The IRS Needs Reform, Not More Taxpayer Dollars

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Posted by Alexander Hendrie on Thursday, August 27th, 2015, 2:08 PM PERMALINK


IRS management is insistent on claiming they are starved of taxpayer dollars, and any problems with the agency are because they do not have enough funding. But in reality, the agency is poorly managed and has failed time and time again at its basic responsibilities. Taxpayers are being ill-served by inept bureaucrats that are more concerned about harassing conservatives and businesses than doing their job.

At every chance, IRS officials claim that the agency is cash-strapped. Union Chief Colleen Kelly recently said the IRS is “struggling to keep the lights on.” But this claim does not hold up under scrutiny.

According to the National Taxpayer Advocate’s Annual Report to Congress the IRS is unable to justify spending decisions. As the report stated:

“The IRS lacks a principled basis for making the difficult resource allocation decisions necessitated by today’s tight budget environment.”

In addition, the IRS has failed to properly prioritize funding even when budgetary pressure did not exist. The agency has failed to produce a single report on tax complexity since 2002, despite federal law requiring one be compiled each year.

In fact, the IRS budget has doubled in the past 30 years, even after adjusting for inflation, according to an analysis by Cato Institute economist Dan Mitchell, Although its funding has declined since 2010, it remains higher than mid 2000s levels.

Recently, the IRS disclosed that hackers had stolen the information of over 330,000 taxpayers. Hackers then used this information to file fraudulent tax returns.

Unfortunately, the IRS hack was entirely preventable. The IRS had been warned by the Treasury Inspector General for Tax Administration (TIGTA) to strengthen their protection of data on seven occasions since 2007. TIGTA has issued almost 50 recommendations that the agency failed to implement before the hack, including 10 more than three years old. Even when the agency had higher funding, they failed to perform due diligence time and time again.

The agency’s poor decision making continues to this day. The IRS recently hired trial law firm Quinn Emanuel to perform an audit of Microsoft, a highly unusual decision that may have violated federal law and has prompted an investigation by the Senate Finance Committee.

But perhaps worse, the agency’s decision to hire a $1,000 an hour, litigation-only white shoe law firm is an egregious waste of taxpayer dollars. The IRS already has 40,000 employees dedicated to enforcement efforts and could have turned the case over to either the IRS office of Chief Counsel or a Department of Justice attorney. Employees in both offices already have the expertise to conduct an examination without putting sensitive information at risk.

Instead the supposedly cash strapped IRS chose to hire an elite law firm under an initial $2.2 million contract.

Lastly, the Senate Finance Committee released a damning report examining the Lois Lerner tea party targeting scandal earlier this month. The report concluded that Lerner’s personal beliefs led her to discriminate against conservative organizations applying for non-profit status. Lerner was able to do so because the agency had given her complete autonomy.

While the IRS continues to plead poverty, it is clear that the problem stems from gross mismanagement, not lack of funds. Agency officials seem more interested in targeting conservative groups and harassing businesses than actually doing the job that taxpayers pay them for.

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Simon Cunningham, https://www.flickr.com/photos/lendingmemo/

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Russell J. Coller Jr.

they probably need a bigger fleet of GMC SUVs & smart phones.... they love them some smart phones.... unencrypted, of course.


Jim Gilmore Signs Taxpayer Protection Pledge to the American People

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Posted by ATR on Thursday, August 27th, 2015, 10:30 AM PERMALINK


Former Governor Jim Gilmore (R-Va.), a candidate for the presidency of the United States, has signed the Taxpayer Protection Pledge to the American people. The pledge is a written commitment to the American people to “oppose and veto any and all efforts to increase taxes.”

“By signing the Taxpayer Protection Pledge, Governor Gilmore continues his commitment to the taxpayers of this country,” said Grover Norquist, President of Americans for Tax Reform. “Governor Gilmore understands that government should be reformed so that it takes and spends less of the taxpayers’ money, and will oppose tax increases that paper over and continue the failures of the past."

Gilmore recently outlined The Growth Code, an aggressive pro-growth tax reform plan that includes a single 15 percent tax on all business income, three individual income tax rates of 10, 15, and 25 percent, immediate expensing of business investment, and a territorial tax system that allows American business earnings abroad to be returned to the U.S. without penalty.

Gilmore served as governor of Virginia from 1998 to 2002. He led a successful campaign to phase out the state’s much-loathed car tax, saving Virginia families millions of dollars. As soon as he left office, the legislature froze the phase out before it fully took effect. (The Tax Foundation has a nice summary here.)

