I somehow am on a number of right-wing mailing and calling lists. Don't ask me how that happened. I do not hide the fact that my views about sustainable democracy and the harms of plutocracy/oligarchy put me to the left of the political spectrum. I do not buy into Chicago School "efficiency" theory, which acts as though you can ignore the facts about what has happened in our economy so long as you can write a mathematical equation that looks pretty and comes out the other way. I do not buy into tax policy discussions of how "uncompetitive" we are because multinationals are oh so heavily taxed (ha). I do not buy into the elite's view of itself as a meritocracy that has "earned" the millions and billions that top CEOs are paid while siphoning off tax money from infrastructure projects or firing workers or decimating pensions or destroying unions and continuing to pay their workers too little while paying themselves too much.
ASIDE: did you watch the News Hour program about the way people who get more think of themselves, automatically, as "worth" more and therefore meriting what they got. Researchers have run experiment after experiment in which the game is rigged--openly--in favor of one participant. Nonetheless, that participant becomes convinced that he is "entitled" to the rewards he is winning compared to the "loser" on the other side. That's a perfect illustration of what happens in the minds of the Romneys and Cheneys and others who amass great fortunes due to a combination of inheritance, fickle finger of fate, and tax subsidies that ensure that those that have get more (like the capital gains preference). That group that gets more thinks of itself as entitled to more, as therefore better than others. It is rather a small step to greed taking over and lack of compassion becoming the norm.
So I got a call Friday afternoon from the "American Legacy PAC." The call turned to a recording by Newt Gingrich. Here's a paraphrase of what it/he said:
I am outraged about the IRS's targeting of conservative and Tea Party groups. The government lies about what it does, lies to cover up the lies, and then hides everything from the public. This is endangering the country. We have to act. That's why I'm supporting the "Audit the IRS" campaign from American Legacy PAC.
Now, you can bet that nobody at American Legacy is going to shed any light on the matter, such as revealing that the BOLO list that included "Tea Party" and "patriot" also included "progressive" and "Occupy". That left-wing groups got probing letters with questions to answer, too. That in fact most Tea Party groups ARE political action groups and probably many of them do not deserve 501(c)(4) status.
And who is supporting the American Legacy PAC? No mention of that on the phone call. But if you look at the website, you see the kind of doublespeak that Gingrich has always used--talk about "American exceptionalism" and the "legacy" from our grandparents that is being lost due to action of the "elite." Of course, here, legacy means "the way we've always done it--meaning the people with money control things". And "elite" doesn't refer to what I mean by elite--which is those who hold the economic resources and financial assets that permit them to maintain dominance over political and judicial decisionmaking, but rather American Legacy uses the term to refer to the intellectuals that it doesn't like, who make up the left-wing of this country who are interested in a country that evolves and progresses, offering opportunity for all.
And the agenda is revealed in the page on the "Chamber of economic advisers", where Gingrich talks about needing to run government like a business and says:
Together we can get the American economy back on track. Unfortunately the answers coming out of Washington are more of the same….more borrowing from China….higher taxes on producers like you and a more intrusive federal and state government to hinder you from building your business. Together we can change that.
Surprise! Gingrich thinks government should be run like a business. Baloney--there's nothing in common between government and businesses. Government's print money, businesses can't. Governments set borrowing rates, businesses can't. Government's serve the least among them, businesses don't bother. Government's are interested in the public good; businesses are interested in private wealth accumulation. The problem with the US today is that we have had almost four decades of thinking that we need to think like that to run a government. We've let infrastructure go to pot, let our support for basic scientific research almost grind to a halt, stifling the real entrepreneurial innovation.
And surprise. Gingrich wants low taxes and deregualtion. That's not anything new. It's Reagan's deregulation, militarization, privatization and tax cut mantra all over again. It didn't work and the Great Recession of Bush's presidency--including the trillions of dollars of debt to bail out the financial system that Gingrich keeps trying to blame on Obama--is a big piece of the proof that it didn't work.
American Legacy is just an effort to get knee-jerk conservatives to plunk up more money to support more of the right-wing effort to continue to keep their "scandal" in the news media. The news media loves it--nothing like a "scandal" (even if not real) to sell ads.
Remember, folks. There are thousands of good public servants working at the IRS who are overworked, understaffed and underresourced. They face highly sophisticated taxpayers and lawyers, supported by much more resources, on a daily basis. They are lobbied by former IRS employees who move to lucrative jobs and use their contacts to talk the continuing employees into seeing their (clients') perspective about tax issues. Theirs is a constant struggle to do the right thing with too little time, too little respect, and too much of this kind of made-up scandalmongering that benefits most of all Big Business and its owners who want to "starve the beast", cut taxes, and cut safety nets.
I am disgusted with Gingrich's "outrage". And I don't think we need to audit the IRS. I'd like to see an audit of the TIGTA--Russell George who didn't even mention in his report that the IRS had used liberal terms as screening devices as well as conservative terms. Guess what, that matters!
Senators Baucus and Hatch, the Chair and ranking minority member of the Senate Finance Committee, respectively, launched a bid for completing a Code reform before Baucus leaves office with a letter to Senators telling them that they should get their bids in within the month for any tax expenditures they want to preserve. See Letter from Baucus and Hatch (June 27, 2013).
At first glance, this doesn't sound like a terrible idea. There are, indeed, too many tax breaks in the Code for huge estates, owners of capital, Big Oil, Big Pharma, "Non-Profit" hospitals, and corporate executives' deferred pay. Wiping them away and then thinking through things fresh might be a part of a process for real tax reform that makes sense.
But it isn't clear that this duo can possibly carve a better system this way. They have both already bought into the idea that the US has to "lower rates" to let Big Business be "competitive", an idea that ignores business reality and sets Congress up for a series of lobbying "auctions" (this tax break for that campaign contribution) [hat tip Evelyn Brody ]. They are both therefore part of the avid group of Big Business supporters who want to cut taxes, not raise revenues to deal with infrastructure needs, safety net needs, climate change, and the many other challenges that face a nation that has spent 40 years in the thrall of bankrupt Chicago School market theories that support winner-take-all systems. Both have touted the idea that taxes should be "simpler''--as though having language that two-year-olds could read would be a reasonable way to ensure that the most sophisticated legal minds hired by the wealthiest Americans don't scam the system! Remember that most of the complications in the Code are there to do two things--to provide special tax subsidies lobbied for heavily by Big Business (with a few for ordinary folk) and to prevent sophisticated (rich) taxpayers from ripping off the system as much as possible.
Worse, these two have both already made it clear that the group they really want to hit are those who benefit from Social Security and Medicare expenditures--their goal isn't to make our social safety net sustainable through the centuries, but to cut holes in it so that the money can leak out in tax rate cuts to line the pockets of the wealthy heirs, the overpaid CEOs, and the banksters that caused the worst economic recession since the Great Depression, at great personal cost to millions of ordinary Americans who have lost their jobs, their homes, and their prospects for the future because of it.
Not surprisingly, their letter to fellow Senators starts with their claim that the current Code is "broken" "riddled with exclusions, deductions, and credits", with the result that "[t]he complexity, inefficiency and unfairness of the tax code are acting as a brake on our economy."
