

That’s because I’m a policy wonk and I’d like to replace our punitive internal revenue code with something simple and fair that doesn’t do nearly as much damage to our economy.

And it’s a fringe benefit that real tax reform would substantially de-fang the IRS.

But I’m also a big believer in the rule of law and a big opponent of capricious government power, so I’m also interested in curtailing the power of the IRS even if we don’t get a chance to fix the tax code.

I’ve previously commented on the unseemly and corrupt behavior of the IRS, and there’s no question the bureaucracy’s actions have been despicable.

But is it so bad that the Commissioner of the IRS deserves to be impeached? Let’s look at pro and con arguments.

Here’s some of what Bloomberg’s Al Hunt wrote about the controversy. He’s obviously a defender of the current Commissioner.

The specifics of any supposed impeachable offenses are vague. Koskinen, 76, is a respected, successful business and government executive who, at the behest of the White House, took on the job of cleaning up the beleaguered tax agency in December 2013, after offenses had been committed. …The accusations stem from 2013, when the IRS’s tax-exempt division was found to have disproportionately targeted conservative groups for scrutiny. Although Koskinen was brought in after the damage had been done, …Some, rather recklessly, accuse him of lying. …The specific charges seem specious: There may have been miscommunication, but there is no evidence of wrongdoing by Koskinen. …The pre-Koskinen abuses by the IRS’s tax-exempt division have been the subject of three inquiries… All were critical of IRS mismanagement, but none found any evidence of illegal activities or political direction from on high.

George Will is not so sanguine about Koskinen’s role. Here are excerpts from his column in the Washington Post.

Federal officials can be impeached for dereliction of duty (as in Koskinen’s failure to disclose the disappearance of e-mails germane to a congressional investigation); for failure to comply (as in Koskinen’s noncompliance with a preservation order pertaining to an investigation); and for breach of trust (as in Koskinen’s refusal to testify accurately and keep promises made to Congress). …After Koskinen complained about the high cost in time and money involved in the search, employees at a West Virginia data center told a Treasury Department official that no one asked for backup tapes of Lerner’s e-mails. Subpoenaed documents, including 422 tapes potentially containing 24,000 Lerner e-mails, were destroyed. For four months, Koskinen kept from Congress information about Lerner’s elusive e-mails. He testified under oath that he had “confirmed” that none of the tapes could be recovered. …Koskinen’s obfuscating testimonies have impeded investigation of unsavory practices, including the IRS’s sharing, potentially in violation of tax privacy laws, up to 1.25 million pages of confidential tax documents. …Koskinen consistently mischaracterized the Government Accountability Office report on IRS practices pertaining to IRS audits of tax-exempt status to groups.

These charges don’t seem (as Hunt asserted) to be “specious.”

That doesn’t mean, by the way, that there aren’t good (or at least adequate) responses to these accusations.

And perhaps Koskinen didn’t technically commit perjury. Maybe he simply engaged in some Clintonian parsing and misdirection.

So I’ll be the first to admit that it’s unclear whether Koskinen deserves to be impeached.

But I’ll also be the first to argue that the IRS is a rogue bureaucracy that needs to slapped down. That’s why it deserves budget cuts rather than the increases favored by the White House.

And Lois Lerner almost certainly should be in jail. Beyond that, I’m open to ideas on how to discourage the tax collectors from engaging in rampant misbehavior.

Just in case you think I’m exaggerating, here’s a list.

These horror stories provide plenty of evidence that the internal revenue service should have its wings clipped.

P.S. Since we’re criticizing the IRS, I can’t resist sharing some oldies but goodies.

P.P.P.S. And since I’m digging through my archives, here’s my collection of IRS humor, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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I’m delighted that so many presidential candidates are talking about partial tax reform and I’ve specifically analyzed the plans put forth by Marco Rubio, Rand Paul, Jeb Bush, and Donald Trump.

These proposals all make the tax code less punitive, and that would be good news for job creation, growth, and American competitiveness.

But that doesn’t mean any of them are perfect. They all fall short of the pure flat tax, which is the gold standard for full tax reform. Another problem is that these proposals won’t be plausible or sustainable unless unaccompanied by some prudent plans to restrain the growth of federal spending.

Today, though, I want to focus on another shortcoming. The various plans need to be augmented by long-overdue restrictions on the IRS, which has become and abusive and rogue bureaucracy.

Consider a few examples.

These horror stories provide plenty of evidence that the internal revenue service should have its wings clipped.

But let’s add another straw to the camel’s back. The tax collection agency in the midst of an audit fight with Microsoft and the IRS is making a mockery of its own rules and flagrantly abusing the company’s legal rights.

This is bad news for one of America’s most successful firms, but it also is creating a very dangerous precedent that could victimize many other companies – large and small – in the future.

Writing for The Hill, Andy Quinlan of the Center for Freedom and Prosperity highlights some of the IRS’s most offensive actions.

First, the IRS is flouting its own rules as part of its persecution of Microsoft.

Government officials, counter to federal law, are trying to bully the company into extending an audit process that should have ended over 6 years ago. …Federal law provides a three-year time period for the completion of an audit, yet IRS officials have been digging through the company’s files for over nine years.

Second, the IRS won’t even tell the company how much money it wants!

Seattle-based Microsoft had to force a hearing on this matter because the IRS refused to submit a final tax bill to Microsoft for a dispute over taxes owed from 2004 to 2006. The IRS has been dragging out this audit process for close to a decade, and continues to pressure the company to sign waivers extending the audit infinitum.

Third, the IRS has been whining about supposedly inadequate budgets, but the bureaucrats are paying a private law firm millions of dollars to participate in this never-ending audit.

In 2014, the government in an unprecedented move hired Quinn Emanuel, a L.A.-based litigation firm to help audit the company. The IRS has billions in budget, teams of lawyers and accountants, yet they decided spend $2.2 million dollars outsourcing their legal team to lawyers that charge in excess of $1000 an hour.  It should come as no shock to anyone following the IRS scandal that Quinn Emanuel is chock full of lawyers who are also large contributors to the party in power.

Fourth, the IRS’s rogue behavior may become standard practice if the bureaucrats don’t face any repercussions for stepping over the line.

This fight actually has little to do with Microsoft. It has everything to do with the prospect of the IRS abusing power, wasting taxpayer money and setting dangerous precedents for enforcement against small businesses. …The actions of the IRS that put this matter into court threatens to set a dangerous precedent on the power of the federal government with regard to tax issues. Congress needs to protect citizens against IRS overreach, and now a potential new procedure that will allow private tax information to be shared with outside law firms.

Wow, what a damning indictment against a vindictive bureaucracy.

And while Microsoft is a big company with plenty of money to defend itself, this is still outrageous. Particularly since the IRS will employ these thuggish tactics against less powerful taxpayers if it isn’t slapped down for by either Congress or the courts.

By the way, I should say something about the underlying dispute. The IRS is not happy about the prices that Microsoft charged when doing intra-firm sales between the parent company and foreign subsidiaries.

Yet if the bureaucrats really think Microsoft abused the “transfer pricing” rules, then the IRS should come up with its own estimate and – if necessary – they can go to court to see who’s right.

For what it’s worth, I suspect the IRS isn’t presenting Microsoft with a bill precisely because the bureaucrats ultimately wouldn’t prevail in a legal fight. The agency probably hopes a never-ending audit eventually will force the company to voluntarily over-pay just to end the torture.

