There is at the moment a serious controversy in the US about the way in which certain Internal Revenue Service persons harassed – that is not putting it too strongly – certain groups, such as Tea Party activists seeking tax-exempt status. And it appears other groups, according to this article in National Review, have been targeted.
This is all very bad, and I am sure that those who are calling for heads to be put on spikes, so to speak, are justified. Tar and feathers, etc. However, it occurs to me that political conservatives/libertarians who complain – with plenty of justification – about the bully-boy tactics of the current Obama regime are in danger of missing the chance to frame the argument in a broader way. Surely the problem is that if any group, of any political colour or leaning, applies for tax-exempt status, then that is playing to the fundamental problem with the tax regime in the US (and for that matter, in other countries where similar tax regimes operate). The problem is that taxes are relatively high, so that getting a tax-exemption is worth a lot of effort and lobbying (and the potential for corruption is obvious). And the bureaucrats therefore get a lot of power in deciding what is, or what isn’t, a tax-exempt organisation.
Surely a way to cut out the need for all this activity is to sweep away the whole system of loopholes, exemptions and special status for for this or that organisation, and institute a flat-, low-tax regime. No exemptions, nada, zip, nothing. Just a simple system that requires far fewer people – such as leftist IRS officials – to operate. Besides removing the potential for mischief-making by such officials, it means we can sack a lot of bureaucrats, saving the public a great deal of money and removing the deadweight cost of a hideously complex tax code.
The IRS scandal over the targeting of the Tea Partiers and others certainly suggests that recently enacted – and complex legislation – such as the US FATCA Act (which targets expat Americans working abroad) could be misused to go after anyone who, for whatever reason, gets on the shit-list of the government of the day. Not an encouraging thought.
But conservatives and libertarians must do more than just moan about the abuses of such powers. It often bemuses me how we are told that conservatives and particularly anarchic or “atomistic” libertarians just don’t get the importance of institutions and the complexities of civil society, etc, etc. But institutions can mestasise into malignant forms, especially where the operation of coercive force, and receipt of privileged sources of income, is involved. In office, conservatives, such as Britain’s Tories or the US Republicans, often fail to deal with, or even better, abolish, those institutions which have become malignant and do them, and the countries they get to lead, a great deal of harm. Just as the Tories have allowed organisations such as the BBC to run on, with privileges unchecked, for years, so the Republicans in the past have missed a trick by not reining in the IRS.
It may be that the IRS cannot be easily abolished outright – which would be the best option – but this institution is is in dire need of drastic shrinkage and simplification. I should have thought that promising to achieve such changes would be a sure vote-winner in forthcoming elections.
Firing the officials responsible (not the low-level ones they’re trying to pin this on) may not deal with the “basic problem”, but it would be both appropriate and satisfying. However, nothing of the sort will happen. First, this is the Obama administration. They play by the rules of Chicago politics: bare knuckles; nothing is off limits; dirty tricks are de rigueur. And they protect their own. Always. Second, the entire IRS reports to the Secretary of the Treasury, himself a notorious tax cheat. How could anyone expect an organization with Timothy Geithner at its head to be ethical or honest?
As to your larger point, there are a lot of libertarians, tea party types, etc., who have been calling for the abolition of the IRS for years. Ron Paul is among them. And the idea of a flat tax, a “Fair Tax”, and various similar arrangements has also been floating around for ages, and none of them get any traction. The institutional biases (and, frankly, the opportunity for political manipulation) of the Internal Revenue Code are just too enticing for politicians to give up willingly. The “potential for mischief-making” is precisely the reason we will never see the end of the IRS (or some successor organization having the same powers) absent a constitutional amendment eliminating the 16th Amendment. Which is to say, not before another Revolution.
(I’m not sure where I first read this – it might have been in Reiser’s “Cadillac desert” about water issues in the US west):
Once upon a time, the medium of horse-trading exchange in the US congress was water projects. Dams, aqueducts, hydroelectric systems, etc. Vote for mine and I’ll vote for yours (or whatever else it was you wanted). Then, in the 50’s, it switched to roads, airports, and bridges. Then, in the 70’s, it switched to tax favors: special exemptions, favorable rates, special zones, tariffs, etc. These were more efficient than their predecessors, since (for example) no environmental impact report delays intruded on the smooth functioning of the market.
You’ll never get congress to agree to simplification. As Glen Reynolds is fond of saying, such schemes are fatally flawed by their lack of opportunity for graft.
The reason this hasn’t happened is simple: members of Congress don’t really work for voters. They work for the lobbyist with the biggest bag of bribe money. And the big businesses and unions that hire those lobbyists like big, complicated government as a way to make it harder for new firms to enter their markets and compete with them.
I agree that constitutional change is needed, and that it’s been difficult to get (all 50 states have already called for a convention — see foavc.org — but Congress won’t call it, and there’s nothing the states can do to compel them). But I don’t believe quite yet that a revolution is necessary or desirable. All we really need is for non-cooperation (if not civil unrest) to render government operations as impractical as happened in 1787 — and the unions and/or the Occupy movement may very well bring that about without any help from the good guys. I’m just going to behave myself and quietly prepare, and I urge all freedom supporters to do likewise.
We give Big Government enormous power to screw up people’s lives. It’s the most natural thing in the world to expect that people will go to greath lengths to ensure that Government is screwing up somebody else’s life. It depresses me to no end how many people think the solution is to give Government more power to screw up people’s lives, and just put The Right People in charge.
‘All power corrupts’ Lord Acton.
First problem with elimination of the IRS is the clout of tax attorneys, tax accountants, and producers of tax software. Combined they form a formidable and effective lobby. If what I hear is true, Turbotax recently lobbied AGAINST a flat tax proposal – gee, I wonder why !!
