Tag Archives: internal revenue code

Dan Mitchell article: Democrats want to give $80 billion to the Internal Revenue Service to audit millions of Americans each year. Yet…after the progressive website ProPublica first published the secret tax information of rich Americans, the tax agency still can’t explain what happened.

Harboring Criminals at the IRS

At the risk of understatement, I am not a fan of the Internal Revenue Service. But, as shown in this closing segment from a recent interview, I get especially outraged when IRS bureaucrats engage in criminal behavior and nobody cares.

This should outrage everyone that we have officials at a powerful agency illegally leaking confidential information.

My daughter’s dogs even registered their disapproval during the interview (I’m dog sitting for a few days).

We don’t know how many IRS bureaucrats were involved, and we also don’t know whether the motive was money, ideology, or partisanship.

Maybe all three.

This is very reminiscent of what happened about a dozen years ago when other IRS bureaucrats stifled Tea Party groups in order to boost President Obama’s reelection prospects.

Despicable then, and despicable now.

A few months ago, the Wall Street Journaleditorialized about this latest scandal.

Democrats want to give $80 billion to the Internal Revenue Service to audit millions of Americans each year. Yet…after the progressive website ProPublica first published the secret tax information of rich Americans, the tax agency still can’t explain what happened.…IRS Commissioner Charles Rettig…promised when the leak occurred…to find out what happened, but in September he told Senators, “We do not yet have any information concerning the source.” Since then it’s been crickets. …The leak is a crime, but tracing it isn’t merely a matter of criminal enforcement. The breach highlights the general failure of the IRS to protect taxpayer data.  …As troubling is the limp response by the IRS. A separate GAO report this May found that the tax agency failed even to enforce its own authentication protocols, which would help to detect breaches when they occur. …The new money for the IRS is harmful on its own terms, but it’s all the worse when it is provided without strings to an agency that has no idea who is stealing private tax data.

Amen.

Hopefully Republicans won’t be stupid (again) and go along with big budget increases for the corrupt IRS bureaucracy.

By the way, ProPublica this morning published a new story based on their stolen data.

Written by Paul Kiel, it claims rich people pay a very low tax rate.

If your company’s stock shoots up and you grow $1 billion richer, that increase in wealth is real. …From 2014 to 2018,the 25 wealthiest Americans grew about $400 billion richer, according to Forbes. To an economist, this was income, but under tax law, it was mere vapor, irrelevant. And so this group, including the likes of Bezos, Elon Musk and Warren Buffett, paid federal income taxes of about 3.4% on the $400 billion, ProPublica reported. We called this the group’s “True Tax Rate.”

There are two points worth making after reading this nonsense.

  1. The left generally makes misleading claims about the tax rate on rich people by ignoring the fact that any dividends and capital gains they receive also are subject to the corporate income tax. The bottom line is that Warren Buffet does not pay a lower tax rate than his secretary.
  2. The new version of this claim, as illustrated by the ProPublica excerpt, is that the rich have a low tax rate because they aren’t hit with a tax when their assets increase in value. But that’s because an increase in wealth is not an increase in income, just as a decrease in wealth isn’t a loss of income.

If ProPublica wants to add a wealth tax on top of the current income tax, they should be honest and openly make that argument.

Instead, they opted to concoct and disseminate a make-believe tax rate.

The takeaway is that the IRS budget should not be increased, period. And it definitely should not be increased because that would reward criminal bureaucrats.

P.S. Don’t forget that the IRS has embraced a ludicrous claim about a $1 trillion tax gap.

The result of having lots of taxes is the mean IRS.

The IRS: Even Worse Than You Think

Posted by Daniel J. Mitchell

Since it is tax-filing season and we all want to honor our wonderful tax system, let’sgo into the archives and show this video from last year about the onerous compliance costs of the internal revenue code.

Narrated by Hiwa Alaghebandian of the American Enterprise Institute, the mini-documentary explains how needless complexity creates an added burden – sort of like a hidden tax that we pay for the supposed privilege of paying taxes.

__________

The Onerous Compliance Cost of the Internal Revenue Code

Uploaded by  on Apr 12, 2010

The tax system is a complicated nightmare that forces taxpayers to devote ever-larger amounts of time, money, energy, and other resources in hopes of complying with the internal revenue code and avoiding IRS persecution. This CF&P Foundation video shows that this corrupt mess is the result of 97 years of social engineering and industrial policy that began almost immediately after that dark day in 1913 that the income tax was created. www.freedomandprosperity.org

______________________

Two things from the video are worth highlighting.

First, we should make sure to put most of the blame on Congress. As Ms. Alaghebandian notes, the IRS is in the unenviable position of trying to enforce Byzantine tax laws. Yes, there are examples of grotesque IRS abuse, but even the most angelic group of bureaucrats would have a hard time overseeing 70,000-plus pages of laws and regulations (by contrast, the Hong Kong flat tax, which has been in place for more than 60 years, requires less than 200 pages).

Second, we should remember that compliance costs are just the tip of the iceberg. The video also briefly mentions three other costs.