Since I’m a policy wonk, I can’t resist noting that the only reason this kind of dispute even exists is because the United States has the highest corporate tax rate in the entire world. So companies naturally seek to maximize the income they earn in other nations (sort of like entrepreneurs and investors decide it’s better to do business in low-tax states such as Texas rather than fiscal hellholes such as Illinois).

And there’s nothing wrong – legally or ethically – with taxpayers choosing not to overpay the federal government.

The IRS can, of course, ask politicians to change the law if their goal is to grab more money. But as explained by Brian McNicoll in a column for the Washington Times, it shouldn’t try to confiscate more loot with endless harassment and dubious tactics.

If Microsoft’s business strategies are a problem for the IRS, it is up to Congress to change the tax law. But as long as those strategies are legal, no one should question Microsoft for doing what it can to limit its tax obligation. …there is reason Congress gives the IRS three years — not eight and certainly not carte blanche to go on indefinitely. …If the IRS has something on Microsoft, by all means bring it forward. But if it doesn’t, it needs to close the books on this near-decade of harassment and send Microsoft a bill for its taxes.

Returning to our main point, this is why tax reform should be accompanied by reforms to rein in the IRS’s improper behavior.

P.S. They haven’t put forth many details, but some candidates have indicated support for the kind of radical tax reform that would de-fang the IRS. Rick Santorum, Ben Carson, and John Kasich have all stated that they like the flat tax. And Mike Huckabee embraces a national sales tax to replace the current tax code.

And if there’s wholesale replacement of the internal revenue code, then a lot of the problems with the IRS automatically disappear.

P.P.S. Since we’re criticizing the IRS, I can’t resist sharing some oldies but goodies.

P.P.P.S. And since I’m digging through my archives, here’s my collection of IRS humor, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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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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I can’t help but wonder whether the song made famous by The Grinch Who Stole Christmas should be the theme song for the Internal Revenue Service. After all, that bureaucracy is “as cuddly as a cactus” and “as charming as an eel.”

And it appears that having “the tender sweetness of a seasick crocodile” is not a good strategy for big budget increases.

Indeed, it appears that working as an adjunct of the Obama reelection campaign has backfired on the IRS. One of the good results of the “cromnibus” negotiations is that GOPers actually took revenge on the IRS for political interference. The bureaucracy is actually going to get less money next year. In other words, a real budget cut, not one of those fake Washington cuts that occur when spending doesn’t increase as fast as desired.

Not surprisingly, the big Democratic donor who now serves as IRS Commissioner isn’t very happy about this development.

The Hill reports that the John Koskinen is claiming that his agency’s budget has been cut too much…and he’s saying that the bureaucrats will make taxpayers suffer as a result.

After absorbing a $346 million budget cut, IRS officials are warning taxpayers not to expect their phone calls to get answered or their refunds to be delivered quickly. Employees shouldn’t count on overtime pay, or for empty staff slots to be filled. And lawmakers seeking to reduce the deficit should assume the agency will collect far less revenue than it could have.  “We’re well beyond cutting out any fat,” John Koskinen, the IRS commissioner, told reporters after his agency saw its budget slashed for the fifth consecutive year. “And we’re now into cutting, as people say, muscle headed toward bone.”

And here are some passages from a story published by Fox News.

The Internal Revenue Service is crying poor in the face of budget cuts and weighing the possibility of its own short-term shutdown — even warning that tax refunds could be delayed next year. …”Everybody’s return will get processed,” Koskinen told reporters. “But people have gotten very used to being able to file their return and quickly getting a refund. This year we may not have the resources, the people to provide refunds as quickly as we have in the past.” …Congress cut the IRS budget by $346 million for the budget year that ends in September 2015. The $10.9 billion budget is $1.2 billion less than the agency received in 2010. The agency has come under heavy fire from congressional Republicans for its now-halted practice of applying extra scrutiny to conservative groups seeking tax-exempt status.

So what’s the real story? Is the IRS budget not inadequate? Do the bureaucrats need more spending to process refund checks?

Well, my first response is to scold people who get refunds. That means, after all, that they overpaid their taxes during the year and – for all intents and purposes – gave the government and interest-free loan.

But that’s a separate issue. Let’s focus on the IRS budget. And as you can see from this chart, the IRS budget has declined since 2010. But you can also see that the IRS budget has approximately doubled over the past thirty years. And these numbers are adjusted for inflation!

So feel free to cry tears for the IRS, but just make sure they’re crocodile tears.

Just like the ones we all cried when the IRS complained about the possibility of being covered by Obamacare, even as the bureaucrats doubtlessly were looking forward to the new power the IRS got as a result of the law (and as humorously illustrated by cartoons from Gary Varvel, Glenn McCoy, and Henry Payne).

Now let’s bend over backwards and look at the issue from the IRS’s perspective. The bureaucrats will argue with some validity that tax laws are far more complex today than they were thirty years ago.

That’s unquestionably true, as shown by data on the number of pages in the tax code, number of provisions in the tax law, and even by the number of pages in the instruction booklet for the IRS 1040 form.

Heck, I mentioned just a few days ago that there were more than 4,600 changes in the tax code between 2001 and 2012 alone. And think of awful tax laws like FATCA that cost more to enforce than they produce in revenue.

All this nonsense is mostly the result of bad laws imposed by politicians, not a result of IRS actions.

But I still can’t find it in my heart to feel sympathy for the IRS.

After all, the IRS somehow managed to find the staff and resources to launch a politically motivated attack against tea party groups. And the so-called Taxpayer Advocate takes the side of the IRS rather than taxpayers. Worst of all, the bureaucracy even found enough money to hand out bonuses after being caught trying to interfere with elections!

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

It couldn’t happen to a nicer group of people.

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

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I don’t particularly care how people vote, but I do care whether they believe in freedom.

That’s why I periodically share stories that should convince everyone to believe in the libertarian philosophy of small government, individual liberty, and personal responsibility.

The stories that get me most agitated are the ones that involve innocent people being robbed by bureaucrats.

And when I say robbed, I use that word deliberately.

Such as the case of an elderly couple who had their hotel stolen by government.

Such as the case of the family grocer who had his bank account stolen by government.

Such as when the government wanted to steal someone’s truck because a different person was arrested for drunk driving.

Such as when the government tried to steal the bond money a family collected to bail out a relative.

Such as when the government seized nearly $400,000 of a business owner’s money because it was in the possession of an armored car company suspected of wrongdoing.

Such as when the government sought to confiscate an office building from the owner because a tenant was legally selling medical marijuana.

Such as when the government killed a man as part of an anti-gambling investigation undertaken in hopes of using asset forfeiture to steal other people’s cash.

With all this background, you can probably guess I’m going to add to that list.

And you’re right. We have a report from the New York Times that has me frothing at the mouth. I can’t imagine any decent person not being outraged by this example of big government run amok.

For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000. The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.

In other words, this is an example of two evil policies – asset forfeiture laws and money laundering laws – coming together in a vortex of we’ll-screw-you-over-even-if-you’re-law-abiding statism.

And you can forget about the Constitution’s presumption of innocence.

Ms. Hinders said in a recent interview. “Who takes your money before they prove that you’ve done anything wrong with it?” The federal government does. Using a law designed to catch drug traffickers, racketeers and terrorists by tracking their cash, the government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. The government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent. Many give up.