Now, there are problems with the Code, that I won't deny. But this litany of evils is just what the lobbyists for the corporate and wealthy ordered--it buys into the attempt by free marketarian/Chicago School economists to paint taxes as evil, as sources of anticompetitiveness, as such dragging anchors on businesses and entrepreneurs that it holds back the economy and "forces" Big Business to offshore its work to cheaper labor elsewhere. And it sets the stage for an outcome that removes anti-abuse provisions and decimates progressivity in favor of the "identity theory" notion of fairness--that you have to have a flat rate that treats everybdoy the same to be fair.
Why is the identity theory of fairness absurd? Because it ignores context. It is like saying an Ant is as big as an Elephant, by ignoring the relativeness of size which is essential to the notion of bigness/smallness. In other words, we can't talk about "fair" without some idea of the scale on which fair is to be measured. And saying that "taxing everybody at the same flat rate" is inherently "fair" (as the right-wing proponents of a flat national sales tax tend to do) misses the point of what fairness is all about!
Then Baucus and Hatch turn to their concept of the "blank slate" and the appeal for senators to name their favorite tax expenditures (ie, their favorite pet interest groups).
We need your ideas and partnership to get tax reform over the finish line. In order to make sure that we end up with a simpler, more efficient and fairer tax code, we believe it is important to start with a "blank slate"—that is, a tax code without all of the special provisions in the form of exclusions, deductions and credits and other preferences that some refer to as "tax expenditures. This blank slate is not, of course, the end product, nor the end of the discussion. Some of the special provisions serve important objectives. Indeed, we both believe that some existing tax expenditures should be preserved in some form. But the tax code is also littered with preferences for special interests. To make sure that we clear out all the unproductive provisions and simplify in tax reform, we plan to operate from an assumption that all special provisions are out unless there is clear evidence that they: (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.
Of course, this "blank slate" approach is a call to arms for all lobbyists, who have already begun aiming their impressive resources at their selected targets. See Politico, Tax Lobbyists Spring Into Action .
But beyond that, note what it says about the provisions--it will keep those that encourage economic growth, increase fairness, or promote other policy objectives. We already know what lobbyists say about all of the provisions that they favor for Big Business and Big Money--that if you don't give favorable tax provisions to all those wonderful (purported) job creators, the economy will crash. And we already know who will use the "make the code fairer" arguments to support their views--it will be the right-wingers who want to eliminate social safety net provisions from the Code. They have lots of money from the Koch brothers and other right-wing wealthy individuals and institutions and lots of paid "scholars" like Cato, and Heritage and all the others to push their views. Tell me--just who is going to lobby for the real concept of fairness in the Code--like (i) getting rid of the preference for capital over labor, (ii) getting rid of tax favorable treatment for any deferred payment or pension plans that are available only to the top managers of firms, (iii) instituting a decent estate tax that begins to eat into the oligarchic dynasties that we've allowed to be created by such limp excuses for estate taxation (including not only much higher rates with more rate brackets, but also elimination of most of the gimmicks using trusts and partnerships and purported discounts; or (iv) creating a much more discriminating rate structure for the income tax that recognizes differences of income in magnitudes as they exist today , with rates for brackets that include half a mil to a mil, a mil to several mil, several mil to 20 mil, 20 mil to 80 mil, 80 mil to 150 mil....and on to the two billion mark? And who is going to make the pitch that we have to raise more revenues in order to meet the needs of the aging baby boomer population as they retire with savings decimated by the Great Recession, homes lost to the lack of banking oversight, and facing significant increases in medical care costs?
It's pretty clear that neither Baucus nor Hatch has any desire to deal with real fairness issues, since that would require INCREASING THE PROGRESSIVITY OF THE CODE. Note what they say to their fellow senators about the task ahead.
The blank slate approach would allow significant deficit reduction or rate reduction, while maintaining the current level of progressivity. The amount of rate reduction would of course depend on how much revenue was reserved for deficit reduction, if any, and from which income groups.
This phraseology reveals perhaps more than they wanted to reveal--first, that they are not even contemplating increasing progressivity, in spite of the past 40 years of reductions in progressive features. And second, they really aren't planning to use elimination of tax expenditures to raise more revenues to make up for the absurd Bush tax cuts that they both helped put into place--note that they say the rate reduction will depend on whether any money is reserved for deficit reduction, providing a pretty strong indicator that there will be no revenues used for government and all the "reforms" would go to another foolish round of tax cuts.
Kitty Richards at ThinkProgress has some similar concerns about this "blank slate" announcement. See Richard, Why we should be wary of 'blank slate' tax reform, ThinkProgress (June 27, 2013). First, using the analysis done for the Simpson-Bowles "zero" plan (which was actually more protective of the lowest income than Baucus-Hatch have declared themselves to be), it would be very difficult to maintain progressivity (much less increase it as I have suggested is required) if base reduction is used to lower rates, since those who benefit most from lowering rates are the taxpayers with the most income.
The Tax Policy Center estimated the effects of the plan and found that it would have disproportionately increased taxes paid by low-income and middle-class families, not even taking into account the expiration of the Bush tax cuts for taxpayers making more than $400,000 per year legislated in last year’s “fiscal cliff” deal. If you compare average federal tax rates under the zero plan and under current law, the zero plan looks even worse – it would actually cut taxes for the top one percent by 10 percent, while more than doubling tax rates for the poor and increasing taxes on the middle class substantially.
Second, she adds, the Baucus-Hatch letter "treats decisions about revenue as an afterthought." Yet revenue-raising is THE PRIMARY REASON WE HAVE TAXES.
Congress should not be engaging in protracted tax reform negotiations that ignore the fundamental problem with our tax code: It does not raise sufficient revenue to fund the operations of government at appropriate levels in a sustainable way.
If Baucus and Hatch are interested in reforming tax expenditures, they should start by scaling back the biggest giveaways to corporations and the rich and devoting that revenue to repealing the sequester, not reducing tax rates for these same corporations and wealthy individuals.
Richards is right on in her critique. We need to recognize the commitments we have to institutions and people, from infrastructure needs like roads and airports to wildfire prevention to climate change action to NIH and other support for basic scientific research on which rests most of the "entrepreneurial" innovations that the self-appointed meritocracy credits itself with. That requires money, and money requires either printing more of it or more taxes. More taxes from the wealthiest corporations and individuals also serves a secondary objective of increasing expanding opportunity and countering, to some small degree, the tendency for most government programs to function as upwards-redistribution paradigms that shift more and more resources to an oligarchic upper crust.
So I cannot think this Baucus-Hatch initiative augers well for the country. I wish Baucus had used his imminent retirement to step back and consider what his legacy could be for a better world, rather than continuing to lie in bed with the lobbyists of the corporate elite. What we need to do first is very simple--get rid of the multiple giveaways to big corporations, revamp the estate tax to make it heftier, and eliminate the many tax expenditures that are mainly for the wealthy (deductions of mortgage interest on second homes, deferred compensation schemes, etc.
Nina Olson has served as the National Taxpayer Advocate for some time, and you can tell she is passionate about her work. She contributes a different perspective to the interaction between the IRS and taxpayers--an interaction that generally goes pretty well but that can from time to time become frustrating to taxpayers and Service alike.
