Archives: May, 2013

IRS Abuses Past and Present

By
Chris Edwards

The stories coming out about IRS abuses of nonprofit groups are appalling. We will likely find out that arrogant and biased officials are to blame, as well as members of Congress who pushed them to be especially aggressive on conservative groups.

Past IRS abuses have stemmed from foul play by both politicians and bureaucrats. As Gene Healy mentions, numerous presidents have used the IRS as a political weapon. As for the bureaucrats, investigations during the 1990s revealed how IRS enforcement had run amok, with abusive tactics being used against small businesses and other taxpayers.

Some of the hearings were hair-raising, and the abuses led Congress to pass the IRS Restructuring and Reform Act of 1998. Useful links to hearing documents are here and here including Senator Roth describing the agency as having an “awesome power.” Washington Post coverage is here, including a story about how even President Clinton was “outraged” by the revelations of IRS abuse.

Going back further, this 1997 book by Shelley Davis describes some of the historical misdeeds and corruption of the IRS. This book review gives an overview of her investigations.

In recent years, efforts to close the “tax gap” have included proposals to augment the power of the IRS and increase the intrusiveness and compliance burden of tax rules. Yet Congress keeps raising tax rates and making the code more complex, which increases incentives for taxpayers to avoid taxes while reducing their ability to comply. Regarding the latest scandal—note that getting tax-exempt status is so valuable because the tax rates are so darn high.

This article by Bill Beach frames the tax gap issue: Congress can reduce the gap by either giving the IRS more police power or by reforms to cut rates and simplify the code. Hopefully the latest IRS scandal convinces Congress that the agency already has too much power. Thus the way to give Americans more freedom from the tax police and to also boost the economy is to scrap the current tax code in favor of a low-rate consumption-based system.

Topics: 
Government and Politics, Law and Civil Liberties, Tax and Budget Policy

Poll: Already Scant Support for Obamacare Erodes

By
Michael F. Cannon

According to the latest Reason-Rupe poll:

The president’s health care law is losing public support… Only 32 percent of Americans say they liked the health care law when it was passed and still like it today. Seven percent liked the law when it was passed, but like it less now. Meanwhile, 45 percent disliked the health care law when it was passed and still dislike it. Four percent of Americans say they disliked the law when it passed, but like it more now.

These results are consistent with the Kaiser Family Foundation Health Tracking Poll, which has always reported a higher level of support for the law than other polls, yet whose latest results show support for Obamacare slipping to just 35 percent of adults.

Topics: 
Government and Politics, Health Care

DOJ vs. School Choice

By
Jason Bedrick

Claiming that private schools in Milwaukee are discriminating against students with disabilities, the Department of Justice (DOJ) sent a letter to the Wisconsin Department of Public Instruction (DPI) demanding that private schools participating in the Milwaukee school choice program comply with Title II of the Americans With Disabilities Act. As Professor Patrick Wolf explains over at Education Next, the DOJ is wrong on the facts and wrong on the law.

Wolf is part of a team of researchers that has studied the Milwaukee school choice program over five years. Their statistical analysis “confirmed that no measure of student disadvantage—not disability status, not test scores, not income, not race—was statistically associated with whether or not an 8th grade voucher student was or was not admitted to a 9th grade voucher-receiving private school.” This is exactly what the law requires. Wisconsin law forbids discrimination on the basis of disability and requires schools participating in the voucher program to accept students on a random basis. 

Moreover, the DOJ is wrong on the law in treating private schools participating in the program as though they were government contractors. As Wolf explains:

Private organizations normally are exempt from Title II of ADA but the DOJ argues that the law applies to private schools in the MPCP because the government is contracting with them to provide a public service (the education of K-12 students). This claim flies in the face of the facts and case-law surrounding the program. The voucher program does not involve any contracts, of any kind, between any government organization and the participating private schools. Students need to meet certain eligibility restrictions to participate in the program, as do interested private schools. Once both are deemed eligible by the state, students choose schools and government funds flow to the private schools based on the choices families have made and consistent with the laws governing the program, not based on any “contract.” In fact, the Wisconsin State Statute that governs the MPCP, §119.23, is entirely separate from Wisconsin State Statute §119.235 entitled “Contracts with Private Schools and Agencies.” Nothing could make the point clearer that the MPCP is not a case of government contracting for education services.