Of course, much of tax code enforcement is based on the upside-down premise that taxpayers are guilty and have to prove themselves innocent.

But that still doesn’t make it right. And the IRS is just the tip of the iceberg. Stealing is now a common practice by all sorts of bureaucracies at all levels of government.

The practice has swept up dairy farmers in Maryland, an Army sergeant in Virginia saving for his children’s college education and Ms. Hinders, 67, who has borrowed money, strained her credit cards and taken out a second mortgage to keep her restaurant going. Their money was seized under an increasingly controversial area of law known as civil asset forfeiture, which allows law enforcement agents to take property they suspect of being tied to crime even if no criminal charges are filed. Law enforcement agencies get to keep a share of whatever is forfeited. Critics say this incentive has led to the creation of a law enforcement dragnet, with more than 100 multiagency task forces combing through bank reports, looking for accounts to seize.

Here’s just one horrifying example of how this process works.

 In one Long Island case, the police submitted almost a year’s worth of daily deposits by a business, ranging from $5,550 to $9,910. The officer wrote in his warrant affidavit that based on his training and experience, the pattern “is consistent with structuring.” The government seized $447,000 from the business, a cash-intensive candy and cigarette distributor that has been run by one family for 27 years. …the government seized $447,000, and the brothers have been unable to retrieve it. …Mr. Potashnik said he had spent that time trying, to no avail, to show that the brothers were innocent. They even paid a forensic accounting firm $25,000 to check the books. “I don’t think they’re really interested in anything,” Mr. Potashnik said of the prosecutors. “They just want the money.” …“We’re just hanging on as a family here,” Mr. Hirsch said. “We weren’t going to take a settlement, because I was not guilty.”

Still not convinced about the venality of big government? Here’s another nauseating example.

Army Sgt. Jeff Cortazzo of Arlington, Va., began saving for his daughters’ college costs during the financial crisis, when many banks were failing. He stored cash first in his basement and then in a safe-deposit box. All of the money came from paychecks, he said, but he worried that when he deposited it in a bank, he would be forced to pay taxes on the money again. So he asked the bank teller what to do. “She said: ‘Oh, that’s easy. You just have to deposit less than $10,000.’” The government seized $66,000; settling cost Sergeant Cortazzo $21,000. As a result, the eldest of his three daughters had to delay college by a year. “Why didn’t the teller tell me that was illegal?” he said. “I would have just plopped the whole thing in the account and been done with it.”

By the way, some of you may be thinking that these terrible examples are somehow justifiable because the government is stopping crime in other instances.

But that’s not true. Experts who have looking at money laundering laws have found that there’s no impact on genuine criminal activity. But lots of costs imposed on innocent people.

Which probably explains why the first two directors of the Justice Department’s Asset Forfeiture Office now say the laws should be repealed.

If you want more information, here’s my video on the government’s costly and failed war on money laundering.

Sigh.

By the way, the government also abuses people in ways that have nothing to do with money laundering or asset forfeiture.

And there are more examples where those came from.

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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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When I wrote recently that the IRS was corrupt, venal, and despicable, I didn’t realize that I was bending over backwards to be overly nice.

Every new revelation in the scandal shows that the agency is beyond salvage.

Writing for Real Clear Markets, Diana Furchtgott-Roth of the Manhattan Institute is appropriately skeptical of the IRS.

Coincidentally, Lerner’s computer crashed 10 days after Congress expressed concern about possible targeting of conservative groups. Emails between January 2009 and April 2011 were lost. Her computer is not available for examination, because it has already been recycled by the IRS. In a further coincidence, or not, a backup tape of agency emails made by the IRS was erased after 6 months. …As Georgia Republican Rep. Doug Collins said, the story sounds more and more implausible.

Diana then explains why this matters, using Obamacare as an example of why we should worry about a corrupt and politicized IRS.

Why should we care about missing emails from 2009 to 2011? As former Secretary of State Hillary Clinton said in a 2013 hearing about Benghazi, “What difference at this point does it make?” It is not just that Americans’ basic trust in the IRS is being called into question. Over the past five years the IRS has been concentrating its power, giving the agency increased opportunities to pick on people and groups it dislikes. …Sarah Hall Ingram, who was commissioner of the IRS’s Tax-Exempt and Government Entities Division from 2009 to 2012 during the Lois Lerner scandal, now heads the IRS Affordable Care Act Office. …Do Americans trust the IRS to calculate these subsidies and refunds impartially? The IRS already made a power grab in May 2012 by extending premium subsidies to the 34 states with federal exchanges.

She also points out that the IRS is carrying water for the President’s attempt to stifle opposing views.

…the IRS proposed regulations that would allow the agency to regulate the free speech of President Obama’s political opponents, while leaving the political activities of his friends untouched. …The regulations were targeted at tax-exempt organizations that file under 501(c)(4) of the IRS code… Under the new rules these groups would not be allowed to engage in voter education that mentions a candidate within two months of a general election or one month of a primary. Left untouched by the proposed regulations were unions, which file under 501(c)(5) of the Internal Revenue Code.

Stan Veuger of the American Enterprise Institute also is not persuaded by the IRS’s deceitful excuses.

The Internal Revenue Service (IRS) and the administration have consistently spouted lies and half-truths about the IRS scandal. The latest development in the controversy is that crucial emails have conveniently gone missing – is there any reason to believe that it is, as the administration claims, a mere accident? …This effort to keep conservative 501(c)(4) organizations from attempting to prevent president Obama’s reelection was, of course, hidden from the public. Ms. Lerner was careful to try and structure the IRS’ targeting in such a way that would not be appear to be a “per se political project,” in her own words, and denied in meetings with, and letters to, congressional oversight staff in 2012 that conservative groups were treated exceptionally or that the IRS’ ways of evaluating 501(c)(4)s had ever changed. The claims were false… In her response to a planted question from the audience at an American Bar Association tax conference, Ms. Lerner blamed the targeting of conservative groups on “our line people in Cincinnatti.” This has also turned out to be false. …non-Tea Party groups were never subjected to the same delays and investigations as Tea Party groups were. This once more suggest that obfuscation and dishonesty were central to the IRS’ approach to their targeting practices.

He even crunches some numbers to show that the claims from the IRS are utterly implausible.

It would be very helpful to see what communications took place between IRS officials and other Democrats. And this is where the missing emails come in. …They are gone, they now tell us, hard drives crashed and tapes were erased. Should we believe that? Of the 82 IRS employees tied to the targeting operation, 7 had their email disappear, or 8.5%. According to IRS commissioner John Koskinen, the industry standard is 3 to 5%. Under reasonable statistical assumptions, that makes the IRS scandal disappearance rate about as likely as the emails having been eaten by unicorn, with a probability far smaller than 1%. Given the IRS’ track record in this affair, that is way beyond anything that would justify giving the IRS and Lois Lerner the benefit of the doubt.

Amazingly, 12 percent of Americans believe the IRS. Here’s some polling data that Phil Kerpen shared on his twitter feed.

I’m particularly happy that younger people are more skeptical. They’re more tech-savvy and realize that the IRS’s excuses are a bunch of….well, a bunch of stuff that comes out of male cows.

And here are some good cartoons on the topic, starting with Eric Allie’s gem.

