Watchdog: IRS May Still Be Targeting Conservative Non-Profits
The IRS’s Exempt Organizations (EO) Unit, the division responsible for reviewing the applications of political non-profits may still be improperly targeting conservative non-profits, according to a report by the Government Accountability Office.
The EO Unit has come under scrutiny in the past following revelations that they had been targeting conservative non-profits under the leadership of Lois Lerner in 2011. Clearly, the agency did not take the proper steps to improve controls and ensure that nonprofits are being treated fairly, regardless of political affiliation.
According to the report, countless controls are insufficient, not being followed, or have not been implemented which increases the risk that non-profits could be targeted based on political affiliation. As the report notes:
“Taken as a whole, these control deficiencies increase the risk that EO could select organizations for examination in an unfair manner—for example, based on an organization’s religious, educational, political, or other views.”
The GAO also found that the agency is failing to monitor examinations and database files. As a result, the approval of selection decisions was not monitored, despite the agency being required to do so. As the report notes:
“GAO’s analysis of a sample of files suggests that an estimated 12 to 34 percent of cases where staff initially selected an organization for examination, but ultimately decided not to perform the examination, were missing the indication of management approval of the final decision, as required in the IRM.”
In many cases compliance checks, compliance reviews, and Exempt Organization Compliance Area (EOCA) classifications are not covered by the same standards as other agency guidelines. As the report states, this means EO staff could deviate from procedures and unfairly target non-profits for scrutiny:
“Reliance on procedures that are outside of the IRM creates the risk that EO staff could deviate from procedures without executive management approval, which could result in unfair selection of organizations’ returns for examination.”
GAO recommended that the IRS improve selection control design and implementation and provided ten actions to the EO unit. While the IRS agreed with all recommendations, they characterized all GAO findings as “hypothetical.”
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Hillary, The Tax Code Is Already Steeply Progressive
Hillary Clinton claims upper income earners do not pay their “fair share” of federal taxes. But new data from the nonpartisan Congressional Budget Office (CBO) shows that the tax code is already steeply progressive. Clearly, a “Buffett Rule” or similar gimmick is a solution in search of a problem:
Overall tax burden
-The top one percent of households pay over 35 percent of federal income taxes and 24 percent of total federal taxes.
- The top 20 percent of households pay 88 percent of federal income taxes and almost 69 percent of total federal taxes.
Average effective rate
- The top one percent of households pay an average income tax rate of over 20 percent while the middle quintile pays an average income tax rate of 2.4 percent.
- The top one percent of households pay an average total tax rate of 29 percent while the middle quintile pays an average total tax rate of over 11 percent.
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American Businesses Do Not Need the Ex-Im Bank
At the end of July, Congress let the charter of the Export-Import Bank expire. While the bank’s continued existence has historically been justified by the loans it provides to American exporters, it became apparent it was no longer succeeding in this role. In recent years numerous reports have uncovered story after story tying the Bank to waste, fraud, and abuse.
While ending this institution of crony capitalism should have been a no-brainer, some in Congress are intent on reviving the bank and plan to tie the reauthorization to must-pass Highway funding legislation. If Congress is serious about responsible spending of taxpayer dollars, it should let Ex-Im stay dead.
The bank was first created in 1934 to finance American exports overseas. At the time, it served an important function - the average tariff on imports around the world sat almost 47 percent. But today, it is less than five percent as the world has shifted toward open trade. The global inequities that once served as a justification for Ex-Im no longer exist. In fact, there are over 400 free trade agreements in effect across the world and Congress has just passed legislation providing guidelines for the administration to negotiate new agreements with trade partners. With these ever diminishing trade barriers, it has become easier and easier for US business large and small to compete.
While supporters of the bank try to tie Ex-Im to American competitiveness, in reality it finances a small fraction of US trade, and a miniscule percentage of small businesses. Instead, it overwhelmingly benefits a select few super-corporations and in recent years over 60 percent of its operations have benefited just ten corporations.
According to statistics from the White House, between 2009 and 2014 the Ex-Im Bank supported just 0.42% of exporters, 0.28% of small businesses and 1.9% of total exports. In that same period, Ex-Im has become ridden with scandals resulting in 85 criminal indictments, 48 criminal judgments, and over $250 million in fines, restitution, and forfeiture.
