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.

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.

• The OECD has allied itself with the so-called Occupy movement to push for bigger government and higher taxes.
• The OECD, in an effort to promote redistributionism, has concocted absurdly misleading statistics claiming that there is more poverty in the United States than in Greece, Hungary, Portugal, or Turkey.
• The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.
• The OECD supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”
• The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

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 »

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:

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.