I like how he includes a representative of the 12 percent of deliberately gullible Americans.

And here’s another contribution from Allie.

And here’s Steve Kelley’s cartoon on the topic.

He’s right, needless to say. It would be better if the IRS was merely squandering money rather than seeking to subvert the democratic process.

Last but not least, here’s an evergreen cartoon about the IRS from Glenn McCoy.

Oh, and let’s not forget two other items.

The political hack who now heads the IRS is a partisan leftist.

IRS Commissioner John Koskinen contributed more than $85,000 to Democratic candidates and committees…with a $5,000 donation to President Obama in 2012 and $19,000 to the Democratic National Committee from 1988 to 2008.

And the political hack who was forced out of the IRS actually wanted to target a US Senator.

…the Internal Revenue Service’s (IRS) targeting of conservative individuals includes a sitting United States Senator. According to emails reviewed by the Committee under its Section 6103 authority, …Lois Lerner sought to have Senator Chuck Grassley (R-IA) referred for IRS examination.

There are more horror stories to share, but this is enough for one day.

Suffice to say, you can understand why my fantasies involve tax reform rather than supermodels.

P.S. I can’t resist one more comment. Don’t forget that the corrupt and partisan IRS is in charge of Obamacare enforcement, but the bureaucrats want to be exempt from that government-run healthcare system. Just like politicians.

The moral of the story: Washington is even worse than you think. It’s a racket for insiders, but a burden for the rest of us.

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Some statements are so lame that they now serve only as punch lines.

Nobody, after all, would ever claim to a teacher that “the dog ate my homework.”

Moreover, surely few if any people ever actually assert to bill collectors that “the check is in the mail.”

And I have to imagine that no guy would be dumb enough to think a girl would fall for the line that “I’ll still love you in the morning.”

But we now have a new champion in the contest for the most laughable and pathetic assertion ever made.

But first some background. Congressional investigators have been trying to figure out the level of criminality and malfeasance in the IRS’s campaign to interfere with the 2012 election by targeting Tea Party groups. Much of the attention has focused on the activities of Lois Lerner, a left-wing ideologue at the center of the scandal.

And it is because of this investigation that we have a winner in the most-preposterous excuse contest. The political hacks at the IRS are now claiming, with straight faces, that they can’t turn over thousands of emails sent and received by Lois Lerner because of a “computer mishap.”

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

The IRS has told Congress that it has lost some of former employee Lois G. Lerner’s emails from 2009 through 2011, including those she sent to other federal agencies… Rep. Dave Camp, chairman of the Ways and Means Committee, said he was stunned… “The fact that I am just learning about this, over a year into the investigation, is completely unacceptable and now calls into question the credibility of the IRS’s response to congressional inquiries,” Mr. Camp said. “There needs to be an immediate investigation and forensic audit by Department of Justice as well as the Inspector General.” …the emails lost were “critical years” from the beginning of the targeting of conservative groups.

At this point, I suppose I should acknowledge that there’s an infinitesimally tiny chance that the IRS is being honest. Maybe, just maybe, the IRS’s immense computer infrastructure and multiple levels of redundant back up happened to fail. And, by an amazing coincidence, they can recover everything except the emails from Lois Lerner that were sent at precisely the time she was instrumental in the IRS’s harassment campaign.

Yeah, right, there’s a chance the IRS is being honest. Just like the Nixon White House could have accidentally erased 18-1/2 minutes of tape.

That being said, there’s a chance I’ll be playing center field next month for the New York Yankees. And an even bigger chance that the models from Victoria’s Secret will invite me for a weekend orgy (and just in case the Princess of the Levant is reading this, I naturally would say no).

Let me now detour into the world of public policy.

The IRS’s venal and corrupt behavior is only possible because the tax code is a Byzantine nightmare of about 75,000 pages. And that doesn’t even include all the tax court decisions and IRS letter rulings that also govern the internal revenue code.

It is this thicket of special-interest sleaze that enables hacks like Lois Lerner to wield unjustified power.

So if we want to actually reduce the chances of similar malfeasance in the future, then action is needed.

But I’m not just talking about prison for the crooks who tried to misuse the power of government.

We also need to rip up the internal revenue code and replace it with a simple and fair flat tax.

As you can see in this video, I’m mostly a fan of tax reform because it will help the American economy. But I’m also delighted the flat tax will reduce the discretionary power of politicians and bureaucrats.

In the long run, of course, it would be even better if we shrank the federal government so much that we didn’t need any broad-based tax of any kind.

 

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I realize this may be a thought crime by DC standards, but it sure would be nice to eliminate the high tax rates that undermine economic growth and reduce American competitiveness.

At the risk of sharing too much information, I fantasize about a world without the internal revenue code. In addition to getting rid of high tax rates, I also want to abolish the pervasive double taxation of income that is saved and invested.

Tax Code PagesJust as important, I want to wipe out the distorting loopholes that tilt the playing field in favor of politically connected interest groups. And I daydream about how much easier tax day would be if ordinary people didn’t have to figure out how to comply with an ever-changing tax code.

But perhaps you’re a normal person and you don’t dwell on these topics. Your fantasies probably have nothing to do with fiscal policy and instead involve that hottie in your neighborhood.

That’s fine. I’m actually envious of well-adjusted people who don’t fixate on the cesspool of Washington.

But – at the very least – I want you to agree that America needs fundamental tax reform. And to help persuade you,  here are some fresh stories to remind you that the tax code and the IRS are a blight on society.

For instance, how do you feel about the IRS engaging in partisan politics, as reported by the Washington Times.

Even as the IRS faces growing heat over Lois G. Lerner and the tea party targeting scandal, a government watchdog said Wednesday it’s pursuing cases against three other tax agency employees and offices suspected of illegal political activity in support of President Obama and fellow Democrats. …the Office of Special Counsel…said it was “commonplace” in a Dallas IRS office for employees to have pro-Obama screensavers on their computers, and to have campaign-style buttons and stickers at their office. In another case, a worker at the tax agency’s customer help line urged taxpayers “to re-elect President Obama in 2012 by repeatedly reciting a chant based on the spelling of his last name,” the Office of Special Counsel said in a statement. …Another IRS employee in Kentucky has agreed to serve a 14-day suspension for blasting Republicans in a conversation with a taxpayer.

For more information about this nauseating scandal, read the wise words of Tim Carney and Doug Bandow.

Or what about the time, expense, and anxiety that the tax code causes for small businesses? Heck, even the Washington Post has noticed this is a big issue.

More than half of small employers say the administrative burdens and paperwork associated with tax season pose the greatest harm to their businesses, according to a new survey by the National Small Business Association. Forty-seven percent say the actual tax bill hits their companies the hardest. On average, small-business owners spend more than 40 hours — the equivalent of a full workweek — filing their federal taxes every year. One in four spends at least three full weeks on the annual chore. There is also the expense of doing that work. Only 12 percent of employers filed their taxes on their own this year, down from 15 percent last year — and hiring help can be pricey. Half spent more than $5,000 on accountants and administrative costs last year. One in four spent more than $10,000.

I was tempted to say compliance costs add insult to injury, except that understates the problem. Watch this video if you want to understand why the tax code needs to be junked.