Even worse, many of the loans the bank finances do not appear to be in the best interests of the American people. In 2014, the bank provided $15 million in loans so a Caterpillar subsidiary could buy equipment from Caterpillar. In 2012, Ex-Im provided nearly $5 billion in loans to the world’s largest oil company, state-owned Saudi Aramco. Saudi Arabian oil giant. The bank has also financed sales between two Chinese state-owned companies, to a foreign energy company accused of displacing the indigenous populace.
Given this abysmal record, it is unsurprising that opposition to the bank can be found from politicians across the ideological spectrum. Liberals and conservatives, like Rep. Jim Jordan (R-Ohio) and former Rep. Dennis Kucinich (D-Ohio) agree the bank is beyond saving. Similarly, presidential candidates from both sides of the aisle, like Ted Cruz and Bernie Sanders oppose reauthorization. Given this depth of opposition Ex-Im is clearly not a matter of partisan politics, but is about responsible use of taxpayer dollars.
The fact is, the Ex-Im Bank is outdated. While the bank may have once played an important role, today it exists as a symbol of Washington cronyism and finances outrageous sales that are not in the best interest of the American people. Regardless of what legislation it is tied to, Congress must not reauthorize the Ex-Im Bank.
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Blumenthal Amendment Destroys Trade-in Value and Consumer Choice
This week the Senate will likely vote on an amendment being offered by Senator Richard Blumenthal (D-Conn.) that would make it illegal for dealers to sell a car with an open recall. While at first this sounds reasonable, the reality is this amendment would apply to any and all recalls, some as insignificant as a misprinted owner’s manual.
The consequences of Blumenthal’s amendment would be a blanket restriction leaving not just dealerships holding the bag but American consumers. In fact the most burdensome impact would be on millions of average Americans who suddenly find their cars with zero trade-in value. It would also prevent consumers from buying some models even though the recall is extremely trivial.
The truth is while safety recalls receive the most attention, the majority are unrelated to safety. For example some KIA models were subject to recall because the tire pressure sticker was misprinted. General Motors also saw a recall of Camaros because “the air bag warning label on the sun visor may peel off.”
Although it is good for consumers to be well informed, enacting overzealous restrictions that blanket the automobile industry and consumer trade-ins is not an approach founded in logic.
For instance a more common sense approach would be to have dealers disclose open recalls at the point of the sale. This would allow consumers to decide whether something as trivial as a misprinted label is important enough to deter purchase. This is exactly how the free market is supposed to work.
Senator Blumenthal’s amendment assumes to little of consumers and market forces. The Senator’s amendment would limit consumer choice and destroy the trade-in value for millions of Americans. Lawmakers in Congress should take action and oppose this illogical and economically detrimental amendment.
Photo credit: Thomas Hawk
Tune In to the Bipartisan Summit on Fair Justice
We all know the statistics. The United States is drowning in one of the world’s most extensive prison populations… and budgets. Americans for Tax Reform is committed to reducing the footprint of the government in people’s lives as much as possible; this is why we are joining our efforts with the Coalition for Public Safety, and the parties present here today.
In order to secure the crime reductions we have been able to achieve in recent years, and expand them, we are looking to apply the proven reforms which have been so successful at the state level. By encouraging better sentencing and more effective alternatives to incarceration, America can provide justice and fiscal sanity simultaneously.
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Dodd-Frank Hammers Small Banks
Small American banks have been hit with a brutal one-two punch over the past decade. First, it was the Financial Crisis. And five years ago today, the Government decided to kick small banks while they were down by passing Dodd-Frank.
Since Dodd-Frank, there has been only one new FDIC-insured bank. You read that correctly, only one new bank since 2010. Bank of Bird-In-Hand in Amish Country, with their horse-and-buggy drive-through, stands alone. In the three decades prior to Dodd-Frank, an average of more than one hundred banks opened annually. And even after past recessions, new banks have opened by the dozens. But since the recession and Dodd-Frank, new banks have been almost non-existent.
And it is not just a lack of new banks, it’s a decline of existing banks. Mergers and failures have erased thousands of independent banks. Since 2006, there has been a decline of 1,762 banks, one of the most precipitous declines in American history.