Wolf suspects that the DOJ’s letter came as a result of the Wisconsin DPI’s report that 1.6 percent of choice students have a disability. Since the DPI is not authorized to collect that information, they estimated the number of students with disabilities using the number of choice students given accommodations on the state accountability exam. However, as Wolf explains, that is a highly flawed proxy since only a minority of students with disabilities are given such accommodations. Wolf’s team of researchers estimated that the number of choice students with disabilities between 7.5 and 14.6 percent, with their best estimate being 11.4 percent.

The DOJ’s overreach may be unsurprising in light of other recent scandals, but it also sets a terrible precedent. Parents choosing to use their vouchers at private educational institutions do not render those institutions “government contractors” any more than grocery stores become “government contractors” when citizens use their EBT cards to purchase food there. The Obama administration’s unlawful and misguided attempt to hamper school choice programs with additional red tape should be vigorously resisted.

Topics: 
Education and Child Policy, Law and Civil Liberties

OECD Study Admits Income Taxes Penalize Growth, Acknowledges that Tax Competition Restrains Excessive Government

By
Daniel J. Mitchell

I have to start this post with a big caveat.

I’m not a fan of the Paris-based Organization for Economic Cooperation and Development. The international bureaucracy is infamous for using American tax dollars to promote a statist economic agenda. Most recently, it launched a new scheme to raise the tax burden on multinational companies, which is really just a backdoor way of saying that the OECD (and the high-tax nations that it represents) wants higher taxes on workers, consumers, and shareholders. But the OECD’s anti-market agenda goes much deeper.

Now that there’s no ambiguity about my overall position, I can admit that the OECD isn’t always on the wrong side. Much of the bad policy comes from its committee system, which brings together bureaucrats from member nations.

The OECD also has an economics department, and they sometimes produce good work. Most recently, they produced a report on the Swiss tax system that contains some very sound analysis, including a rejection of Obama-style class warfare and a call to lower income tax burdens.

Shifting the taxation of income to the taxation of consumption may be beneficial for boosting economic activity (Johansson et al., 2008 provide evidence across OECD economies). These benefits may be bigger if personal income taxes are lowered rather than social security contributions, because personal income tax also discourages entrepreneurial activity and investment more broadly.

I somewhat disagree with the assertion that payroll taxes do more damage than VAT taxes. They both drive a wedge between pre-tax income and post-tax consumption. But the point about income taxes is right on the mark.

Read the rest of this post »

Topics: 
Government and Politics, International Economics and Development, Tax and Budget Policy

Never Mind the IRS, You’d Better Be Nice to Kathleen Sebelius

By
Michael F. Cannon

ObamaCare’s Independent Payment Advisory Board is everything its critics say and worse. It is a democracy-skirting, Congress-blocking, powers-unseparating, law-entrenching, tax-hiking, fund-appropriating, price-controlling, health-care-rationing, death-paneling, technocrat-thrilling, authoritarian, anti-constitutional super-legislature. Its very existence is testament to government incompetence. It stands as a milestone on the road to serfdom.

The Congressional Research Service has now confirmed what HHS Secretary Kathleen Sebelius pretends not to know but what Diane Cohen and I explained here: 

[I]f President Obama fails to appoint any IPAB members, all these powers fall to Secretary of Health and Human Services Kathleen Sebelius.

That’s an awful lot of power to give any one person, particularly someone who has shown as much willingness to abuse her power as Sebelius has. 

I would also like the Congressional Research Service to address a feature of IPAB that Cohen and I first exposed. According to the statute, we write: 

Congress may only stop IPAB from issuing self-executing legislative proposals if three-fifths of all sworn members of Congress pass a joint resolution to dissolve IPAB during a short window in 2017. Even then, IPAB’s enabling statute dictates the terms of its own repeal, and it continues to grant IPAB the power to legislate for six months after Congress repeals it. If Congress fails to repeal IPAB through this process, then Congress can never again alter or reject IPAB’s proposals.