And let’s not forget that high tax rates are pointlessly destructive and bad for America. Dozens of companies have redomiciled in other jurisdictions to get out from under America’s punitive corporate tax system. And more are looking at that option. Here are some excerpts from a report in the U.K.-based Financial Times.

Walgreens has come under pressure from an influential group of its shareholders, who want the US pharmacy chain to consider relocating to Europe, in what would be one of the largest tax inversions ever attempted. …The move, known as an inversion, would dramatically reduce Walgreens’ taxable income in the US, which has among the highest corporate tax rates in the world. …In a note last month, analysts at UBS said Walgreens’ tax rate was expected to be 37.5 per cent compared with 20 per cent for Boots, and that an inversion could increase earnings per share by 75 per cent. They added, however, that “Walgreens’ management seems more hesitant to pull the trigger near-term due to perceived political risks.”

By the way, “perceived political risks” is a polite way of saying that the team at Walgreens is worried that the company might be targeted by the crowd in Washington. In other words, it will be attacked if it does the right thing for workers, consumers, and shareholders.

But that’s blaming the victim. All you really need to know is that America’s corporate tax system is so harsh that companies don’t just escape to Ireland, Switzerland, the Cayman Islands, and Bermuda. They even find better fiscal policy in Canada and the United Kingdom!

Last but not least, do you trust the IRS with your confidential financial data? If you answer yes, seek help right away from a mental health professional and check out these stories.

According to the Washington Times:

A new cost-saving computer technology being implemented by the IRS has left the agency vulnerable to hacking, putting taxpayers’ info at risk, an investigative report has found. …although the IRS has developed cybersecurity guidelines, many of the servers aren’t following them, said a report by the agency’s internal watchdog, the Inspector General for Tax Administration. In fact, the servers failed 43 percent of the tests investigators put them through, though they aren’t releasing what those tests and settings are due to security concerns.

According to a Bloomberg report:

A U.S. Internal Revenue Service employee took home a computer thumb drive containing unencrypted data on 20,000 fellow workers, the agency said in a statement today. …The IRS said it’s working with its inspector general to investigate the incident. The IRS statement didn’t say why the incident was discovered now, didn’t include the name of the employee who used the thumb drive and didn’t say whether the employee still works at the IRS.

And National Review has reported:

The Internal Revenue Service stole and improperly accessed 60 million medical records after raiding a California company, according to a legal complaint filed in March with the California superior court for San Diego. …“No search warrant authorized the seizure of these records; no subpoena authorized the seizure of these records; none of the 10,000,000 Americans were under any kind of known criminal or civil investigation and their medical records had no relevance whatsoever to the IRS search.”

So what’s the bottom line? I suppose there are different interpretations, but my view is that the system is irretrievably broken. It needs to be shredded and replaced.

What are the options?

My real fantasy is to have a very small federal government. Then we wouldn’t need a broad-based tax of any kind.

But I also have incremental fantasies. Until we can shrink the federal government to its proper size, let’s at least figure out ways of collecting revenue that are much less destructive and much less unfair.

The flat tax is one possible answer.

I’m also a fan of the national sales tax, though only if we first amend the Constitution to ensure that politicians don’t pull a bait-and-switch and burden us with both an income tax and sales tax!

To be more specific, I’m a fan of the Fair Tax, but only if we make sure that politicians never again have the ability to impose an income tax.

P.S. Since we’re on the subject of taxes, folks in Northern New Jersey, Southern New York, and New York City may be interested in a tax symposium this Thursday at Ramapo College in Mahway, New Jersey. Along with several other speakers, I’ll be pontificating on the following question: “The Income Tax:
Necessary Evil, Or the Root of All Evil?”

The college is convenient to I-287 near the New York/New Jersey border. Say hello if you attend.

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Looking at labor markets, my biggest concern is the drop in labor force participation.

The data from the Labor Department on the employment-population ratio, for instance, suggest a permanent reduction in the share of the population that is working.

And since economic output and living standards ultimately depend on the quality and quantity of labor and capital that is being productively utilized, it obviously is not good news that millions of people are no longer employed.

But if I had to identify a second-biggest concern, it would be the “Europeanization” of long-run unemployment in the United States. Specifically, we have a growing problem of too many people being unemployed for long periods.

I pontificate about this issue in a column for CNN.

…there are almost 4 million Americans who have been out of work for more than six months. That’s a big number. What’s disconcerting is that the current long-term unemployment is more serious than in previous economic downturns. Data from previous business cycles show people suffering from long-run joblessness at worst accounted for about 20% to 25% of the unemployed. In recent months, that percentage has jumped to nearly 40% — an all-time record! Indeed, America is beginning to look like Europe. It used to be that long-term unemployment in the U.S. was only a fraction of Europe’s, but the latest data from the Organization for Economic Cooperation and Development show that the United States has caught up to many of Europe’s welfare states. That’s not a race we want to be part of, much less win.

Here are some charts that illustrate the severity of the problem.

Let’s start with a look at what’s happened over time in the United States.

Long-Run Unemployment as Share of Unemployed

As you can see, the problem of long-run unemployment rises and falls with the business cycle. But during previous recessions, the share of the unemployed who were out of work for more than six months rarely climbed above 20 percent. And then the problem quickly got better once the economy began to recover.

That’s no longer the case. Long-term unemployment peaked at more than 40 percent of overall joblessness between 2010 and 2012. And even though we’ve supposedly been in a recovery since the summer of 2009, that number has fallen to only about 37 percent.

Now let’s compare the data from the United States to the numbers from other developed nations. As you can see, the United States used to have a huge advantage over other industrialized countries, but that gap has almost completely disappeared.

Long-Run Unemployment - US v OECD

We don’t know, to be sure, whether this represents a permanent change. But my concern is that we’re more and more likely to see bad European-type numbers now that we’re enduring European-type economic policies of bigger government and more intervention.

There is an alternative, which I explained in my CNN column, that could improve American labor markets.

…what’s the solution? There’s no silver bullet, but economic growth is the single most important key. …Unfortunately, …we’re still suffering through a sluggish economic cycle. Recent improvements in the overall employment rate are in large part the result of people dropping out of the labor force, and the problem of long-run unemployment has barely budged. To boost employment, we need the kind of strong growth America enjoyed during the Reagan and Clinton years, when millions of new jobs were created and the unemployment rate fell dramatically. To get there, we need a return to the types of free-market policies we got under Reagan and Clinton: a lower burden of government spending and less intervention from Washington.

Seems simple, right? We got good growth and job numbers during the Reagan and Clinton years, so we should replicate those policies.

But that hasn’t been the case. And the problem didn’t start with Obama, though he’s certainly made it worse.

…we’ve been moving in the exact opposite direction. Under both Presidents Bush and Obama, the size and scope of government has expanded, and the United States — which had the world’s third-most free-market economy when Bill Clinton left office — has now dropped to 17th in the Economic Freedom of the World rankings. We also need to make sure the unemployed don’t get lured into long-term dependency. One glaring example of misguided big-government policy is the argument to endlessly extend unemployment benefits. …Moreover, Obama’s proposed hike in the minimum wage…is the equivalent of sawing off the bottom rungs on the economic ladder. Simply stated, businesses create jobs when they think a new employee will help the bottom line. Artificially raising the cost of workers — particularly those with marginal skills — is a recipe for creating more unemployment.

I hate repeating myself, but it bears saying over and over again that the key to prosperity is small government and free markets.