Though it is still early in the 2016 nominating process, most of the GOP candidates have already made a written commitment to the American people that they will oppose and veto any tax increase in the event they are elected to the White House. Along with Gilmore, these candidates include Marco Rubio, Rand Paul, Ted Cruz, Chris Christie, Rick Perry, Carly Fiorina, Dr. Ben Carson, Rick Santorum, and Mike Huckabee.

ATR has shared the Pledge with all candidates for federal office since 1986. In the 114th Congress, 49 U.S. Senators and 218 members of the U.S. House of Representatives have signed the Pledge. Pledge signers include Senate Majority Leader Mitch McConnell, House Speaker John Boehner, House Majority Leader Kevin McCarthy, House Majority Whip Steve Scalise, and GOP Conference Chair Cathy McMorris Rodgers. Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Committee Chairman Paul Ryan are also pledge signers.

On the state level, 13 incumbent governors and approximately 1,000 incumbent state legislators have signed the Pledge. The pledge-signing governors include Scott Walker (R-Wis.), John Kasich (R-Ohio), Rick Scott (R-Fla.), and Nikki Haley (R-S.C.).

In 2012, all candidates for the Republican nomination for president signed the Taxpayer Protection Pledge, with the lone exception of former Utah Gov. Jon Huntsman. Huntsman finished seventh in Iowa and third in New Hampshire before dropping out of the race.

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Gage Skidmore https://www.flickr.com/photos/gageskidmore/

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Chart: Among Governors Running for President, Jindal Has Best Anti-Spending Record

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Posted by Alexander Hendrie on Wednesday, August 26th, 2015, 4:58 PM PERMALINK


Of the 17 GOP Presidential candidates, nine have experience serving as chief executive of a state. A study by Dan Clifton, head of policy research at Strategas Research Partners, provides an apples to apples comparison of their record on government spending. The chart below compares the average annual increase in general fund spending during each Governor’s term. The chart shows that during his time in office, Gov. Jindal has the most aggressive anti-spending record:


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Gage Skidmore https://www.flickr.com/photos/gageskidmore/

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Mr. Right

It's a real shame that Jindal isn't doing better in the polls.


The Grover Norquist Show: Obama IRS is Rotten to the Core

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Posted by Alexander Hendrie on Tuesday, August 25th, 2015, 4:53 PM PERMALINK


In the 28th edition of The Grover Norquist Show, ATR President Grover Norquist discusses the latest IRS news with Policy Fellow Alex Hendrie. Since it was revealed that the IRS targeted conservative non-profits under the leadership of Lois Lerner, investigators have uncovered concerning stories of lost emails, destroyed hard drives, and Lerner's contempt for conservative and tea party groups.

While this scandal epitomises the toxic culture of the IRS, the agency has also failed to serve taxpayers in many other ways. Last week, it was revealed that the personal information of over 330,000 taxpayers was hacked in May. The agency had been warned to strengthen protection of taxpayer data seven times by watchdog groups since 2007 but failed to implement almost 50 recommendations. Clearly, the IRS is an agency in need of major reform. See the podcast here.

 

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Gage Skidmore https://www.flickr.com/photos/gageskidmore/

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IRS Discloses Existence of Second Personal Email Account Used By Lois Lerner for Official Business

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Posted by Alexander Hendrie on Tuesday, August 25th, 2015, 11:29 AM PERMALINK


Lois Lerner had a second personal email account she used to conduct IRS business, according to a report by Washington Times reporter Stephen Dinan. The agency disclosed this information on Monday through a court filing for an open-records lawsuit that was filed by watchdog group Judicial Watch.

Update: Toby Miles is Lois Lerner's dog, according to a National Review article.

The email address, identified as “tobomatic@msn.com” was supposedly used by a “Toby Miles.” It is unclear who Toby Miles is, and what his relationship is to Lerner. Regardless, it is clear that this account was used by Lerner for IRS business. The email is the third used by Lerner for IRS business – she also used her official agency address and another personal address.

According to IRS lawyer Geoffrey J. Klimas, the agency only recently learned of the existence of this third email address:

“As the agency was putting together a set of documents to turn over to Judicial Watch, it realized Ms. Lerner had used yet another email account, in addition to her official one and another personal one already known to the agency.”

In his court filing, Klimas argued that the IRS previously hinted of the existence of additional email accounts based on a footnote contained in a 2014 letter that referenced Lerner’s “personal home computer and email on her personal email account(s).”