As we all know, there has been much ado lately about the difficulty that Tea Party and other conservative (and progressive) groups have had getting recognized as 501(c)(4) "social welfare" organizations.
The threshold question at stake here is the IRS's early interpretation of the statute, which says social welfare groups must be operated "exclusively" for social welfare, to mean they just can't have politicking as their primary purpose. Back in the days when the IRS arrived at that facially silly interpretation, there was probably minimal risk of having political groups use C4 status to be able to hide their donors from the public. Of course, we live in a highly politicized world now, and there is no longer any question about this issue. Political groups have shown themselves willing to spend huge sums of money as secretly as possible to influence elections, and if they can use C4 status to do it, they will.
The IRS response to the brouhaha raised by the House Republicans has been something those GOPers will find to their liking but that we all should instead find appalling. Any group that will substantiate that it will spend less than 40% of its resources on campaigning can now be a C4 and keep its donors secret. That's wacky--but that's what happens when Congress browbeats federal employees and tries to manage a complex agency from the political "smoke-filled" room.
What should happen is that Congress legislates in this area to make clear that any group that spends any more than an inadvertent/accidental/de minimis amount of time engaging in politicking cannot be a C4 organization and must be a 527 that is required to disclose all donors other than those that give less than $200. This is in fact one of the alternatives supported by Olson, who says that Congress should legislate to create clarity about the rules governing politically oriented nonprofit groups. She says another option would be to make unlimited political activity fine. That's not a good idea--it would give the shady corporate donors attempting to 'own' elections the very control and secrecy they want.
The next question is--assuming there were some groups whose applications took too long to process and who were, in the typical clumsiness of large bureaucracies, required to engage in a lengthy process of questions and responses that some think went beyond what would have been appropriate, what, if any, redress would be appropriate?
The most appropriate response, it seems to me, is to process those applications expeditiously and make a decision one way or another.
Nina Olson wants a million a year to pay to taxpayers as "apology payments". She thinks that would help identify problems and make IRS employees more sensitive, while providing a "symbolic gesture" that the government recognizes its mistake.
This seems to me to be a very very bad idea. Creating payments for jobs not perfectly done implies a perfection that simply isn't achievable in large institutions with multi-faceted functions. Payments like this could even serve as an incentive for taxpayers to cause (as discreetly as possible) IRS employees to trip up . This is a slippery slope that slides all the way to the bottom. Every year there will be demand for more "apology payments" and cries for truly compensatory damages, and then for truly punitive damages. IRS employees will be evaluated on whether their actions led to an apology payment--and even the best employees will make mistakes sometimes, leading to an even higher level of reluctance to take on even the most egregious problems from taxpayers--especially those who are likely to be aggressive in seeking apology payments (ie, the deep-pocketed ones). It just doesn't do for the nation's tax collection agency to be in a position of cowardice vis-a-vis taxpayers. Sophisticated taxpayers already engage in sham transactions and fraudulently overstate their basis. They will be encouraged to redouble those efforts, because the message of the "symbolic" apology payments will be that the IRS is fair game for tomfoolery.
In 5-4 decisions in which Justice Kennedy, as considered likely, joined the Court's liberal wing to form a majority as against the Scalia-Thomas-Roberts-Alito rightwingers, the Supreme Court delivered its opinions in the two gay marriage cases before it this term. They are-Hollingsworth v Perry (rejecting an appeal of the lower court decision overturning California's Proposition 8, on technical jurisdictional grounds), and US v. Windsor (affirming the unconstitutionality of Section 3 of DOMA (the federal "defense of marriage act" ) that forbids the federal government from treating as married spouses for any federal law purposes those gay couples that are legally wed in their state jurisdictions).
The Windsor case was on appeal from the Second Circuit, which applied heightened scrutiny to find unconstitutional DOMA's denial of the marital exemption to a same-sex surviving spouse of a marriage that took place in Canada and was recognized in New York where the couple lived at the time of the spouse's death.
The limitation of lawful marriage to heterosexual couples, which for centuries had been deemed both necessary and fundamental, came to be seen in New York and certain other States as an unjust exclusion. Slip op. at 14.
The jurisdictional issue in Windsor was not a hangup for the Court. As I had indicated in the BNA Webinar on the two cases prior to the decision, the US retained a sufficient stake in the matter--relying on INS v. Chadha, the Court found that the government's refusal to pay the tax refund, even after the Justice Department's decision not to defend such cases, provide an existing Article III "case or controversy" before the Second Circuit and before the Supreme Court.
The judgment orders the United States to pay money that it would not disburse but for the court’s order. The Government of the United States has a valid legal argument that it is injured even if the Executive disagrees with §3 of DOMA, which results in Windsor’s liability for the tax. Slip op. at 8.
There was merely a prudential hurdle to overcome, and here prudence argued for a decision, given the extensive amici briefings on both sides, including the House-leadership organization's briefing adverse to the Executive.
BLAG’s sharp adversarial presentation of the issues satisfies the prudential concerns that otherwise might counsel against hearing an appeal from a decisionwith which the principal parties agree. Were this Court to hold that prudential rules require it to dismiss the case, and, in consequence, that the Court of Appeals erred infailing to dismiss it as well, extensive litigation would ensue. The district courts in 94 districts throughout the Nation would be without precedential guidance not only in tax refund suits but also in cases involving the whole of DOMA’s sweep involving over 1,000 federal statutes and amyriad of federal regulations.
The constitutional holding in Windsor is a narrow reading of the equal protection afforded by the Fifth Amendment's extension to the states. Writing for the Court and joined by Justices Kagan, Sotomayor, Breyer, and Ginsburg, Justice Kennedy recognized that states have historically been allowed to define marriage--subject to Congressional restraints as in Loving v. Virginia's rejection of miscegenation laws--and noted that DOMA intervened to take away a protected status provided by those states that had recognized gay marriage--this was both the Congressional purpose and the effect of the law. Because it creates two-classes of marriages within a state that recognizes one class of marriage, and forces couples to treat their relationship one way for state purposes and another for federal purposes, it violates the most basic principles of equal protection.
Today twelve states and the District of Columbia recognize same-sex marriage. This decision gives same-sex married couples in those states equal treatment under federal law with married couples.
Here the State’s decision to give this class of persons the right to marry conferred upon them a dignityand status of immense import. When the State used its historic and essential authority to define the maritalrelation in this way, its role and its power in making the decision enhanced the recognition, dignity, and protectionof the class in their own community . ... What the State of New York treats as alike the federal law deems unlike by a law designed to injurethe same class the State seeks to protect.
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This status is a far-reaching legal acknowledgment of the intimate relationship between two people, arelationship deemed by the State worthy of dignity in the community equal with all other marriages. It reflects both the community’s considered perspective on the historicalroots of the institution of marriage and its evolving understanding of the meaning of equality.
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DOMA seeks to injure the very class New York seeks to protect. By doing so it violates basic due process and equal protection principles applicable to the Federal Government. See U. S. Const., Amdt. 5; Bolling v. Sharpe, 347 U. S. 497 (1954). The Constitution’s guarantee of equality "must at the very least mean that a bare congressional desire to harm a politically unpopular group cannot" justify disparate treatment of that group.