While Dodd-Frank was intended to target big institutions, it is becoming clear that small banks are being driven into insolvency as a result of heightened regulations and compliance costs.. A Harvard Kennedy School Report finds that community banks have seen their banking asset share decline by 12.4% percent while large banks (excluding the 5 biggest) have seen their asset share grow by 11.4%.
According to the Mercatus Center, there are nearly 27,000 regulations associated with Dodd-Frank, more regulations than associated with all other laws passed during the Obama administration – combined. It is a basic fact of business that large institutions can better adapt to regulatory pressure than smaller ones. Small banks have stunted growth because all new resources must go into hiring compliance officers and potential new banks are daunted by the regulatory wall barring them from entering the market.
These developments should be viewed with grave concern. Not only do local banks provide more personalized services, but they also provide a critical life-line for small businesses seeking loans. Small banks – those with less than $1 billion in assets - account for only 8 percent of all banking assets, but make one-third of all small business loans. The decline of these banks will be a major blow to American innovators and entrepreneurs seeking investment.
The damage does not end there. More than a third of Dodd-Franks regulations have yet to be finalized. This means more regulations, costs, and uncertainty for small banks. To stop the decline of community banking and a concentration of banking assets in fewer and fewer banks, Congress must not celebrate Dodd-Frank’s birthday and instead address the problems with the law.
California Should Beat Back Asset Forfeiture
California is on the verge of fixing abusive civil asset forfeiture laws in the state. Yesterday, California Assembly Committee passed Senate Bill 443 unanimously (7-0) after passing the State Senate (38-1). The new bill has the potential to improve California’s civil asset forfeiture laws, which currently have a D in the Institute for Justice’s Scorecard, and a C+ in Freedomworks’s.
SB 443 will place much needed restrictions on law enforcement. Right now, law enforcement agencies need ‘clear and convincing evidence’ in order to seize property. The bill will alter that by requiring a criminal conviction for forfeiture to take place. The San Diego Union Tribune explains that the new law would impose “a steeper burden of proof so that agencies are less apt to view law-abiding citizens as cash cows”.
In addition, the bill provides forfeiture victims the right to a fair hearing to reclaim their lost property. If exonerated, victims will be entitled to attorneys’ fees and litigation costs compensation.
This legislation addresses the “equitable sharing program” that local law enforcement agencies can use to circumvent state laws. SB 443 will prevent federal-state collusion and will bar transfers of seized property to the federal government. This particular provision of the bill takes away the ‘profit incentive’ that current civil asset forfeiture laws provide for law enforcement agencies. State officials can still claim 80% of the proceeds when they hand them over to the federal government. In 2012 alone, federal, state and local law enforcement snatched approximately $4.2 billion in seized assets. The main opponent of SB 443, the California Association of Police Chiefs complained that the bill would “significantly reduce distribution amounts to local law enforcement.” It is clear that this police profiteering must be stopped.
Russ Caswell was one victim of the draconian civil asset forfeiture laws in the state. The Drug Enforcement Agency (DEA) in conjunction with local police seized his family-owned motel because of a handful of drug-related arrests of some motel guests. Although, Mr. Caswell had always cooperated with the authorities and was unaware of the illegal activity, local police still seized his hotel. Mr. Caswell was never convicted of a crime, but the $2 million property was too irresistible to be left alone.
Assemblyman David Hadley (R-Torrance) and Senator Holly Mitchell (D-Los Angeles) have taken on the crucial job of leading the charge for reforming civil asset forfeiture. The bill’s proponents feel that it is essential to uphold “a core American principle of justice that you can’t have your life, liberty or property taken away from you without due process of law.”
Americans for Tax Reform is urging California Gov. Jerry Brown to sign SB 443 into law and elevate California’s civil asset forfeiture laws on par with other states leading reforms such as New Mexico and Montana.
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5 Years Later: Dodd-Frank Continues to Cripple Small Business, Kill American Jobs
In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act established the Consumer Financial Protection Bureau which claims to "help consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives." In reality, Dodd-Frank and the resulting government interference have done more harm than good for American consumers by crippling small businesses and stunting job growth.
Five years later, small businesses are struggling to comply with this complex legislation. According to the Wall Street Journal, the United States is losing on average one community bank or credit union a day because of Dodd-Frank. American Action Forum released a study analyzing the overwhelming costs of the legislation; $24 billion in final rule costs and 61 million paperwork burden hours.
