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Posts tagged “IRS

A Government of People


One constant with the Obama administration has been the taint of scandal. Of course, the news media has been particularly exercised over the past ten days or so. Beginning with Benghazi, continuing through the IRS mess and right into the Justice Department’s spying on the AP, the folks at 1600 Pennsylvania Avenue have been deluged by the media feeding frenzy. But the reality is this: Team Obama has faced a seemingly endless run of scandals throughout this Presidency. There was the lack of “shovel-ready” jobs, the “green energy” debacles of Solyndra and Fiskar, the notoriously inept “Fast and Furious” gun running operation, the “recess appointments” of NRLB directors, the Corporation for National and Community Center misuse of funds. This is also the administration that sees no problem with killing Americans overseas, has pushed for expanding the Patriot Act to allow warrantless spying on virtually anyone (the root of the AP scandal), pushed hard for the authority to indefinitely detain anyone, appointed committed communist Van Jones to a federal post, created the “czar” positions and has overseen the overwhelming ammunition purchases by the Department of Homeland Security. There are plenty more, of course, but you get the idea – this is an administration that kicks up dirt with every step.

The current narrative is that all of this proves that the Obama administration has a bunch of rotten eggs, some who are outwardly corrupt and that the lack of managerial skill in the White House is the primary culprit for all this nonsense. Well, yes – but don’t get sucked into that storyline. The real scandal is not malfeasance by government officials, nor is it the nature of Washington politics. It is not the politicization of every detail (sorry, Mrs. Pelosi) or Republican complicity with a dastardly administration (sorry, Mr. Limbaugh).

The real scandal is that everything that has happened was going to happen under this President, regardless of Congressional oversight or public outcry. No matter how many times the administration stubs its big toe, it will continue on the path they set upon in January, 2009. This is not because the President or his chief lieutenants are corrupt by nature. Instead, it is because of the overriding belief that government can solve all problems, tackle every issue and bring peace and harmony throughout the land.

On its face, this isn’t a terrible idea. It would be wonderful if there were an entity that could wave a magic wand and make every problem disappear. It is the basic thought behind every liberal policy position. But it is scandalous, if only because it is an idea that has been tried many times before and never with any success. In some cases, the result of attempts at government interventions are humorous (such as the toilet paper shortage in Venezuela). But far more often, the results are disastrous. If you’re at a loss for why this is, all you need to do is look at the people around you.

The preamble to our Constitution established a “Government of the People, by the People and for the People.” What the Founding Fathers failed to verbalize is that as with all governments, it would also be a government OF people. That is to say, at all levels of government, there are people making decisions daily; decisions which affect their fellow citizens’ daily lives. What liberals (or progressives) fail, time and again to recognize is that people are not infallible.  Quite the contrary, people make mistakes. And a person who believes in the infallibility of government is going to be far less vigilant in looking for the fallibilities in government employees than one who knows better. The Founders understood that bureaucrats generally lack common sense, which is why they spent more time writing into the Constitution the things government is not allowed to do than conferring powers to the bureaucracy. Not so sure on this point? Stop to ask yourself how many of those people around you would you trust with intimate details of your life. Then realize that one out of every ten Americans is currently receiving a paycheck from your taxes – and you’ll begin to understand why government is not the beneficent giant liberals want you to believe in.

This is not to say government is inherently evil. However, when the people employed by the government are in charge of the government, bad things tend to happen. It isn’t a lesson that Barack Obama seems to have learned – and it’s why he is not fit (and never was) to be the Chief Executive of the United States.


How to twist taxes to your (political) advantage


A positive development in our politics is that attention is finally turning to the debt and the annual deficit. In case you aren’t aware of the raw numbers, the deficit for the past two years has ballooned to more than an aggregated $3 trillion. That has raised the national debt to more than $14 trillion – or, about $123,000 for every household in the United States. I give President Obama credit for finally listening to the nation and recognizing the seriousness of the problem. It marks a dramatic turn for him, seeing as how he spent more in his first two years in office than his predecessor did in eight.

In his speech last week, the President didn’t mince words: he expects the “wealthy” to pay substantially more than they currently do while he continues to spend like a drunken sailor on things only a drunken politician would consider necessary. Lo, the blogosphere and networks have focused on the President’s new Medicare proposal (more on that tomorrow) and how yes, the “rich” should pay more. After all, the argument goes, the middle class is paying higher rates than the wealthy and that is just unfair. It certainly seems a winning political argument; after all, who isn’t for soaking the rich?

This makes for good sound bites and good politics, but bad policy. I realize that in some regions the Democrats definition of “wealthy” (a family earning $250,000/year) might make sense. But in others, $250,000 per year is simply middle class. Upper middle class, to be sure, but hardly wealthy. In the New York metro area, a family easily achieves a combined $250,000 in income with two public sector workers. It is even easier to reach if one person sells cars and the other works in the local bodega. The same holds true for San Francisco, Los Angeles and other major metro areas around the country. This is really a call to arms in class warfare, the destructive political game played by Andrew Jackson and Teddy Roosevelt, with disastrous effects for the nation – though those effects weren’t felt until decades later. Even liberal icon FDR understood the dangers of the game and generally shied away from playing it.

Fortunately, the IRS keeps records on the truly wealthy and the rest of us. The latest data they have is from 2007; but since the one tax policy liberals love to hate – the “Bush Tax Cuts” were already in effect – it makes a good statistical reference point. You can find it here. In it, the IRS keeps tabs on the 400 wealthiest taxpayers in the country and compares their rates to the rest of the taxpaying public. They began tracking the data in 1992, so we have a 15 year window in the way tax policy evolved through both the Bush and Clinton eras.

At first blush, it seems as though liberals may be on to something. The IRS calculated the effective tax rate on the top 400 earners as 26.38% in 1992, rising to a high of 29.93% by 1995, and then steadily dropping to 16.62% by 2007. But statistics are wonderful things; anyone can quote a number out of context to prove an argument and this is exactly what the liberal media is doing.

First, I give credit to the IRS for doing what nobody to the left of center has bothered doing in their arguments. Their numbers reflect 1990 dollars ,thereby accounting for inflation (in mathematical terms, they normalized values). So, if the truly wealthy were paying lower effective rates, then the government should have been taking in less money from them, right? Not so fast: in 1992, the IRS collected about $4.5 trillion; by 2007 that figure rose to $14.5 trillion. Why? Well, in 1992 not a single one of those 400 returns reflected an effective tax rate over 31%. By 2007, even with the hated “Bush Tax Cuts”, 55% of the top 400 had an effective tax rate of at least 35%. The lower overall tax rate for these taxpayers is reflected in the fact that 35 of them paid no tax – an effective rate of 0%.

Overall, the truly wealthy combined to pay 2.05% of the taxes in 2007, nearly double the 1.04% they contributed in 1992. In actual dollars, they contributed nearly $23 billion of the government’s total tax take of $1.1 trillion. Those who make up this class are certainly already paying their share and the administrations attempts to paint them as sore winners can only result in flat out class warfare.

We do have a revenue problem, since we’re spending more than 4 times what the government is taking in. A better focus would be on the 45% of Americans who currently do not pay any income tax. Certainly, if you’re gross income is below the poverty line for your region, you shouldn’t be expected to pay, but I doubt 45% of Americans are living in poverty. That certainly seems much fairer and also guarantees that those currently benefiting from living here also gain equity in the system.

However, I doubt we’re going to find $1.6 trillion in revenue by asking everyone to pay their taxes. We still need deep spending cuts just to get the 2012 budget balanced. Tune in as I tackle those issues throughout the week.