Second, the last time the code was ‘simplified’ in the late 80’s
( prompting the comment that if it were to get any ‘simpler’, NO ONE would be able to understand it !! ) a friend who was far more familiar with the tax code than most stated that there were in fact ‘gifts’ buried within the code. Deductions could be take by a company if it met a list of criteria which could only be met by a SINGLE company in existence !!. The code was written to ‘reward’ certain entities !! This is the stick and carrot capabilities that can be used by politicians and they are not about to surrender those capabilities.
Third, NO ONE in politics can SERIOUSLY attempt to rein in or eliminate the IRS without expecting to have EVERY facet of their financial existence place under a microscope until they surrender. Imagine being audited, repeatedly where you have to prove your innocence ( read that as time and money ), rather than the other way around.
They can destroy you. Literally.
One case I remember from the 80’s was an individual who not only lost his assets, bank accounts etc. but the IRS also drained his girlfriends accounts. NOT wife – girl friend – NO legal attachments to the man AT ALL.
They freely admit that any advice you get from them cannot be used as a defense if you are audited. In other words, you cannot depend on anything they tell you to do or not do tax wise to be correct !
Lastly, they are answerable to NO ONE.
Good luck trying to rein that in or eliminate it.
A number of yeas ago, I saw a fellow testifying before congress about IRS abuses. He was so afraid of retaliation, he wore a bag over his head
the entire time he was testifying. I don’t guess any commentary is really needed.
In theory, a member of Congress could apply to hold the IRS staff auditing him or her in contempt were that action to be in retaliation for taking steps against the member.
What if the Capitol Police were sent in by Congress to haul in the relevant IRS staff, top downwards for an arraignment before a Congressional committee? Could this ever happen?
Mr Ed, is that correct? I am aware that someone can be held in contempt of Congress as an institution (viz Eric Holder), but I’m not sure that one can be criminally charged with being in contempt of an individual member of Congress. (If that were truly the case I’d be in prison now!)
Kind of like how for the common citizen, ignorance of the law is no defense…but when the agents of the government don’t know or understand the law, well of course they don’t. There’s just too much law for the people charged with enforcing it to know and understand.
Funny how that works out, huh?
@ Laird, here is the Wikipedia entry on contempt of Congress, the inherent power would be the safer one to use, as it avoids the Courts. They haven’t yet got the time to go after everyone.
The powers are clearly modelled on the British Parliament, but the Congress retains far more practical power than Parliament.
Two great wrongs were enabled 100 years ago by the U. S. Congress: the direct taxation of Americans and the creation of a central bank. The people must dismantle these laws, for they are the prime source of the State’s political power.
It was Garet Garrett who wrote, “No government can acquire power and put it forth by law and edict. It must have the means. A tyrant may issue laws and edicts, but if he lacks the means to enforce them they have no fury. In the ancient case, means might be the direct command of labor, food, and materials. So the pyramids were built. In the modern case, means will be money.”
Red, in addition to the 16th Amendment and the Federal Reserve Act, 1913 also saw the ratification of the 17th Amendment (direct popular election of senators) and the (first) inauguration of Woodrow Wilson. Truly a dismal year in our nation’s history, perhaps the worst ever. Happy centennial!
Good post J.P.
For example few people are upset about not getting exception from South Dakota income tax and corporation tax – because there is no South Dakota income tax or corporation tax (and, if anyone asks, the sales tax is 3% and the property tax is not wildly high).
There was indeed no Federal income tax before 1913 and no Corporation Tax before 1909.
If the Federal government only SPENT MONEY on the things it is consitutionally allowed to spend money on (did not treat “the common defence and general welfare” as a catch-all “general welfare spending power” rather than the PURPOSE for the specific spending powers it is given by Article One, Section Eight of the Constitution of the United States) then there would be no need for a Federal income tax or corporation tax now.
By the way, “libertarian” leftists, the United States now has some of the highest business taxation (and some of the most demented business regulations – threatening company directors with prison for minor clerical errors and so on) inb the world. So put that in your “American is controlled by the corporations” pipe and smoke it.
By the way – what to know why Hollywood is a shadow of what it was in the 1930s and 1940s?
Because of the break of the studeo system (the same companies having an intergrated outfit from film production to the cinemas) – more “anti trust” nonsense, and general “corporation bashing”.
Of course churches are a classic example of corporations (as are secular charities) -which should give people who declare “corpoations are the creation of the state” pause for thought.
Dear Mr Pearce
The whole purpose of government has evolved to tax. Value added government is but a fraction of the current levels of taxation in the West. In order to dispose of the accumulated and ever increasing tax revenues government has to cultivate a range of clients to help it dispose of them and to develop franchises for revenue raising, now extending to ever more complex laws with financial penalties for transgression – severe at the corporate level and trivial to moderate at the individual level.
The client base includes both recipients of tax revenues and beneficiaries of tax exemptions. All support government in its tax raising/tax disbursing endeavour, for which the government naturally charges a fee: politicians and bureaucrats do not work for free, or indeed for less than national average earnings any more.
Since government is no longer a value added service, it has effectively become the largest criminal organisation in the land. It launders money on a grand scale from the pockets of the taxpayer into the pockets of its clients.
The shere volume is mind-boggling: to paraphrase a quote from an earlier era, a trillion here, a trillion there and pretty soon you’re talking serious money.
Not all of that increase is down to the debasement of the currency. A percentage is due to real increases in theft with menaces.
What is the difference between government and organised crime?
One is illegal.
But neither is lawful.
DP
Look up remember denise.org IRS Miller caused her suicide in Indiana 2010 but I forgot Indiana answers to no one for suicide by officals in power remember Pat from Wheatfield and her killers still are free.