American consumers are seeing the consequences of these burdensome regulations. For example, before Dodd Frank, 75% of banks offered free checking and in 2012, only 39% of banks continued to do so. Similarly, the minimum average balance necessary to qualify for free checking has doubled over the same time period. Many attribute this to the bill's Durbin Amendment, which imposed price controls on the interchange fee (paid between banks for the acceptance of card based transactions) charged for debit cards.
Additionally, a study by the International Center for Law and Economics found low income families are being hit the hardest. The center estimates that from 2014-2017, $1 billion to $3 billion annually will be transferred from low-income households to large retailers and their shareholders as a result of the Durbin Amendment.
Small business institutions, and the jobs that go along with them, have also been shrinking in the era of Dodd-Frank. Congressman Jeb Hensarling (R-Texas) compared Dodd-Frank to "Obamacare for our economy." Hensarling reasons, "Dodd-Frank has left us with fewer choices, higher costs and less freedom." Small business institutions simply cannot afford to comply with these rules. Community banks and credit unions are increasingly forced to close as a result of ever worsening regulations and compliance costs.
In a recent study, the Harvard Kennedy School of Government suggests lawmakers work to identify, "what regulatory conflicts are unnecessarily harming community banks, to ensure better coordination and to reduce unintended consequences stemming from conflicting regulatory objectives.” The same study concluded that Dodd-Frank accelerated the decline of America’s community banks.
In 2010, as an alternative to Dodd-Frank, House Republicans introduced the Consumer Protection and Regulatory Enhancement Act. Rather than sweeping government overhaul, this legislation sought to reform the financial regulatory system through market-based solutions and without taxpayer funded bailouts. After enduring five years of oppressive Dodd-Frank policies, the time has come to revisit these proposed alternatives.
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New Report Confirms Federal Government Failed to Monitor Billions in Obamacare Funds
The federal government failed to track billions of dollars in grants given to states to create Obamacare exchanges according to a report by Reason Magazine’s Peter Suderman. As a result, neither the federal government nor the states are able to say how much of the $2.78 billion in Medicaid matching funds were improperly used to construct state exchanges. In addition, the report finds these states have yet to complete an alarmingly high list of functions associated their exchange websites.
These findings appear in a July 2015 draft report compiled by the nonpartisan Government Accountability Office (GAO) and obtained by Reason.
As Suderman notes, the Centers for Medicare and Medicaid Services (CMS) did not require states to track funding to exchange marketplaces with any specificity. As a result “ [CMS] is not in a position to account for all federal funds that went toward the establishment and support of marketplace IT systems.” Instead, CMS requires states to categorize funding in five vague categories: IT contracts, IT consultants, IT personnel, IT equipment, and IT supplies.
Despite this freedom and over $5.4 billion in grants from the federal government, state exchanges encountered numerous complications in setting up. In fact, as the report notes, only one state based exchange has completed “development of hub services functions such as verifying an individual’s identity and citizenship, and retrieving tax information for evaluating taxpayer eligibility for insurance affordability program.”
Even worse, several state exchanges have already failed, and many face financial difficulties now that grant money is all but exhausted and states are required to finance without federal assistance.
In Hawaii, the exchange received $205 million in grant money, but was unable to become financially sustainable upon launch due to a lack of potential enrollees. Most embarrassingly, the exchange enrolled zero individuals during a special enrollment period.
As bad as Hawaii was, Oregon’s exchange is undoubtedly the poster child for government waste. The state received $305 million in federal funding but had failed to complete a workable exchange months after launch date.
The disaster prompted then-Gov. Kitzhaber to place a trusted campaign consultant, known as the “Princess of Darkness” in charge of the exchange, despite her having no IT or healthcare background. When the exchange was dismantled, it was officially because it was unworkable and unsalvageable. However, reports emerging since suggest that the princess dismantle the exchange solely based on assisting the governor’s reelection campaign.
It remains unclear how much of the millions in funds can be recovered from these failed exchanges, or whether the federal government has any contingency plan should more states return to the federal system. But given the revelations that millions more could have been improperly spent on constructing exchanges and key functionality remains unfinished, it is clear that stronger controls are needed immediately.
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1) Horrific abuse of taxpayer dollars and 2) Seemingly criminal behavior by politicians to avoid accountability. Except for purposes of national security, all government transactions should be 100% transparent.