But to the extent we become more like France and less like Hong Kong, we are doomed to get anemic economic performance and fall in the competitiveness rankings.

P.S. On another topic, it pains me to report that one of the worst examples of DC sleaze is about the become law.

The so-called farm bill has cleared Congress after corrupt Democrats seeking more food stamp spending Farm Bill Spendingjoined forces with corrupt Republicans seeking more agri-business welfare.

The invaluable Tim Carney describes the lobbyist feeding frenzy that produced this monstrosity.

A trillion-dollar, pork-filled farm bill stuffed with corporate welfare passed the House last week and cleared the Senate on Tuesday… The bill perpetuates the federal sugar program. Arguably Washington’s least defensible corporate welfare boondoggle, the sugar program keeps out foreign sugar, hiking prices for consumers, killing jobs for candy makers and enriching a few politically connected sugar producers. The farm bill replaces a flawed program of direct payments to farmers with a potentially more wasteful program of subsidized crop insurance, which takes money from taxpayers and gives it to banks and farming businesses. …The bill had its supporters, of course: the agribusiness lobby, the farm-finance lobby, the White House and the Congressional leadership of both parties. …The Ag lobby got what they wanted. The GOP leadership passed its bill. Democrats got their trillion-dollar price tag.

But here’s the part that really gets me pissed.

Lawmakers also stripped out of the final farm bill a provision that would have required congressmen to disclose the farm subsidies they receive from taxpayers.

This Chip Bok cartoon is a good summary of what happened.

Farm Bill Cartoon Bok

Just in case you need a reminder about why the Department of Agriculture should be abolished.

P.P.S. Since we’re sharing bad news, I’m sure you’ll be delighted to know that the new head of the IRS has decided to reward employees by giving them more of our money. Here are some excerpts from a report in the Washington Times.

Citing the need to boost employee morale, the Internal Revenue Service’s new commissioner said Monday that he will pay out millions of dollars in bonuses to agency employees, reversing a decision his predecessor made to save money… The move didn’t sit well with congressional critics who have been stupefied by the agency’s targeting of tea party groups… “It’s hard to think of a group of people less deserving of bonuses than IRS employees. Frankly, this is outrageous,” said Sen. Orrin G. Hatch of Utah, the ranking Republican on the Senate Finance Committee.

Hey, but nothing to worry about.

After all, the President has appointed one of his big donors to investigate whether anybody at the IRS did anything wrong.

And we already know the results of that investigation. As this Jerry Holbert cartoon notes, the President has told us there isn’t a smidgen of corruption.

IRS Musical Cartoon

Gee, I know I’m satisfied with that assurance. After all, the President would never lie to us, would he?

I guess this is what they mean by trickle-down government.

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It’s time to extinguish any lingering Christmas cheer. Today’s topic is over-bearing and tyrannical tax administration.

To be more specific, we’re going to look at the extent to which taxpayers are mistreated during the process of collecting revenue.

Yes, the amount that governments steal from you also is important, but that’s a topic we’ve already discussed on many occasions.

Moreover, we’re not going to focus on the IRS. Yes, the internal revenue service is infamous for its brutal and intrusive tactics. And I’m embarrassed to note that the United States scored very poorly in a Tax Oppression Index prepared by Switzerland’s Institut Constant.

But I want to focus today on places other than Washington. And the good news (at least relatively speaking) is that some countries scored even lower than the United States. The very worst nation was Italy, and you probably won’t be surprised that Germany (the country that figured out a way to use parking meters to tax prostitutes) and France were among the jurisdictions that also ranked below America.

This story from Brittany provides a rather appropriate glimpse at what it’s like to be a taxpayer in France.

For customers at the Mamm-Kounifl concert-café in Locmiquélic, carrying drinks trays and used glasses back to the bar was a polite tradition. But for social security agency URSAFF, it was also an infringement of labour laws because customers were acting like waiters, French local newspaper Le Télégramme reported.

But what’s really amazing is the way in which France’s revenue-hungry bureaucrats “caught” the alleged scofflaws.

“Around half-past midnight, a customer returned a drinks tray. She passed by the bar to go to the toilets. That was when it all kicked off.   My husband was pinned against the glass by a man. A woman leapt on me, showing her ID card and that’s when I realised it was a URSSAF check. They told me I had been caught using undeclared labour,” owner Markya Le Floch told Le Télégramme. …The authorities initially fined the pub owners €7,900 and briefly placed them in police custody. …URSSAF are still pursuing a social case and are now seeking €9,000 due to non-payment of the original fine.

Wow. This may be even more Orwellian than the FDA raid against the Amish farm that was selling unpasteurized milk to consenting adults. Or more absurd than the DEA busting a grandmother for buying cold medicine.

Imagine if the IRS adopted this French policy. If you take your significant other on a fancy date to McDonald’s and then carry your trash to the garbage receptacles, you’ll be guilty of providing “undeclared labor” and the tax police can then decide to impose taxes and fines because there could have been a taxable employee fulfilling that role.

I’m not joking. That seems to be the premise of the case in France.

Let’s now look at how taxpayers are treated by the various states here in America. Using data from the Council on State Taxation, the Tax Foundation has put together a map with grades for each state based on “good government” principles of tax administration.

Tax Administration Map of States

I’m surprised that Maine and Ohio rank so highly, particularly since neither state gets very good grades based on either Tax Freedom Day, aggregate tax burden, or the State Business Tax Climate.

But I’m not surprised that California ranks at the bottom. The state routinely gets bad grades on various measures of fiscal policy. No wonder so much income is moving out of the state. As for Louisiana, I can understand why Governor Jindal is so anxious to get rid of the state income tax.

Though the absence of a state income tax doesn’t guarantee good tax administration. Nevada, for instance, gets a poor grade in the COST survey.

P.S. If you like cartoons mocking California’s tax-and-spend politicians, click here, here, here, here, here, and here.

P.P.S. I’ve only shared one French-related cartoon, but you can seem my attempts at humorous captions here, here, and here.

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One of my missions in life is fundamental tax reform. I would like to replace the corrupt internal revenue code with a simple and fair flat tax.

Though what I really want is a tax system that minimizes the damage of extracting money from the productive sector of the economy, so I’ll take any system with a low rate, no double taxation, and no distortionary loopholes.

The national sales tax, for instance, also would be a good option if we can first repeal the 16th Amendment so there’s no risk that politicians would pull a bait and switch and saddle us with both an income tax and a sales tax (and in my ultimate fantasy world, we would shrink the federal government to the size envisioned by the Founding Fathers, in which case we probably wouldn’t need any broad-based tax at all).

While I normally make the economic case for tax reform, there are many reasons to fix our broken tax code.

Many Americans, for instance, are rightfully upset that the tax code is a 76.000-page monstrosity that enables the politically well connected to benefit from special provisions.

So we don’t know if the rich are paying an appropriate amount. Some of them are paying too much because of high rates and double taxation, while some of them are paying too little because they have clever lawyers, lobbyists, and accountants.

In an ideal world, if someone like Bill Gates earns 10,000 times as much as I do, then he should pay 10,000 times as much in tax. That’s a core principle of the flat tax.

But this post isn’t about why we need tax reform to promote economic growth or fairness. Instead, I want to focus on tax reform as a way of reducing welfare fraud. The Treasury Department just released a report acknowledging that the IRS made more than $100 billion of improper “earned income credit” payments over the past decade and that about one-fourth of all such payments are in error.

