Category Archives: Taxation

CEI Podcast for July 2, 2013: The True Story of European Austerity

europe satellite night
Have a listen here.

Warren Brookes Fellow Matthew Melchiorre discusses his new study, which finds that, despite the prevailing narrative of severe austerity across Europe, only 4 countries out of 27 have actually cut taxes and spending.

Now it’s Getting Serious

From Politico: “The IRS softball team in Washington canceled a game scheduled for Friday against a team from Texas Sen. John Cornyn’s office and wasn’t able to reschedule.”

The plot thickens.

New Cato Video on the IRS Scandal

Well worth five minutes of your time. Features the ACLU’s Michael MacLeod-Ball, David Keating from the Center for Competitive Politics, and Cato’s John Samples and Gene Healy (Gene’s column on the same subject is also worth reading). Click here if the video embedded below doesn’t work.

IRS Apologizes for Targeting Conservative Groups

richard nixon pointing finger
The only surprising part of this story is that the IRS apologized. Whichever party is in power, its critics can expect more IRS attention than usual. Since  the executive branch is currently run by a Democrat, tax-exempt groups with phrases like “tea party” and “patriot” in their names were targeted. But the tables turn when a Republican is president. Charlotte Twight gives a historical example on p. 271 of her book Dependent on D.C.:

Republican President Richard Nixon in 1971 expressed his intention to select as IRS commissioner “a ruthless son of a bitch,” who “will do what he’s told,” will make sure that “every income tax return I want to see I see,” and “will go after our enemies and not go after our friends.”

President Bill Clinton, a Democrat, is also alleged to have abused his position to punish political enemies.

Conservatives are right to be outraged by today’s news. But they shouldn’t be surprised by it. Nor should they direct their ire at President Obama or the IRS staffers who initiated the unnecessary investigations. They should be outraged that politics has become such a high-stakes game in the first place that officeholders view this type of behavior as a legitimate political tactic. The problem is systemic, not partisan.

CEI Podcast for February 21, 2013: The Wages of Sin Taxes

sin tax
Have a listen here.

CEI and the Adam Smith Institute have teamed up to publish a U.S. edition of Christopher Snowdon’s study “The Wages of Sin Taxes.” He argues that sin taxes are an ineffective way to treat the harmful effects of drinking, smoking, and obesity. Fellow in Consumer Policy Studies Michelle Minton wrote the foreword.

Supply-Side Democrats

The only significant difference between the Republican and Democratic parties is their rhetoric. When it comes to policies actually enacted, a much better metric, they are remarkably similar. Despite their similarities, the parties will still reliably oppose whatever the other team is proposing.

A case in point is how tax cuts affect total revenues. Reagan-era supply-side economists argued that tax cuts, by sparking economic growth and aggregate spending, could actually increase tax revenues under certain conditions. Their basic insight that tax revenue has dynamic economic effects was, and is, correct. But the dynamic effects were too small to counteract the lower marginal rates, let alone Reagan’s spending hikes in defense and other areas; the deficit grew. Democrats have sneered at supply-side tax ideas ever since.

Of course, twenty years before that, Democrats were proposing exactly the same policy, and for the same reason. In chapter 16 of Passage of Power, the fourth volume of Robert Caro’s Lyndon Johnson biography, Johnson has just assumed the presidency, and is figuring out how to pass as much of the late John F. Kennedy’s legislative program as possible, beginning with the FY 1965 budget. His thinking was this would improve his chances of winning the 1964 election. Caro explains how progressives (he misuses the word “liberal”) and conservatives butted heads in that year’s budget battle:

Liberals wanted a larger role for government, wanted bigger, and new, government social welfare programs and therefore a larger budget. They believed the $11 billion tax cut [proposed by Kennedy] would, by putting more money into people’s pockets, stimulate the economy and thereby increase tax revenues, and the money the government would have available for these programs. Conservatives, uneasy about an expansion in government’s role and about the proposed new programs, were opposed to the higher spending, and believed the deficits would be increased by the tax budgets.

Somewhere, Art Laffer is either smiling or scowling. Not sure which.

CEI Podcast for January 24, 2013: Gov. McDonnell’s Transportation Plan

Have a listen here.

Virginia Governor Bob McDonnell recently released a headline-grabbing plan for the state’s transportation funding that would abolish the state’s gasoline tax and raise other taxes to make up the difference. Land-use and Transportation Policy Analyst Marc Scribner is critical of the plan, and prefers policies that fit the user-pays, user-benefits principle.

An IRS Trojan Horse

I’ve written before about why a return-free tax system is a bad idea (here and here). Under a return-free system, the IRS collects information on you and fills out your 1040 for you, so all you have to do is cut a check. The conflict of interest in having your tax collector also be your tax preparer is obvious.

A new proposal from the IRS, called a real-time tax system, looks benign, if only by comparison. It’s still a bad idea. But as my colleague David Deerson and I explain in The Daily Caller, the worst aspect of real-time is that it uses very similar technology to return-free. In other words, it’s a step on the way to a return-free system:

A return-free tax system is a terrible policy that has little appeal to anybody — except the IRS itself. Progressives see it as an encroachment on privacy; conservatives consider it an assault on economic freedom. They should oppose a real-time tax system with equal vigor. Once the databases and reporting software are in place, it will be easy for the IRS to implement return-free. A better solution for increasing compliance and making it easier for taxpayers to fill out their returns is actually quite simple — simplify the tax code.

Read the whole thing here.

Tax Day Approacheth

Have you ever noticed that Tax Day is almost exactly antipodal with Election Day on the calendar? If that’s a coincidence, it’s a happy one for politicians. Complying with the 70,000-page tax code costs about $300 billion per year, and takes the equivalent of 3.8 million workers. By comparison, the income tax raises a little over $1.4 trillion per year. It’s an incredibly inefficient way to raise money.

In this video, our good friends over at the Cato Institute make the case for simplification. Maybe moving Tax Day and Election Day closer together would spur Congress to do something about it. Meanwhile, the U.S. is falling behind other countries that are adopting simpler systems every year, such as a flat tax or a fair tax.

Click here if the embedded video below doesn’t work.

Institute for Justice Sues the IRS

A new IRS proposal to require licensing all tax preparers would put a lot of people out of work. Not everyone can afford to pay for classes, exams, fees, and continuing education courses. It would also artificially tip the competitive scales in favor of H&R Block and other big tax prep firms. So the Institute for Justice is suing. This video explains why (click here if the embedded video doesn’t work):

The video doesn’t make an important argument: If the IRS has the power to grant licenses, it also has the power to take them away. Tax preparers had better be careful not to fight too hard for their clients’ interests. Nice career you have there. Shame if anything were to happen to it.

Caleb Brown and I wrote about that angle in a piece for Investor’s Business Daily.