It is outrageous that new revelations are still breaking years after the public first learned of the Lois Lerner tea party targeting scandal. Earlier this month, a report by the Senate Finance Committee found that the IRS granted just one conservative group non-profit status over a three year period. The report concluded that Lerner’s personal political beliefs drove her to undertake a concerted effort to discriminate against tea party and conservative non-profits by delaying their applications and subjecting them to unnecessary audits.

See Also:

 

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Another Reason for Tax Reform: Etsy Corp

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Posted by Hal Smith on Monday, August 24th, 2015, 12:33 PM PERMALINK


Yet another American start-up has packed up and moved out of the country. This time, Brooklyn based Etsy was forced to establish a subsidiary in Ireland as result of a corporate tax rate that continues to drive entrepreneurs and businesses overseas.

In 2014, Etsy recorded 5 million members, including 1.4 million active sellers and 19.8 million active buyers. With such a large presence, Etsy sellers generated gross merchandise sales of $1.93 billion globally.

But Etsy it taking the revenues elsewhere. It made the logical and legal decision to move under the 12.5% corporate tax rates in Ireland. The United States undercuts any competitive business at a rate of 39%.

While the corporate tax rate is hard enough, the structure of the tax code ensures that if companies don’t move overseas they will choose to go in debt rather than make a profitable business.

Corporations are heavily pressured to choose debt financing over equity as a result of a tax structure that ensures that equity profits and the required returns to investors are both taxed. Therefore, startups, which struggle to find available credit and simply cannot get suitable bank loans are forced into this double tax.

According to the Tax Foundation, the U.S. has the highest corporate income tax rate amongst the 34 members of the Organization for Economic Development (OECD) and the third highest in the world.

The average corporate tax rate for these OECD countries is 25% -- a little over half what the United States draws from struggling startups.  

Once again the antiquated, overly complicated, and anti-competitive corporate tax code of the United States has forced another start-up overseas. Forcing entrepreneurs to other countries is the last thing this recovering economy needs, but with such inefficient and debilitating economic barriers like double taxation, who can blame them for leaving?

There needs to be a corporate tax rate of 20% in order to have the fair competition that fosters innovation and American entrepreneurship.

 

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Michelle Roy https://www.flickr.com/photos/formulaexo/

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Gina McCarthy on Obama's National Energy Tax: "Minority communities will be hardest hit."

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Posted by Justin Sykes on Friday, August 21st, 2015, 2:10 PM PERMALINK


This month President Obama and the EPA released the final version of their “Clean Power Plan,” or as more aptly referred, the new “National Energy Tax.” The rule seeks to limit carbon in the U.S., and by the EPA’s own projections the benefits will be negligible, reducing global temperatures by 0.018 degrees by 2100 and sea level rise by a mere 0.20 millimeters by 2050. 

While the environmental impact of the carbon rules is virtually non-existent, the impact on American families will be disastrous. Projections show the carbon rule will likely increase electricity rates in the U.S. by double digits in over 40 states. Such rate increases amount to a regressive tax on the nation’s most vulnerable.

The overwhelmingly regressive nature of the carbon rule is why leaders in Washington, such as House Speaker John Boehner (R-Ohio), have chosen to describe the rule as “Obama’s National Energy Tax.” 

In a recent panel discussion in D.C., EPA Administrator Gina McCarthy admitted the disparate impact the new carbon rule would have stating, “We know that low-income minority communities would be hardest hit.” For once, Administrator McCarthy has chosen to be direct and open about what the rule really means for America’s most vulnerable populations. 

As Americans for Tax Reform has previously pointed out, and EPA Administrator McCarthy has now confirmed, the effects the new carbon rule will have on low-income and minority communities will be particularly devastating.

According to recent reports by the National Black Chamber of Commerce, American minority communities will see jobs losses, reductions in household income and increased poverty rates that are far above the national average.

The report found that as a result of the regressive nature of Obama’s carbon rules, by 2035 African-American communities will see cumulative job losses of almost 7 million. For Hispanic communities the losses will be well over 12 million.

Similarly, median household income for African-Americans would decrease by $5,000 over the next 20 years and Hispanics would see losses greater than $7,000. The carbon rule will also lead to skyrocketing poverty rates for Hispanics, who will see poverty rate increases above 26 percent. For African-Americans the report found poverty rate increases of over 23 percent. 

Administrator McCarthy and President Obama seem all to comfortable sacrificing the livelihoods of millions of hard-working Americans for essentially non-existent benefits. Sadly as a result of the carbon rules, some of America's most vulnerable could now find themselves thrust into poverty, many of whom have just managed to pull themselves out.