    1. The money we send to Washington, which is a direct cost to our pocketbooks and also an indirect cost since the money often is used tofinance counterproductive programs that further damage the economy.
    2. The budgetary burden of the IRS, which is a staggering $12.5 billion. This is the money we spend to employ an army of tax bureaucrats that is larger than the CIA and FBI combined.
    3. The economic burden of the tax system, which measures the lost economic output from a tax system that penalizes productive behavior.

The way to fix this mess, needless to say, is to junk the entire tax code and start all over.

I’ve been a big proponent of the flat tax, which would mean one low tax rate, no double taxation of savings, and no corrupt loopholes. But I’m also a big fan of national sales tax proposals such as the Fair Tax, assuming we can amend the Constitution so that greedy politicians don’t pull a bait and switch and impose both an income tax and a sales tax.

But the most important thing we need to understand is that bloated government is our main problem. If we had a limited federal government, as our Founding Fathers envisioned, it would be almost impossible to have a bad tax system. But if we continue to move in the direction of becoming a European-style welfare state, it will be impossible to have a good tax system.

The result of having lots of taxes is the mean IRS.

The result of having lots of taxes is the mean IRS.

The IRS: Even Worse Than You Think

Posted by Daniel J. Mitchell

Since it is tax-filing season and we all want to honor our wonderful tax system, let’sgo into the archives and show this video from last year about the onerous compliance costs of the internal revenue code.

Narrated by Hiwa Alaghebandian of the American Enterprise Institute, the mini-documentary explains how needless complexity creates an added burden – sort of like a hidden tax that we pay for the supposed privilege of paying taxes.

__________

The Onerous Compliance Cost of the Internal Revenue Code

Uploaded by  on Apr 12, 2010

The tax system is a complicated nightmare that forces taxpayers to devote ever-larger amounts of time, money, energy, and other resources in hopes of complying with the internal revenue code and avoiding IRS persecution. This CF&P Foundation video shows that this corrupt mess is the result of 97 years of social engineering and industrial policy that began almost immediately after that dark day in 1913 that the income tax was created. www.freedomandprosperity.org

______________________

Two things from the video are worth highlighting.

First, we should make sure to put most of the blame on Congress. As Ms. Alaghebandian notes, the IRS is in the unenviable position of trying to enforce Byzantine tax laws. Yes, there are examples of grotesque IRS abuse, but even the most angelic group of bureaucrats would have a hard time overseeing 70,000-plus pages of laws and regulations (by contrast, the Hong Kong flat tax, which has been in place for more than 60 years, requires less than 200 pages).

Second, we should remember that compliance costs are just the tip of the iceberg. The video also briefly mentions three other costs.

    1. The money we send to Washington, which is a direct cost to our pocketbooks and also an indirect cost since the money often is used tofinance counterproductive programs that further damage the economy.
    2. The budgetary burden of the IRS, which is a staggering $12.5 billion. This is the money we spend to employ an army of tax bureaucrats that is larger than the CIA and FBI combined.
    3. The economic burden of the tax system, which measures the lost economic output from a tax system that penalizes productive behavior.

The way to fix this mess, needless to say, is to junk the entire tax code and start all over.

I’ve been a big proponent of the flat tax, which would mean one low tax rate, no double taxation of savings, and no corrupt loopholes. But I’m also a big fan of national sales tax proposals such as the Fair Tax, assuming we can amend the Constitution so that greedy politicians don’t pull a bait and switch and impose both an income tax and a sales tax.

But the most important thing we need to understand is that bloated government is our main problem. If we had a limited federal government, as our Founding Fathers envisioned, it would be almost impossible to have a bad tax system. But if we continue to move in the direction of becoming a European-style welfare state, it will be impossible to have a good tax system.

The result of having lots of taxes is the mean IRS.

The result of having lots of taxes is the mean IRS.

The IRS: Even Worse Than You Think

Posted by Daniel J. Mitchell

Since it is tax-filing season and we all want to honor our wonderful tax system, let’s go into the archives and show this video from last year about the onerous compliance costs of the internal revenue code.

Narrated by Hiwa Alaghebandian of the American Enterprise Institute, the mini-documentary explains how needless complexity creates an added burden – sort of like a hidden tax that we pay for the supposed privilege of paying taxes.

__________

The Onerous Compliance Cost of the Internal Revenue Code

Uploaded by on Apr 12, 2010

The tax system is a complicated nightmare that forces taxpayers to devote ever-larger amounts of time, money, energy, and other resources in hopes of complying with the internal revenue code and avoiding IRS persecution. This CF&P Foundation video shows that this corrupt mess is the result of 97 years of social engineering and industrial policy that began almost immediately after that dark day in 1913 that the income tax was created. www.freedomandprosperity.org

______________________

Two things from the video are worth highlighting.

First, we should make sure to put most of the blame on Congress. As Ms. Alaghebandian notes, the IRS is in the unenviable position of trying to enforce Byzantine tax laws. Yes, there are examples of grotesque IRS abuse, but even the most angelic group of bureaucrats would have a hard time overseeing 70,000-plus pages of laws and regulations (by contrast, the Hong Kong flat tax, which has been in place for more than 60 years, requires less than 200 pages).