This Fox News article is a good summary. Here are the key details.

The Internal Revenue Service paid out more than $110 billion in tax credits over the past decade to people who didn’t qualify for them, according to a Treasury report released Tuesday. …IRS inspector general J. Russell George said more than one-fifth of all credits paid under the program went to people who didn’t qualify. …George said in a statement. “Unfortunately, it is still distributing more than $11 billion in improper EITC payments each year and that is disturbing.” …The agency said it prevents “nearly $4 billion in improper claims each year and is committed to continuing to work to reduce improper claims.” The EITC is one of the nation’s largest anti-poverty programs. In 2011, more than 27 million families received nearly $62 billion in credits.

Now some background. The “earned income credit” or “earned income tax credit” is actually an income redistribution scheme operated by the IRS. It’s basically a wage subsidy. If someone earns money (the “earned income” part), the law says the IRS should augment that money with a payment from the government (the “credit” or “tax credit” part).

The key thing to understand, though, is that the EITC is “refundable,” which is the government’s term for payments to people who don’t earn enough to owe any income tax. That’s why it’s primarily an income redistribution program. Only it’s operated by the IRS rather than the Department of Health and Human Service or some other welfare agency.

And when government is giving away other people’s money, there are those who will try to abuse the program. That’s true for corporate welfare, and it’s true for traditional welfare like food stamps. And, as we see from the Treasury report, it’s true for the EITC.

That’s the bad news.

The good news is that the EITC has a redeeming feature. Some lawmakers realized traditional welfare programs were very destructive because they paid people not to work. The EITC supposedly offsets that perverse incentive because you get the money only because you earn some income.

But now let’s share some additional bad news. The government takes away the EITC once your income reaches a certain level, and this is equivalent to a big increase in the marginal tax rate on earning additional income.

And when you combine the EITC with all the other redistribution programs operated by government, you create a huge dependency trap. Indeed, the chart shows that many of these programs can be larger than the EITC (which is called “negative income tax”).

So let’s adopt a flat tax and get rid of all the bad features of the tax system, including the EITC. Welfare and income redistribution are not proper roles of the federal government.

We’re far more likely to get good results – both for poor people and taxpayers – if we let state and local governments experiment and learn from each other on what actually helps people climb out of poverty.

P.S. I can’t overlook an opportunity to point out that today’s complicated and convoluted tax code is the reason why we have a powerful and intrusive Internal Revenue Service. And never forget that the IRS has a long record of abusive actions.

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President Obama promised he would unite the world…and he’s right.

Representatives from dozens of nations have bitterly complained about an awful piece of legislation, called the Foreign Account Tax Compliance Act (FATCA), that was enacted back in 2010.

They despise this unjust law because it extends the power of the IRS into the domestic affairs of other nations. That’s an understandable source of conflict, which should be easy to understand. Wouldn’t all of us get upset, after all, if the French government or Russian government wanted to impose their laws on things that take place within our borders?

But it’s not just foreign governments that are irked. The law is so bad that it is causing a big uptick in the number of Americans who are giving up their citizenship.

Here are some details from a Bloomberg report.

Americans renouncing U.S. citizenship surged sixfold in the second quarter from a year earlier… Expatriates giving up their nationality at U.S. embassies climbed to 1,131 in the three months through June from 189 in the year-earlier period, according to Federal Register figures published today. That brought the first-half total to 1,810 compared with 235 for the whole of 2008. The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside.

I’m glad that the article mentions that American law is so out of whack with the rest of the world.

We should be embarrassed that our tax system – at least with regard to the treatment of citizens living abroad and the treatment of tax exiles – is worse than what they have in nations such as France.

And while there was an increase in the number of Americans going Galt after Obama took office, the recent increase seems to be the result of the FATCA legislation.

Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport. …Fatca…was estimated to generate $8.7 billion over 10 years, according to the congressional Joint Committee on Taxation.

I very much doubt, by the way, that the law will collect $8.7 billion over 10 years.

And it’s worth noting that President Obama initially claimed that his assault on “tax havens” would generate $100 billion every year. If you don’t believe me, click here and listen to his words at the 2;30 mark.

So we started with politicians asserting they could get $100 billion every year. Then they said only $8.7 billion over ten years, or less than $1 billion per year.

And now it’s likely that revenues will fall because so many taxpayers are leaving the country. This is yet another example of how the Laffer Curve foils the plans of greedy politicians.

You may be tempted to criticize these overseas Americans, but I’ve talked to several hundred of them in the past few years and you can’t begin to imagine how their lives are made more difficult by the illegitimate extraterritorial laws concocted by Washington. Bloomberg has a few more details.

For individuals, the costs are also rising. Getting a mortgage or acquiring life insurance is becoming almost impossible for American citizens living overseas, Ledvina said. “With increased U.S. tax reporting, U.S. accounting costs alone are around $2,000 per year for a U.S. citizen residing abroad,” the tax lawyer said. “Adding factors, such as difficulty in finding a bank to accept a U.S. citizen as a client, it is difficult to justify keeping the U.S. citizenship for those who reside permanently abroad.”

Imagine what your life would be like if you had trouble opening a bank account or conducting all sorts of other financial activities. Things that are supposed to be routine, but are now nightmares.

I collected some of the statements from these overseas Americans. I encourage you to visit this link and get a sense of what they have to endure.

And then keep in mind that all of these problems would disappear if we had the right kind of tax system, such as the flat tax, and didn’t let the tentacles of the IRS extend beyond America’s borders.

P.S. Based on people I’ve met in my international travels, I’d guess that, for every American that officially gives up their citizenship, there are probably a dozen more living overseas who simply drop off the radar screen. Many of these people can’t afford – or can’t stand – to deal with the onerous requirements imposed by hacks, bullies, and lightweights in Washington such as Barbara Boxer.

P.P.S. Remember the Facebook billionaire who moved to Singapore to escape being an American taxpayer? Many of us – including me – instinctively find this unsettling. But if we believe that folks should have the freedom to move from California to Texas to benefit from better tax policy, shouldn’t they also have the freedom to move to another nation?

The same is true for companies.

If our tax law is bad, we should lower tax rates and adopt real reform.

Unless, of course, you think it’s okay to blame the victim.

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There are lots of despicable people in Washington engaged in a lot of unsavory behavior, so it would be very difficult to get agreement if you asked regular people to select the most odious feature of the political class.

HypocrisyMany people would probably choose corruption as the defining characteristic of Washington, and it would be hard to argue with that choice, but I think hypocrisy is an even better choice.

There’s something fundamentally wrong when people push for policies while making sure they don’t have to abide by the results. Yet it happens all the time in government.

1. It galls me that the pro-tax bureaucrats at the OECD get tax-free salaries while pushing for higher taxes on everyone else.

2. Or how about rich left wingers who bleat about compassion but who are stingy with their own money.

3. And the wealthy leftists who use tax havens while trying to deny others from protecting their money.

4. There are members of the Washington elite who don’t have to live under the gun control laws they impose on others.

5. What about the politically connected business types who endorse higher taxes in exchange for favors from Washington.

6. Or the politicians who evade the taxes they impose on ordinary citizens.

7. How about Canadian politicians who support government-run healthcare but then come to America when they need treatment.