 

Photo Credit: Chesapeake Bay Program 

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Vermont’s $200 Million Obamacare Exchange “Hellish” for Enrollees

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Posted by Alexander Hendrie on Friday, August 21st, 2015, 9:00 AM PERMALINK


Despite receiving almost $200 million in federal taxpayer dollars, Vermont’s Obamacare exchange website still lacks basic functionality. Two years after the website went live, customers are unable to auto-reenroll or change personal information without contacting employees at a call center. Not only is this an egregious waste of taxpayer dollars, the condition of the website has created hardships for Vermonters and complicated their healthcare system. The system is so poor that one healthcare advocate in the state recently described the functionality of the Vermont Health Connect exchange as “hellish” for consumers.

Since launching in late 2013, Vermont Health Connect has been plagued with “debilitating glitches.” For close to 20 months, the exchange relied on a mind-bogglingly complex method of processing requests, with many having to be logged and entered manually into up to six different databases.

For months a backlog of over 10,000 “change of circumstance” requests existed, but Governor Peter Shumlin recently announced that the exchange had cut its backlog in half. Even so, more than 4,500 customers still have requests that needed to be processed. While this is rare good news, the state now faces a race against time to complete several new functions before the next enrollment period begins in October 1. If it does not, the state will have to spend $3.5 million hiring temporary workers to manually enroll individuals.

A recent report by VTDigger detailed the burdens that the exchange has created for Vermonters enrolled on Obamacare. One woman paid premiums for nearly a year only to discover that Vermont Health Connect had canceled her plan, instead of removing her son from the plan as she had requested.

Throughout the year, the individual was told by exchange employees that she had been covered, but now that she has learned this is not the case it is likely she will have to pay the penalty for not having health insurance because of Obamacare’s individual mandate.

Another woman enrolled on the exchange did not receive invoices for months from Vermont Health Connect because of the exchange backlog. Despite the exchange failing to send invoices, her account may be canceled due to non-payments. The exchange still expects individuals to pay, even if they don’t receive invoices.

After nearly two years, it is unbelievable that a $200 million website still lacks basic functions. But Vermont is not an isolated case - Oregon, Hawaii, and Massachusetts are just some of the many cases of failed state exchanges.

Given the numerous problems that have arisen from the construction of state exchanges, it is clear that the federal government’s vision for a set of state run Obamacare exchanges is unrealistic. With federal taxpayers on the hook for at least $5.4 billion in funds to construct these exchanges, the American people deserve stronger oversight over how this money was spent.

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Nathan Warner, https://www.flickr.com/photos/greenfday69/

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Brooke Paige

Coming Soon - Moral, Social and Fiscal Bankruptcy for Vermont !

Here in the "Magic Kingdom" of Vermont, the politicians tell us that everything is rosy and most of the Democratic lapdogs eat it up like Alpo, until they personally are affected by the chaos that passes for governance.
It is not just our defective healthcare finance disaster that is driving both young adults and retirees out of state - additionally taxes of every imaginable kind; ill-conceived and uncontrolled wind and solar development (driving the cost of electricity out of sight while despoiling our scenic vistas); a lack of worthwhile job prospects (especially for first time job seekers), drug abuse and drug crime overwhelming social services and law enforcement; dysfunctional government "services" which appear to serve the "public servants" rather than the taxpayers - Vermont's list of troubles seem limitless.

If the 2016 election cycle does not produce a radical improvement in leadership Vermont will find herself doomed to moral, social and fiscal bankruptcy for a generation or more !

Valerie Mullin

Just think of the missed opportunity that the $200 million might have done for the good of Vermont, instead of to paper pushers. So sad and so it continues.


“This is State government, sir”: Michigan gets one step closer to Asset Forfeiture Reform

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Posted by Jorge Marin, Danil Zelenkov on Thursday, August 20th, 2015, 2:00 PM PERMALINK


Yesterday, the Michigan Senate Judiciary Committee demonstrated bold legislative initiative by unexpectedly voting a slew of civil asset forfeiture reform bills out of committee.

The committee heard testimonies from national advocacy organizations on both sides of the aisle as well as law enforcement. Although there was some token opposition from state law enforcement, seven of the eight bills passed the committee unanimously.