You read that right. For more, read our paper, especially Box 3 on page 9.

CRS, I’m interested to know what you think. Take a close look at the law and get back to me.

Topics: 
General, Government and Politics, Health Care

Republicans Slowly Catch Up to the 21st Century

By
David Boaz

Public opinion on gay marriage has changed a lot in recent years, perhaps more rapidly than on any other major issue. Yet as Jonathan Rauch noted last year, one demographic group has resisted that change: Republicans. As he wrote:

In moving as decisively as they have on gay rights, the Democrats are following the country….

But the dissenters have not vanished. Rather, they have holed up inside the Republican Party. According to polling by the Pew Research Center, two-thirds of Democrats and almost 60 percent of independents call same-sex relations morally acceptable; only a bit over a third of Republicans agree. White evangelicals, in particular, are unique among major demographic and religious categories (including Catholics) in their fierce disapproval of homosexuality, and these days the vast majority of them (70 percent, according to Pew) are Republican or lean Republican.

To put the matter bluntly, the Republican Party is becoming an isolated bastion of anti-gay sentiment. That is not because Republicans and conservatives are immune to the general trend toward acceptance of homosexuality. It is because the trend is slower among Republicans.

But in today’s Washington Post there’s some interesting evidence of movement among Republicans. A strong majority of voters in Virginia, a state that passed a gay marriage ban in 2006, and 40 percent of Republicans now say “it should be legal for gay couples to get married.” Note the changes from 2006 in this Post graphic:

Washington Post graphic

Note especially that column in the lower right. How has public opinion in Virginia changed since the 2006 amendment vote? Support for gay marriage (or opposition to a ban) has risen by 13 points. Independents are up only 3 points. Democrats are up by 7 points, perhaps because of the endorsement of President Obama. And Republican support is up 25 points.

Last year, I called the sudden silence of Republican leaders on gay marriage “the sound of social change.” It looks like they knew which way the wind was blowing in their own base.

Topics: 
Government and Politics, Law and Civil Liberties

Debating Global Affairs in Doha

By
Doug Bandow

Qatar is much in the news, as the small Persian Gulf sheikdom attempts to extend its influence. It promoted revolution in Libya and is doing the same in Syria. Of course, the ruling family is less enthused with Iranian revolutionaries and looks askance at Shia democracy protestors in Bahrain. (So does the U.S., of course, which is threatening to bomb the regime in Tehran and has said little about Bahrain’s Sunni monarchy as it busily represses the country’s Shia majority.)

However, Qatar also engages in more mundane activities, such as hosting the annual Doha Forum, which brings together world leaders to discuss important international topics. Qatar takes the event seriously. Explains the official website: “Held in the presence of His Highness Sheikh Hamad bin Khalifa Al Thani, Emir of the State of Qatar, who will preside over the opening ceremony on May 20th, the forum will commence with an address by His Excellency Sheikh Hamad bin Jassim Al Thani, Prime Minister and Minister of Foreign Affairs.”

Lesser personages also participate, which explains why I’ve been invited to attend. I will be flying over this weekend. The conference begins on Monday and sessions will cover international politics and the global economy, Arabs and the changing world, global economic development, challenges facing new Arab democracies, international cooperation, human rights, and digital media.

I’m looking forward to the event and, frankly, even more to discussions outside of the formal sessions. It has been several years since I’ve been to Qatar, so it will be interesting to see how the country is adjusting to the Arab Spring. It also will be illuminating to compare Qatar to Dubai, another small but ambitious Gulf state, which I visited last week.

The Persian Gulf remains the fulcrum of important world events and potential American military intervention. In fact, my nephew has been deployed there in recent weeks, though hopefully will be returning home soon. Although travel to the region doesn’t turn one into an instant expert, it does help give a practical feel to events which too often are viewed primarily through the skewed prism of Washington.

Topics: 
Foreign Policy and National Security

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