Second, we should remember that compliance costs are just the tip of the iceberg. The video also briefly mentions three other costs.

    1. The money we send to Washington, which is a direct cost to our pocketbooks and also an indirect cost since the money often is used to finance counterproductive programs that further damage the economy.
    2. The budgetary burden of the IRS, which is a staggering $12.5 billion. This is the money we spend to employ an army of tax bureaucrats that is larger than the CIA and FBI combined.
    3. The economic burden of the tax system, which measures the lost economic output from a tax system that penalizes productive behavior.

The way to fix this mess, needless to say, is to junk the entire tax code and start all over.

I’ve been a big proponent of the flat tax, which would mean one low tax rate, no double taxation of savings, and no corrupt loopholes. But I’m also a big fan of national sales tax proposals such as the Fair Tax, assuming we can amend the Constitution so that greedy politicians don’t pull a bait and switch and impose both an income tax and a sales tax.

But the most important thing we need to understand is that bloated government is our main problem. If we had a limited federal government, as our Founding Fathers envisioned, it would be almost impossible to have a bad tax system. But if we continue to move in the direction of becoming a European-style welfare state, it will be impossible to have a good tax system.

President Obama and Alternative Minimum Tax

President Obama and Alternative Minimum Tax

Dan Mitchell does it again. He is always right on the mark.

CPAs Celebrate as Obama Proposes to Create a Turbo-Charged Alternative Minimum Tax

Posted by Daniel J. Mitchell

Wow, this is remarkable. The alternative minimum tax (AMT) is one of the most-hated features of the tax code. It is such a nightmare of complexity that even Democrats routinely have supported “patches” and “band-aids” to protect millions of additional households from getting trapped in this surreal parallel tax universe – one that requires taxpayers to calculate their taxes two different ways, with the IRS getting the maximum amount of money from the two returns. (Hong Kong, by contrast, give taxpayers the option of calculating their taxes two different ways, but they’re allowed to pay the smaller of the two amounts.)

Notwithstanding the AMT’s status as arguably the worst feature of the internal revenue code, President Obama apparently wants to double down on this horrific policy by creating a new version of this nightmarish provision.

Here are some excerpts from the Wall Street Journal‘s coverage, including a key observation that Obama’s scheme is just another version of the AMT.

The administration’s principle resembles the Alternative Minimum Tax, which was first adopted in 1969 and was intended to hit the superwealthy. The AMT has been hitting an increasing number of the middle class because it wasn’t indexed for inflation, and Congress has continually wrestled with how to get rid of it.

The WSJ article also notes that a glaring inconsistency in the White House’s rhetoric. the plan is supposed to be a “very significant” tax hike, but doubling the tax burden on millionaires would only raise $19 billion per year. In other words, the Administration’s class-warfare rhetoric is probably just cover for a tax hike that actually will hit a lot of people with far more modest incomes.

The proposal also could apply to a broader selection of taxpayers—all households with incomes of more than $1 million. Those earners are expected to pay an average of $845,000 this year, according to the nonpartisan Tax Policy Center. Assuming the households in the group of 22,000 pay that amount, even doubling their tax burden would raise just $19 billion a year at a time when deficit reduction is being measured in trillions of dollars. That doesn’t take into effect any change in taxpayer behavior prompted by a new tax regime. A senior administration official said that depending on where the minimum rate is set, the plan could be a “very significant” revenue raiser. The official wouldn’t provide details. …Some conservative economists say such a proposal could put a drag on capital markets and ignores the fact that many companies have already paid tax on the income before it is distributed to owners as dividends or capital gains.

The New York Times, to its credit, provides a fair description of the issue (including a much-needed acknowledgement that Warren Buffett may not have been honest and/or accurate), and also suggests that Obama may be proposing to replace the existing AMT with this new version (though that presumably would negate its impact as a revenue-raiser).

Mr. Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline at the White House on Monday. Mr. Obama’s proposal is certain to draw opposition from Republicans, who have staunchly opposed raising taxes on the affluent because, they say, it would discourage investment. It could also invite scrutiny from some economists who have disputed Mr. Buffett’s assertion that the megarich pay a lower tax rate over all. Mr. Buffett’s critics say many of the rich actually make more from wages than from investments. …The administration wants such a tax to replace the alternative minimum tax, which was created decades ago to make sure the richest taxpayers with plentiful deductions and credits did not avoid income taxes, but which now hits millions of Americans who are considered upper middle class.

Actually, the AMT also hits lots of middle-class families since having kids is considered a “preference” for tax purposes.

But that’s just an insult layered on top of injury. What makes Obama’s new scheme so destructive is that it would (though the White House has not explained the details) somehow classify dividends and capital gains as “preference” items – even though everyone acknowledges that such income already is double taxed!

In other words, Obama claims to be concerned about jobs, but he is proposing a big tax hike on the saving and investment that is necessary to create jobs. Amazing.

Regular readers will recognize this video about Obama’s class-warfare tax policy. But if you haven’t seen it, five reasons are presented to explain why it will backfire.

But look at the bright side. At least accountants and tax lawyers (and don’t forget bankruptcy specialists) will get more business if Obama’s plan is implemented.