At the hearing, US Justice Action Network Executive Director Holly Harris explained the convoluted history of asset forfeiture in America,

Centuries ago, civil asset forfeiture was actually used as a means to seize assets from pirates.  In the 1980s, asset forfeiture was expanded to seize assets from international drug kingpins.  But now, law enforcement is using civil asset forfeiture to seize cars and cash from average citizens who are never even charged with crimes.  And here in Michigan, far too many innocent property owners have found themselves entangled in a flawed process…We are a long way from pirates and kingpins.

Jorge Marin, Criminal Justice Specialist at Americans for Tax Reform, also congratulated the Michigan Association of Police Organizations for their endorsement of the proposals,

Fortunately, this is a uniting issue. The Michigan Association of Police Organizations understands full well that bad laws reflect poorly on the vast majority of police officers; men and women who genuinely want to protect their communities and have done so with distinction.  The Package of laws under consideration would strengthen the reporting requirements for forfeitures. This would be a massive step in the right direction.

He further explained the importance of protecting the due process of law and how civil asset forfeiture laws infringe upon that,

You may be wondering what taxes have to do with civil asset forfeiture. Simply put, tax reform is simply a means to an end: the end being the protection and expansion of individual freedom. For this reason we have flagged asset forfeiture as an egregious threat to due process and legislative accountability of the nation’s crucial police force and their budgets.

Yesterday ATR released an official endorsement of Michigan’s civil asset forfeiture legislation.

After being asked about what the federal government was doing with respects to asset forfeiture by an ill-fated prosecutor, Committee Chairman Rick Jones shot back “this is state government, sir,” demonstrating how the states are leading on this issue despite what the federal government is doing.

Americans for Tax Reform is supportive of the Senate Judiciary Committee decision to move forward with this legislation. We urge state legislators across the country to take Michigan's lead.

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Massachusetts Obamacare Exchange Facing Legal Investigation

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Posted by Danil Zelenkov on Thursday, August 20th, 2015, 1:36 PM PERMALINK


Massachusetts Health Connector – the state’s failed Obamacare exchange – is faced with yet another challenge, this time a legal one. The U.S. Attorney’s Office is demanding the state exchange open its books in order to find out how the State government wasted hundreds of millions of dollars in a failed revamp of their healthcare exchange. Although Massachusetts was the home of the Obamacare blueprint “RomneyCare”, the federal regulations imposed on the state broke an already working system and displaced thousands of Medicaid recipients.

Massachusetts was one of about 15 states that received $4.5 billion in funds from the Centers for Medicare and Medicaid Services (CMS) to fund the construction of its own healthcare marketplace. The transformation was cheered on by then Democratic Governor Deval Patrick (D-Mass.), and close to $224 million was spent to upgrade the system.

But things did not go to plan. The exchange failed to work on day one.

While residents of the state were unable to get healthcare, the response from state officials was nonchalant. 41 days after the failed launch of the website Governor Patrick was asked about possible concerns with the exchange. His response was “No, none at all.” To this day, he continues to downplay the disastrous rollout by stating that people should be realistic and that “change is messy”.

Not only did this debacle prevent individuals in the state from signing up for Obamacare, the failed exchange displaced 325,000 residents who were then placed on a ‘transitional’ Medicaid program regardless of eligibility requirements. In all, the disaster resulted in $1 billion in further costs. Underlying the chaos in the exchange, it was later discovered that 6,000 residents were simultaneously receiving both Medicaid and state exchange benefits.

The skyrocketing costs and repeated malfunctions aside, the most disturbing aspect of the Massachusetts fiasco is the intentional concealment of the failures by the Commonwealth Connector Authority (CCA), the organization tasked with oversight of the transition.

Before the initial launch of the state exchange, testing proved a 90% failure rate. Despite this, the untested website was launched with the expectation that “Users Do Testing” where users through their experience with the exchange would “recognize how bad [it] was.” One whistleblower described the whole launch as like a kid who does something wrong and is waiting to be caught. Even worse, those who attempted to raise concerns were silenced on purpose. As one of the whistle blowers points out: “We were always told to be quiet, it doesn’t matter, don’t say anything”.

It is clear that Massachusetts officials repeatedly and deliberately concealed failures of the website construction and its ability to function properly. They tried to hide the shortcomings by coercing state workers to “approve poor quality work and covered up the project’s abysmal progress in a presentation to federal officials”.

The U.S. Attorney’s office has issued a subpoena to uncover the Obamacare incompetence which is plaguing this state. Taxpayers have a right to know how a supposedly simple transition from Romneycare to Obamacare managed to spend a quarter of a billion dollars and resulted in $1 billion worth of costs for Massachusetts residents.  

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