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The Act’s demonstrated purpose is to ensure that if any State decides to recognize same-sex marriages, those unions will be treated as second-class marriages for purposes of federal law.This raises a most serious question under the Constitution’s Fifth Amendment.
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Under DOMA, same-sex married couples have their lives burdened, by reason of government decree, in visible and public ways. By its great reach, DOMA touches many aspects of married and family life, from the mundane to the profound.
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Though Congress has great authority to design laws to fit its own conception of sound national policy, it cannot deny the liberty protected by the Due Process Clause ofthe Fifth Amendment.
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This requiresthe Court to hold, as it now does, that DOMA is unconstitutional as a deprivation of the liberty of the person protected by the Fifth Amendment of the Constitution. The liberty protected by the Fifth Amendment’s DueProcess Clause contains within it the prohibition against denying to any person the equal protection of the laws
But there is a huge problem looming because of the failure of many states to recognize same-sex marriages performed in other states even though they recognize all other marriages performed in those other states. Section 2 of DOMA--which allows states to refuse to recognize sister-state marriages--in flagrant violation of the normal rules of comity between states--was not at stake here and thus its repeal remains for future cases. This means that there will be considerable uncertainty --and much bigotry and discrimination against gay couples for some time as those states that have enacted discriminatory constitutional or statutory provisions against gays continue to deny marriage rights to gay married couples when they move into them, and perhaps prevent them from retaining custody of their children or being able to legally divorce their spouses or will estates to their spouses. These problems will be resolved, at least for now, under each states "conflict of laws" provisions, with the overlay of the state's constitutional prohibitions, where existing, on recognition of same-sex marriages. This will cause harmful suffering to gay couples, so one would expect that there will be litigation on this issue soon. The Court's opinion regarding the many problems that would be created by extended litigation over the legality of DOMA section 3, across 1000 federal laws, shows that factor weighed heavily in its prudential decision to consider the constitutionality of Section 3. Perhaps it failed to adequately consider what it would mean to fail to carry the point further to a repudiation of same-sex marriage bans under a full Equal Protection holding. After all, the Court, citing Loving v. Virginia, acknowledged that
State laws defining and regulating marriage, of course, must respect the constitutional rights of persons.
The result is that gay marriage is recognized in the 12 states and the District of Columbia that have official recognized gay marriage either through legislation or court action (and, under Hollingsworth v Perry, now also in California), and that couples married in those states can now file joint returns, inherit an estate from a spouse without paying any estate tax and otherwise enjoy the special privileges (or, in some cases, burdens) provided to married couples under federal tax law and all other federal laws.
Regretably, but as expected, the Court did not reach the question of whether state-law prohibitions of gay marriage violate the Equal Protection Clause. This will await another day with a proper case challenging a state ban on same-sex marriage, perhaps after a number of states reverse their current constitutional amendments discriminating against gays by treating the privileges of marriage under state law as available only to a man-woman couple. Perhaps the varied views of the right-wing--a dissent by Chief Justice Roberts, a dissent by Justice Scalia in which Justice Thomas joined (and Roberts in Part I), and a dissent by Alito in which Justice Thomas joined in Parts II and III--augers well for a gradual withering away of the "traditionalist" (and religious fundamentalist) views supporting a same-sex marriage ban.
Some celebration is in order, as indeed took place across the country today, regarding this additional step toward erasing the kinds of bigotry that have been a stain on the country's belief in liberty for all since its inception. See Joy, and Dismay, as the Supreme Court rules, New York Times (June 26, 2013) (slides).
But the country's religious right will undoubtedly try to minimize the freedoms for gay and lesbian citizens as much as possible in the course of the state-by-state battles to come over recognition of gay marriage. The right claims that this is a matter of religious freedom, but it is in actuality a matter of religious imperialism--an attempt by conservative Christians to hoist their church's definition of marriage onto the laws of the land for everyone in the country, no matter their own religious persuasion or lack thereof. The fundamentalist view that only men and women can marry should have no legal status. Let those churches whose hierarchies accept that ideological position adopt that position as their church policy, but let them not succeed in forcing others to accept their views about gay and lesbian citizens and what constitutes a family.
Ross Douthat's commentary in the Times discusses this religious issue. See Religious Liberty and the Gay Marriage Endgame, New York Times blogs (June 26, 2013). Douthat supports the idea that these kinds of rights should be developed on a state-by-state basis, as a social experiment. I must admit I find that approach disgusting. If we were to say today that segregation or slavery or anti-semitism could be incorporated in state laws on a state-by-state basis to allow the dissenting minority who wanted (and still want, in a dismaying number of cases) to treat African Americans or Jews as inferior citizens without too much community disruption, no one would accept it. Why is it that people who claim to be thinkers--like Ross Douthat and the four right-wing Justices of the Supreme Court--continue to act like treating gays and lesbians as inferior citizens with second-class privileges is okay?
Note that the idea, discussed by Douthat, that there is a "religious issue" and that churches will have to incorporate their schools differently to "protect" them is a result of the growing false understanding of the Constitution's guarantee of religious freedom, fostered by politicians too willing to kow-tow to religious hierarchies and a Supreme Court overladen with a strongly religious majority who have long failed to understand the Constitutional framework for what it is--a protection for individual practitioners, not for religious institutions. Neither churches nor their businesses nor their organizational charities (i.e., church-run schools, hospitals and similar subsidiary institutions) merit religious protection from anti-discrimination laws intended to protect individual rights to religious freedom: by definition, if the institution is given "freedom" to impose its ideologies on individuals, the individuals themselves have lost those freedoms. These are individual rights, not institutional or corporate rights. Thus, to protect the individual's right to freedom of religion, a religious institution should not be permitted to force an institutional employee--other than perhaps its management personnel who have supervisory rights to hire and fire and penalize employees and are the carriers of the religious dogma "torch"-- to practice the dogma of the institution on birth control, gay marriage, divorce, or any other aspect of the religious dogma.
I thus find the statement of Ben Domenech, editor of The Transom, who is quoted in Douthat's commentary, quite offensive--he says that states will need to "alter their laws accordingly to protect religious organizations, businesses, mosques and churches, and prevent community clashes as best possible." The Constitution doesn't protect "religious businesses" and cannot put avoiding community clashes above protecting the religious liberties (or nonreligious views) of all Americans.
Someday the Court will correct its error on this point, but one suspects that will be far in the future.
Too bad that the Supreme Court voted the other way on the Voting Rights Act--a decision that essentially disregarded both Congress's role under the Civil War amendments and Congress's 2006 analysis of the need for continued oversight, especially in the states currently within the coverage. Note that the law provided for states to be brought within the coverage or exempted from the coverage, so the Roberts Court's right-wing activist decision was an unjustified effort to find a way to favor Southern (and Republican) states. Scalia's dissent in the Windsor case--in which he argues that the Court owed respect to the legislative branch (see exceprt, below) stands in sharp contrast to the willingness of the Court to override Congress's renewal of the Voting Rights Act upon the basis of an extensive record of hearings and evidence as to continuing discrimination against minority voters in those Southern states, where poll places are moved to inconvenient locales and ID forms are required that may be difficult for minorities to obtain. In Windsor, Scalia claims that "democratically adopted legislation" like DOMA should be upheld by the Court, but in the Voting Rights Act case the majority ran roughshod over such legislation in a situation where Congress's role is mandated by the amendment itself.