8. To close this list on a humorous note, we also have Occupy Wall Street protesters who fight “The Man” while wanting to make “The Man” more powerful.

But if you want a really powerful example of hypocrisy, nothing stands out more than politicians trying to exempt themselves from Obamacare.

Crocodile TearsThey’ve even been complaining that the law is so bad that they may quit their jobs. And they’re so disconnected from reality that they think we’ll be upset at the loss of their “seniority” and “experience” – as if taxpayers value their ability to squander money.

But it’s not just politicians who are being hypocritical. The bureaucrats at the IRS also don’t want to live under Obamacare – even though they’re the ones who will be forcing us to live under that misguided law!

Here are some excerpts from a report in the Washington Examiner.

IRS employees have a prominent role in Obamacare, but their union wants no part of the law. National Treasury Employees Union officials are urging members to write their congressional representatives in opposition to receiving coverage through President Obama’s health care law. …Like most other federal workers, IRS employees currently get their health insurance through the Federal Employees Health Benefits Program, which also covers members of Congress. House Ways and Means Committee Chairman Dave Camp offered the bill in response to reports of congressional negotiations that would exempt lawmakers and their staff from Obamacare. …Camp spokeswoman Allie Walker said. “If the Obamacare exchanges are good enough for the hardworking Americans and small businesses the law claims to help, then they should be good enough for the president, vice president, Congress and federal employees,” she also said.

To augment the remarks of Rep. Camp’s spokeswoman, it also would be good to somehow figure out a way to make the lobbyists and other Washington insiders participate in the Obamacare exchanges.

There aren’t many “sure things” in life, but one of them is that Obamacare would be repealed almost instantaneously if the bigwigs in Washington actually had to live under the law designed for peasants like you and me.

Unfortunately, that’s why Congressman Camp’s legislation will never get approved.

So let’s end this post with a bit of dark humor from Bob Gorrell.

Obamacare Cartoon July 2013 6

You can enjoy more Obamacare cartoons by clicking here, herehereherehere, and here.

P.S. For readers in New Jersey (and also New York City), I’ll be speaking this upcoming Wednesday, July 31, at the Friedman Day luncheon sponsored by Americans for Prosperity.

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Exactly three years ago, I posted a simple quiz about libertarians and patriotism.

The two questions in that quiz are illuminating since they highlight how libertarians in some cases may differ from conservatives (click here for more on that issue), but I also included this t-shirt, which seems to capture the mindset of a lot of Americans regardless of their political outlook.

Well, it seems that Mark Twain had the same attitude as the young lady in the photo, at least if we can believe the quote in this Steve Breen cartoon.

Simply stated, our loyalty should be to a set of ideals, not to any particular group of people who happen to hold power.

Patriotism Cartoon

What makes the cartoon so effective, though, is the inclusion of an IRS thug and a snoop from the NSA.

Reminds me of this cartoon about Obama and the Founding Fathers.

But there’s a serious point to discuss. Are we losing our freedoms and giving the state too much power and authority?

According to a recent news report, a former lieutenant colonel for the infamous East German STASI spy agency says the NSA-type snooping ability “would have been a dream come true.”

Wolfgang Schmidt…pondered the magnitude of domestic spying in the United States under the Obama administration. A smile spread across his face. “You know, for us, this would have been a dream come true,” he said, recalling the days when he was a lieutenant colonel in the defunct communist country’s secret police, the Stasi. In those days, his department was limited to tapping 40 phones at a time, he recalled. Decide to spy on a new victim and an old one had to be dropped, because of a lack of equipment. He finds breathtaking the idea that the U.S. government receives daily reports on the cellphone usage of millions of Americans and can monitor the Internet traffic of millions more.

I’ve already written that we do have enemies and that I think it’s okay to spy on those enemies (though I want the government to get judicial approval before spying on Americans).

But I also wrote that spying should be subject to cost-benefit analysis. The NSA info-gathering exercise reminds me of anti-money laundering laws and those laws are a costly failure. They invade our privacy, hurt the poor, impose high regulatory costs, and have little or no impact on underlying crimes.

We also need to be concerned about potential misuse of data, whether by people currently in the government or those that will have access to the information in the future.

This is what worries me the most. Simply stated, I don’t trust people in government. Which, rather ironically, means I’m in agreement with a former STASI bigwig.

Even Schmidt, 73, who headed one of the more infamous departments in the infamous Stasi, called himself appalled. The dark side to gathering such a broad, seemingly untargeted, amount of information is obvious, he said. “It is the height of naivete to think that once collected this information won’t be used,” he said. “This is the nature of secret government organizations. The only way to protect the people’s privacy is not to allow the government to collect their information in the first place.”

Hmmm… maybe being warned about the risk of unrestrained government by a former communist spy is the modern equivalent of being called ugly by a frog?

In any event, I suppose Herr Schmidt has first-hand knowledge of the danger of giving government too much information.

P.S. Speaking of first-hand knowledge, it’s somewhat amusing that former communists in Russia and current communists in China have told the Europeans that the welfare state breeds too much dependency.

P.P.S. While this post has touched on libertarians and patriotism, fairness requires me to acknowledge that leftist politicians also believe in a form of patriotism.

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What do you do if you’re part of a government bureaucracy that has been caught red-handed engaged in sleazy, corrupt, and (almost surely) illegal targeting of Americans for their political beliefs?

But before you answer, keep in mind that your bureaucracy also has been exposed for wasting huge amounts of money at lavish conferences. What’s the ideal way of dealing with the fallout from that scandal as well?

The answer is simple. Even though you and your pals already are paid more than the peasants in the private sector, give yourself and your cronies giant bonuses!

I’m not joking. Here are some excerpts from an AP report.

The Internal Revenue Service is about to pay $70 million in employee bonuses despite an Obama administration directive to cancel discretionary bonuses because of automatic spending cuts enacted this year, according to a GOP senator. …“The IRS always claims to be short on resources,” Grassley said. “But it appears to have $70 million for union bonuses…” Three congressional committees and the Justice Department are investigating the targeting of conservative groups. And key Republicans in Congress are promising more scrutiny of the agency’s budget, especially as it ramps up to play a major role in implementing the new health care law.

Sort of makes this cartoon self evident.

IRS Trust Cartoon

Indeed, this motivates me to announce “Mitchell’s First Theorem of Government.”

I’ve explicitly expressed this sentiment in the past, and hinted at it here, here, and here.

Now it’s time to make it official.

Mitchell's First Theorem of Government

I hope you’ll agree this is a nice addition to Mitchell’s Golden Rule, Mitchell’s Bleeding Heart Guide, and Mitchell’s Law.

And maybe one of these will catch on and I can be famous like Art Laffer.

P.S. Enjoy some cartoons about the IRS scandals here, here, and here.

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I was thinking of writing something deep and profound, but then I saw this cartoon. For those of us who love the IRS, it’s too good not to share.

IRS Frankenstein Cartoon

Frankenstein periodically appears in political cartoons, including this Glenn Foden IRS cartoon and these Henry Payne cartoons about Romneycare and Obamacare.

Sort of makes you wonder why there’s so much discrimination against the Mummy, Count Dracula and the Werewolf? Maybe we can ask the EEOC to launch an investigation after they’re done trying to coerce businesses into hiring ex-convicts.

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