We have no power to decide this case. And even if we did, we have no power under theConstitution to invalidate this democratically adopted legislation. The Court’s errors on both points spring forth from the same diseased root: an exalted conception of the role of this institution in America. J. Scalia dissent in Windsor, Slip Op. at 1.
While I disagree with Scalia's view expressed in his dissent that there was no standing in Windsor, I do think he makes some very good counterarguments to the arguments in Alito's dissenting opinion about jurisdiction, which would recognize the BLAG (purportedly a bipartisan house legislative group, but in the Windsor case, only 3 Republican leaders of the House authorizing a "defense" of Congress's actions in enacting DOMA) as a rightful adversary at the Court in a case such as Windsor. Scalia accurately sinks daggers into Alito's trumped up theories of Congressional prerogative to litigate against the Executive whenever it doesn't like the way the Executive carries out Congressional duties.
I had more or less concluded that I was done with writing about the IRS screening of applicants for tax exempt 501(c)(4) status--mainly because it was so obvious that the right-wingers inside and outside Congress were using this fake scandal to try to stir up even more "government is the problem" and "taxes are bad" angst amongst ordinary folks who mostly don't have a clue how tax-exempt status works, why the IRS has to screen C4 applicants, or what would or would not constitute inappropriate targeting.
I've said all along that selecting terms like "patriot" or "tea party" or "progressive" would be reasonably linked to an expectation that a great deal of the group's activity would be political and not "social welfare." And in a regime where the IRS decades ago foolishly interpreted "exclusive" to mean "not primarily", there needed to be some kind of reasonably accurate mechanism for picking out the groups most likely to be engaged in lots of political activity and maybe not so much social welfare activity.
There are always a few right-wingers who comment on the posts (and/or to me privately) to say that they are sure I wouldn't be so supportive of the IRS If the IRS had used a word like "progressive" to screen applicants. I've responded that I think it would be entirely appropriate, and that I would guess that they did in fact use terms for liberal groups, since more of the groups selected for stricter scrutiny appeared to be on the left end of the spectrum rather than the right end. But, nonetheless, the GOPers in Congress and their supporters have continued to repeat the word "scandal" within 2 of "IRS" day after day after day. Paul Caron (not a left-winger) has had a running tabulator for anything about the IRS listing Day XXXX of the IRS Scandal on Tax Prof, even after various profs have said "enough with that."
So perhaps it is fitting that the IRS has disclosed that it used several progressive terms to help screen applications: progressive, Israel, and occupy were used. Those are as clearly identified with the left as "tea party" and "patriot" are with the right. That means--as I've insisted all along--that the IRS wasn't really using inappropriate criteria that one-sidedly targeted conservative groups. Instead, it was using terms that it thought likely to screen out those groups more likely to be involved in political activity. Tea Party groups have been quite visibly highly political and involved in campaigning. Progressive groups also. Both of those screening terms seem appropriate to me.
Now, the new leader of the IRS (not yet the commissioner) has said the IRS will also fast-track any groups that have suffered delays so long as they vouch that they will not spend more than 40% of their resources/volunteer efforts on politicking. So we see that the right has gained one of the things it wanted--a clear cut safe harbor for a considerable amount of politicking under a "social welfare" rubrick that lets it keep its political campaign donations a secret.
Is this a good thing? I don't think so. What should happen is that Congress should legislate in this area. Social Welfare should mean no more than a de minimis (which I'd define at less than 10% of resources/ volunteer time) resources spent on politicking of any kind. Any group that spends more than a de minimis amount of its resources (cash, in-kind, volunteer or official services) for politicking should be required to apply for 527 status and disclose all donors. Alternatively any group that does any politicking whatsoever should have to reveal all donors and amounts donated.
In recent posts, the Importance of Distribution and Markets, Minimum Wages, and the Sins of Friedmania, I have noted the centrality to sustainable democratic institutions of corraling the market so that the power and wealth of the elite few does not work to impoverish the many. That means that government either rungs many programs for the benefit of the many itself--such as Medicare, Veterans' Care, public education, public utilities--or government ensures that it has systems in place to counter the power of the elite--such as redistributionist tax policies, social welfare policies that satisfy important needs such as health care and retirement security, with a good measure of "required self-help" through mandatory savings mechanisms.
Mark Thoma has a recent piece in the Fiscal Times that reflects the same ideas, from a slightly different perspective. He enumerates 7 ways that markets don't work and require government intervention: retirement savings, health care, carbon emissions, labor support, financial sector, government contracting, and economic and political power. See Mark Thomas, 7 Important Examples of How Markets Can Fail, http://www.thefiscaltimes.com/Columns/2013/06/18/7-Important-Examples-of-How-Markets-Can-Fail.aspx#page1, Fiscal Times ( 2013).
"When there are substantial departures from the conditions needed to approximate pure competition, markets usually perform poorly and government intervention can often help. In some cases, e.g. with a carbon tax or cap-and-trade, government intervention will reduce output and employment growth in the industry and many misguided market fundamentalists, or those with other agendas, will object to these “growth killing” policies. In other cases, e.g. in health insurance markets, government intervention will cause the industry to expand rather than contract. Here, the objection is generally about the growing size and power of government. "
" But in both cases what’s important is that government intervention is moving us closer to the competitive ideal, and true believers in the power of markets would endorse rather than object to these policies. " Id.
Two items caught my attention in today's newspapers and they represent diametrically opposed positions on what matters in society. One, by Paul Krugman, deals with the problems of monopoly rents--especially in industries in which there is very little production in this country combined with mostly profit-taking from some kind of intellectual property--think Apple and the financial industry. The other, by Richard Posner, talks about the importance of national security and minimizes the need for a minimum wage.
Krugman notes the "growing importance of monopoly rents," which are "profits that do not represent returns on investment but instead reflect the value of market dominance." Krugman, Profits without Production, New York Times (June 21, 2013), at A19. He suggests that the growing importance of these rents from markiet dominance represent a "disconnect between profitsd and production" that may factor into our continued lack of robust economic growth. He contrasts GM in its heyday, when it owned hundreds of factories and employed about 1% of the total nonfarm workforce in this country, with Apple today, when it "seems barely tethered to the material world, employing fewer than 0.05% of US workers, with most work outsourced to China and "charg[ing] what the traffic will bear" for its i-products. And this story is part of a bigger story--the impact of rent-seeking corporate profits on the overall economy. It is driving rising inequality, as there is a "sharp shift in the distribution of income away from wages in general and toward profits." Id. Since the profits reflect market dominance rents, not returns on investment, a monopolist can be profitable without expanding its production capacity--as Apple is, sitting on "a giant pile of cash, which it evidently sees no need to reinvest in its business." Id. The effect of monopoly profit-taking is that wages are depressed. With household spending down as "labor gets an ever-smaller share of national income while corporations, despite soaring profits, have little incentive to invest, you have a recipe for persistently depressed demand."
The second item was a small blurb on the editorial page inthe Wall Street Journal, in which they pick out quotes from famous people worth noting. This time it's Richard Epstein writing for the Hoover Institution. See Notable & Quotable, Wall Street Journal (June 21, 2013), at A13. Epstein suggests that "[a]ll government actions should be examined under a presumption of distrust" which is why, he says, he has supported "constitutional regimes that afford strong protections to economic liberties and private properties." Now, folks, you have to ask, what does "economic liberty" --or even "private property" mean. For Epstein, it is a "natural right" kind of idea--the misguided, Friedman-derived notion that markets can run themselves, letting the powerful who own considerable private property succeed and the weak who don't fail. That kind of brute force capitalism encourages corruption, rentier profits (see Krugman, above), and a depressed, highly unequal society in which them that have gets and everybody else is either a peon or some kind of low wage earner in thrall to the titans of Big Business. Epstein goes on to give an example of his belief in "economic liberty"--the veiw that "there is no coherent case for state intervention" to maintain a minimum wage. This is the view of someone who might say "let them die" of a poor person unable to afford health care, or "let them eat cake" of a poor person unable to afford bread. This is not "compassionate conservatism" but brute force capitalism. It is the view that the wage will find its bottom based on the "neutral" market forces. But neutral market forces don't exist. They are shaped by the powerful and if you let the powerful take wages from ordinary workers to puff up their own profits, they will do so to the full extent of their market power.
Epstein then contrasts the lack of a need for the state to ensure a minimum wage, which would "degrade the efficiency of private markets" with the need for the state to "put in place institutions that limit aggression in both domestic and foreign affairs. Unlike protecting the livelihood of ordinary Americans, "national security is an area where government may be appropriately feared, but is still desperately needed." We shouldn't be so uptight about the FISA court's allowing the government to grab all kinds of privacy data, because Epstein is confident that the NSA data grab is not "an intolerable invasion of privacy."
I for one remain unconvinced that the incredible data-grab by all the federal spy agencies is an acceptable intrusion on individual liberties in the name of "national security." And I am quite sure that the establishment of a minimum wage to prevent the huge imbalance of power in the work place from allowing owners to grab all the gains from production at the cost of workers is a very good kind of state intervention on behalf of ordinary folk. Epstein has it backwards--his ideological blinders from Chicago School economic "theory" are showing and his "economic liberty" arguments translate into the same old class warfare approach of protecting the profits of the elite at whatever cost they may bring to the rest.
If an increasing share of the economy driven by monopoly profits and increasing inequality from depressed wages and the impact of rent-seeking profits on business expansion are bad things, what might be considered reasonable policy steps to take to deal with this problem Krugman has pointed out and Posner has disregarded? It seems to me there are several policy positions that noticing the damaging effect of rent profits should push for: 1) increase minimum wages, 2) enact "Medicare for all" so that all those who lose out in a monopoly-driven corporate environment have an opportunity for decent health care (and the monopoly power of insurers is removed), 3) reinvigorate anti-trust legal actions to break up huge corporate empires like Big Oil, Big Banks, Big Pharma, etc., and 4) reinvigorate labor law to protect workers and ensure that those who want to organize can do so easily (with card-check and similar provisions, similar to motor vehicle registration of voters.
The UK's David Cameron announced that Britain's 10 crown dependencies and overseas territories--Cayman Islands, Bermuda, Jersey, Gilbraltar, Anguilla, Turks and Caicos Islands, Guernsey, Isle of Man, and the British Virgin Islands--would sign on to the OECD's multilateral convention on Mutual Administrative Assistance in Tax Matters. They also agreed to "produce action plans about providing information on who owns which companies and who benefits, the so-called beneficial ownership." Wall St.J., June 17, 2013, at C3.
While many vacationers may know most of these spots because of their location in tropical paradises, most tax practitioners recognize them as key linchpins in tax avoidance plans of many wealthy individuals, banks and corporations. As many as 18,000 corporate offices are located in mailboxes in a three-story building in the Caymans, all with a few Cayman laywers as their principal directors. And of course one of the reasons these tax-haven countries are in demand is that they have both very low taxes and a good deal of secrecy about just who owns what.
Signing the OECD tax convention won't solve all the many problems that revolve around tax haven and banking secrecy jurisdictions. The exchange of information provisions, while an advance over no agreement to exchange information, are still far too difficult to bring into play without having some information about owners and account holders.
But getting these tax haven jurisdictions on board the convention is a first step in the right direction, just as the signing of the convention by other tax haven and banking secrecy jurisdictions like Singapore earlier this year was. One can't help hoping that it is a signal that these tax haven countries realize that tax secrecy ultimately will not be a great way to maintain a stable economy and they will eventually need to produce something useful besides tax avoidance regimes.
I have dedicated this blog to a concept I call "democratic egalitarianism"--the idea that individuals flourish best in a free society that allows them to choose democratically the rules that govern their lives, with the understanding that the institutions must be sustainable and must allow all individuals to flourish, not just a select few. It is that latter idea that supports a view of egalitarianism--not that everyone is always "exactly" an equal of others, but that the society's resource allocation provisions have to counter the tendency for resources to concentrate in the hands of a powerful few. Since there can be no absolute equality, society's institutions must counter the tendency for wealth and power to aggregate in the hands of those with more wealth and power by mandating downward redistribution of wealth and power.
The claim is that every decision in society is in some way redistributionist. Most redistribute upwards to those that already have wealth and power and "connections". Society's institutions have to counter that--at least at the margins--with downward redistribution from those with wealth and power to those without wealth and power. Hence, a progressive income tax system that taxes those at the bottom of the income distribution less than those at the top serves this underlying value. A regressive sales tax system that taxes those at the bottom more severely, in relative terms, than those at the top undermines sustainable democracy.
The US is becoming more and more a society of haves and have-nots, a society that could allow a candidate for president to make claims about merit that suggest that anyone who isn't a successful "have more" is just plain irresponsible (Romney's infamous 47% speech to a private group of wealthy and powerful fundraisers). The Great Recession--engendered in large part by the greed of the have-more class, especially bankers and corporate managers and owners who reap disproportionate rewards for their labor or simple ownership of assets compared to the workers who make those rewards possible--has left the US an even more unequal society than it was before, as the wealthy have mostly recovered and moved ahead, while the middle class and poor have mostly suffered, with jobs that have moved from decent to inadequate and pay scales that continue to reflect the upper class's willingness to exploit the rest of society for their own selfish ends. (And this is true even if that upper class gives "generously" to charities that further their own interests and push their own views about education or transportation or religion onto the recipients of that "charity".)
The Times today has a number of excerpts from commencement speeches given by nationally known figures. I found the excerpt from Ben Bernanke's speech at Princeton worth noting. Here's the excerpt the Times printed:
"A meritocracy is a system in which the people who are the oluckiest in their health and genetic endowment; luckiest in terms of famiy support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate--there are the folks who reap the largest rewards.
The only way for even a putative meritocracy to hope to pass ethical muster, to be considered fair, is if those who are the luckiest in all of those respects also have the greatest responsibility to work hard, to contribute to the betterment of the world and to share their luck with others." Ben Bernanke, excerpted in Commencement Speakers: In Looser Tone, A Call to Take Risks and Be Engaged, New York Times (June 16, 2013), at Y20
This sounds well and good as far as it goes. But it suggests that this kind of society (a "meritocracy") where people who are born into the good life are the ones that can succeed, is okay so long as these meritorious people "contribute to the betterment of the world and share their luck with others", a phrase which sounds like a mere tithing-type responsibility to "give back."
Nah, I don't think so. I don't think that goes nearly far enough. This is not a society I want to live in--where the rich get richer and exercise some royal-like "noblesse oblige" interest in the dregs of society that their very success has created.
If we are to have a society that believes in merit, then it needs to be one that recognizes that the luck of birth has nothing to do with merit but with the concentration of wealth and power in the hands of too few people. Merit, in any useful sense, is only okay so long as the ranks of those who merit success can readily expand to include those not so lucky at the outset. Else the upper class will essentially become a superior caste that enjoys all the rewards, except for the crumbs handed out as charity, and the masses will be essentially peons serving the wealthy few.
How does one maintain a notion that merit is good but avoid the problem of the lucky, powerful few ruling over everyone else? It requires a lot of work, work we haven't been doing very well lately. It requires a decent minimum wage sufficient for people to live on. It requires government systems that actively reallocate resources towards those in need and away from those who already have plenty rather than providing millionarie congressmen millions more in agricultural subsidies for their agribusinesses as we currently do. Through a progressive (i.e., redistributive) tax system, a decent anti-trust system that prevents monopolies and even semi-monopolies, a more innovation-supporting copyright and patent system that does not allow a few well-funded groups to control too much of the new knowledge base for too long, a strong labor law system that does not allow employers to ride roughshod over workers, and a very strong sense of the public good and the need to maintain some systems of primary importance to core democratic values as public rather than private ones--like health care, education, and probably energy. We are failing on so many of these points, as anti-trust has withered to a shrunken ghost of its former self, as global MNEs exercise too much power over workers and communities, as companies are allowed to ignore the externalities of their success (government subsidies and government stability) and of their business models (environmental pollution, worker deprivation).
In particular, the tax system is so frequently under attack from the radical right because it offers an important tool for preventing oligarchy--through the estate tax, which should be strengthened rather than weakened, through the income tax, which should be made more progressive by getting rid of preferential rates for capital gains (among many other important progressive reforms), and through the provisions for standard deductions and personal exemptions and refundable credits, which can provide a part of the social safety net that any wealthy, advanced nation should provide.
These things won't happen until people stop allowing corporate greed--and the wealth and power ambitions of the Koch brothers and their ilk--to decide the fate of the nation. We do still have the power of the ballot box. We as individuals have to work to counter the corporatist creedo that is being preached by Koch-funded think tanks and "social welfare" (really political party) groups. We have to elect people willing to fight for a sustainable democracy and to legislate against the interests of the biggest and most powerful businesses and their owners/managers. The corporatist lobby that commodifies everything is extraordinarily powerful. Fighting it isn't easy. But it must be done.
See the Motherboard article, below, for another analysis of the "meritocracy" idea, and some insight into what the inventor of the term, Michael Young, meant to be doing in his seminal work a half century ago.
I suppose it shouldn't be surprising that the mostly-to-the-right Detroit newspapers would have a center-page opinion piece calling for the elimination of the IRS, that ages-old mantra of the radical right and of those corporate-backed propaganda tanks and radical-liberatarian idea pushers like Cato and Heritage Foundation and Claremont and many of the Tax Party groups, etc. But this one is so bad that it is necessary to call it out for what it is--a bunch of hog-wash. See Nolan FinLey, Let's Get Rid of the IRS, Detroit News (June 10, 2013).
Finley starts out with a presupposition that the scandal-mongering about the IRS is not only completely accurate (which it isn't--liberal and conservative groups were selected for scrutiny, and scrutiny was called for in respect of groups that had "tea party" in their names, since most of them were in fact mainly doing politicking) but that it was also "obvious[ly]" done from at the orders of Obama operatives to aid the President's election chances (which is completely unfounded conspiracy-mongering speculation). He states that "the IRS has been caught red-handed targeting conservative political groups for special scrutiny in what seems obvious was an attempt to aid the reelection bid of President Obama."
An initial scaffolding of distortions and malicious speculation cannot bode well for any opinion piece. So it isn't a surprise that the rest of the piece doesn't hold water, either. He calls the required statutory scrutiny of applicants for 501(c)(4) status a "dragnet"--failing to even acknowledge that the statutory requirement states that such groups must be "exclusively" operated for social welfare purposes and that it is in fact through administrative dispensation via interpretative regulations that the IRS applies instead a "primarily" for social welfare purposes test, thus permitting (too much) politicking as long as it isn't the primary activity.
He goes on to claim that use of the term "patriot" as a screening filter for politicking groups implies that "the United States government finds something sinister in patriotism". Again, that's a ridiculous association of what may possibily have been a perfectly reasonable though politically unwise filter term--i.e., if there are lots of groups with "patriot" in their names that do a lot of politicking, then it is a reasonable term to pick for giving those groups extra scrutiny to see if they do too much politicking, though the expectation that conservatives would rise up in arms if those types of groups receive extra scrutiny should have been a red flag cautioning against use of that term in spite of its usefulness.
Then Finley asserts that this conspiracy-theory thinking provides "more than enough reason to jettison plans to make it [the IRS] the enforcement arm of Obamacare." Now, it is true that the IRS has so many different federal programs that it has to oversee that it is almost impossible for it to do an appropriate task of doing so. Congress has loaded it with tasks (including all the tax expenditure programs embedded in the federal income tax code) and consistently underfunded it so that it is usually understaffed and overstretched. But the answer to that is not to take away a task that it is perhaps best suited for out of all the agencies, but rather to fund the IRS appropriately so that it can do the tasks assigned to it by Congress. Finley completely ignores the underfunding problem, since--as revealed later on--he really wants to decimate or eliminate the IRS entirely.
Finley talks about the IRS as "an institution America no longer trusts" because it is "the most feared agent" and on "that has proven itself willing to manipulate the levers of government to achieve a political end." Again, many problems in this rhetoric.
If the IRS is actually the "most feared" (I personally suspect the CIA and FBI and NSA would come in ahead in that race, but haven't seen any actual empirical study on this issue)--even after the enactment of three laws pulling back on its power to enforce and essentially hamstringing its employees with the "ten sins" provisions included in the 1998 act (see earlier post)-- it is because for decades the right-wing propaganda tanks and media have been pushing distrust of the IRS and of taxes and of government generally. People are influenced by that constant cry of "bad guy" based on blowing up of individual anecdotes into massive (presumed) patterns.
And the claim that the IRS "has proven itself" using its power for political purposes is simply unfounded. There is no "proof" of the assertion made by Finley. He is merely playing the Bill O'Reilly game of asserting speculation--or even worse, falsehoods,-- as fact in order to buttress his own personal vendetta against the IRS and its employees. Most IRS employees are civil servants, not political appointees. I've known quite a few Republican IRS employees in my years as a tax practitioner, and have considered writing about what I consider a related problem -- that too many IRS employees are too willing to court the pleasure of taxpayers such as big multinationals or large law firms or accounting firms that may well become their future employers or clients when they leave the Service.
Now Finley hits his stride with his real objective--arguments for disbanding the IRS, eliminating the income tax, and replacing it with a (regressive and hard to enforce) national sales tax.
The most fitting punishment would be to disband the IRS. And junk the income tax, too. Mike Huckabee, former governor of Arkansas and now a TV talk show host, is urging Congress to replace the income tax with a national sales tax. You’d pay tax on the money you spend instead of the money you earn.That would eliminate the need for an IRS that audits tax returns, hands out non-profit status and enforces a tax code that is egregiously complex and unfair. Id. (paragraphing removed).
Finley reveals his true ignorance here (if he hasn't done for most readers already). Let's just consider first some of the ancillary issues around "disbanding the IRS".
Because the IRS does function as the major enforcement agency for many things besides the income tax, Congress would have to undertake a comprehensive analysis of all of those activities and assign them to some other agency. In all likelihood, that other agency would lack agents with expertise to handle the assigned task, and the result would be essentially a transfer of those currently staffed with the activity to the other agency, requiring considerable time to merge functions and perhaps failing to do it well enough to maintain current operating efficiency, much less improve it (just as huge mergers or consolidations of businesses often go awry).
Further, the time to do the study, legislate the transition, and implement the transition would require continued operation of the current agency and the replacement agency, duplicating costs at a time when conservatives like Finley claim they want to cut wasteful government spending.
The Internal Revenue Code is not really "egregiously complex."
Read earlier posts on the right's tendency to overstate (by tens of thousands of pages) the "size" of the Code and to treat "size" as an appropriate substitution for any analysis of complexity.
Only 30% or so of individual taxpayers itemize, and itemization is the primary complexity faced by individual taxpayers. Most of those who do itemize are in the relatively wealthy part (upper 30% )of the income distribution, and most of those who have difficult and complex decisions to make are the very wealthy who have expensive tax experts to do their work for them.
Most of the complexity in the Code stems from two factors--(a) tax expenditures (subsidies) that benefit (substantially, in most cases) particular types of wealthy and business taxpayers lobbied for by those taxpayers and (b) anti-abuse rules necessitated by the clever tax strategies invented by the wealthy taxpayers' (especially corporate and business taxpayers') expensive tax experts.
It is naive to think that any tax system--whether income or excise or transfer or territorial or worldwide or sales or VAT-- could be "simple" for wealthy individual and corporate taxpayers with a global playing field and incredible sums able to be spent on avoidance and at the same time generate sufficient revenues to provide for the most basic of public goods and services, including a decent safety net for those caught in vulnerable positions by age, illness, or other lack of privilege.
5. Most sales tax systems include incredible arrays of exemptions (for example, for non-profit groups and charities) and exclusions (for "necessities" where the sales tax could make a difference between life and death for those living in poverty) and special provisions (lobbied for by particular industries). A VAT (if that were the form required) would in all likelihood require the same complexities about what is income or not that an income tax requires. A VAT or a national sales tax would require a mechanism for enforcement of collection not unlike the IRS's function and a mechanism for tracking individual's payments not unlike the IRS's current function. It would not permit the elimination of audits of tax returns (just different kinds of returns), handing out nonprofit status (just a different rationale and basis) or enforcing a complex tax code (just a different one).
Finley's ignorance is further revealed by his claim that a "similar outcome" (disbanding or making the IRS much smaller) could be achieved by "vastly lowering current income tax rates in exchange for eliminating all deductions and credits" because there would be "no reason to examine returns."
lowering rates doesn't achieve anything but less revenue--which will have to be made up for in other ways (adding complexity) or by further hardship on the already suffering ordinary people of this country who bore the brunt of the Great Recession, the foreclosure crisis, the unemployment crisis, and the corporatisation of education that has paid administrators twice or more what they are worth while cheating professors, teachers and students;
eliminating all deductions and credits might simplify somewhat the income tax, but at the cost of considerable unfairness in many cases--for just a few obvious examples, removing the foreign tax credit for taxes paid to other countries would result in some instances in "double taxation" of the same revenue by the US and the other country; removing the "standard deduction" and "personal exemption" would undermine a universal view that the income tax shouldn't reach the amount necessary to maintain a barely sustaining level of income for food, shelter and clothing;
even if it were possible to "lower rates and eliminate all deductions and credits", it wouldn't be possible to get rid of the IRS or eliminate audits or curtail enforcement or reduce the tax code to something a kindergartner could understand--a critical question for the Code is "what is income"--and therein lies a huge portion of the complexity and most of the ways that taxpayers have found to abuse the rules by claiming "phantom" losses. (Note that Finley doesn't talk about removing elections, exemptions, and exclusions--was that intentional?) There would still be the same need for returns, audits, and enforcement, and there would still need to be all the procedural provisions for litigation and regulations and penalties and interest on overdue taxes. There would be rules still for all the different types of entities (much of the complexity of the Code lies in the rules for permitting partnerships to have considerable flexibility in their allocation of income and losses among the partners). Certainly Finley wouldn't suggest that the tax code should get to tax gross income and taxpayers be required to forego claiming any losses!
Finley ends with what he thought was a question requiring an obvious answer of "none"--essentially asking that if we can eliminate the IRS and get rid of the health care "entitlement", "what's the downside?"
The answer is not the one he so ignorantly professed to believe. The downside is huge, and there is little upside. Finley disregards the growing inequality in this country and the continuing poverty in what is still the richest country in the world. He doesn't care, apparently, that his "solution" would create even more problems for the poor, as programs that they depend on administered through the IRS-such as the Earned Income Tax Credit and the standard deduction and personal exemptions--would be eliminated with his proposal. Further, without a tax collection and enforcement agency, much of the good done by the federal government would wilt on the vine--from the Centers for Disease Control to the NIH and the Smithsonian, from transportation safety to education funding, and even the right's much beloved military. We simply can't and shouldn't get rid of the IRS--every advanced country in the nation has a bureau that collects and enforces the tax laws. We could get rid of the particular health care reform enacted as Obamacare, but we shouldn't --rather, we should continue to improve it, ultimately instituting Medicare for all and removing the rent-seeking profiteers from the picture except for those who have so much money that they can afford to buy luxury health care.
Finley's proposal amounts to more hot-air from the right about their favorite target--taxes and tax enforcement--that would have regressive results lopsidedly benefiting their favorite beneficiaries--the wealthy and Big Business (owned mostly by the wealthy). Apparently, people like Finley really want a country where brute market forces allow a few to reap all the benefits and the many to suffer, resulting in a classed society with the few living in relative splendor and the rest living off the dregs. That would be the result of most of these proposals for turning to a regressive sales tax and shutting down federal tax enforcement, making such proposals a form of class warfare pure and simple.
(if you don't believe me about "rent-seeking profiteers" in the health care business, read Saturday's New York Times story about the way Questor--a Big Pharma company--has reaped huge profits by essentially building a monopoly power over an immune-disorder drug called Acthar and now intends to purchase a competitor's potential threat (selling for tens of thousands less) because a US startup wanted to make it available cheaply in the United States. Questor bought Acthar in 2001 when it was selling for just a few hundred dollars a vial. By 2007 questor had increased the price to almost $1500 a vial. And in 2007, Questor increased the price in a single jump to $23,000 a vial--yes you read that number correctly. This is the perfect example of the fact that the right's beloved "market" doesn't work if the government doesn't provide the right framework--in this case, enforcement of anti-trust laws much more stringently than has been done in the last few decades as anti-trust has practically dropped from the national vocabulary.)
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