Tag Archives: IRS

Fiscal Foolishness a Costly Salve For Midterm Jitters

05 Friday Aug 2022

Posted by in Fiscal policy, Inflation

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The “Inflation Reduction Act” (IRA) is about as fatuous a name for pork-barrel spending and taxes as its proponents could have dreamt up! But that’s the preposterous appellation given to the reconciliation bill congressional Democrats hope to approve. Are we to believe that Congress suddenly recognizes the inflationary effects of governments deficits? Well, the trouble is the projected revenue enhancements (taxes) and cost savings are heavily backloaded. It’s mostly spending up front, which is exactly how we got to this point. There are a number of provisions intended to increase domestic energy production in the hope of easing cost-push, supply-side price pressures. However, provisions relating to fossil fuel production are dependent on green energy projects in the same locales. So, even if we get more oil, we’ll still be pissing away resources on wind and solar technologies that will never be reliable sources of power. Even worse, the tax provisions in the bill will have burdens falling heavily on wage earners, despite the Administration’s pretensions of taxing only rich corporations and their shareholders.

The Numbers

The IRA (itself an irritating acronym) would add $433 billion of new federal outlays through 2031 (*investments*, because seemingly every federal outlay is an “investment” these days). At least that’s the deal that Chuck Schumer and Joe Manchin agreed to. As the table below shows, these outlays are mostly for climate initiatives, but the figure includes almost $70 billion of extended Obamacare subsidies. There is almost $740 billion of revenue enhancements, which are weighted toward the latter half of the ten-year budget window.

The deal reduces the federal budget deficit by about $300 billion over ten years, but that takes a while… somewhat larger deficits are projected through 2026. I should note that the Congressional Budget Office has issued a new score this week that puts the savings at a much lower $102 billion. However, that “new” score does not reflect the changes demanded by Kyrsten Sinema (R-AZ).

Spending

Budget projections are usually dependent on assumptions about the duration of various measures, among many other things like economic growth. For example, the increased Obamacare subsidies are an extension, and the scoring assumes they end in 2026. It’s hard to believe they won’t be extended again when the time comes. Over ten years, that would cut the deficit reduction roughly in half.

The bill is laden with green energy subsidies intended to reduce CO2 emissions. They will accomplish little in that respect, but what the subsidies will do is enrich well-healed cronies while reducing the stability of the electric grid. Tax credits for electric vehicles will be utilized primarily by wealthier individuals, though there are tax credits for energy-efficient appliances and the like, which might benefit a broader slice of the population. And while there are a few provisions that might address supplies of fossil fuels and investment in nuclear energy, these are but a sop to Joe Manchin and misdirection against critics of Joe Biden’s disastrous energy policies.

Revenue

Should we be impressed that the Democrats have proposed a bill that raises revenue more than spending? For their part, the Democrats insist that the bill will impose no new taxes on those with taxable incomes less than $400,000. That’s unlikely, as explained below. As a matter of macroeconomic stability, with the economy teetering on the edge of recession, it’s probably not a great time to raise taxes on anyone. However, Keynesians could say the same thing about my preferred approach to deficit reduction: cutting spending! So I won’t press that point too much. However, the tax provisions in the IRA are damaging not so much because they depress demand, but because they distort economic incentives. Let’s consider the three major tax components:

1. IRS enforcement: this would provide about $80 billion in extra IRS funding over 10 years. It is expected to result in a substantial number of additional IRS tax audits (placed as high as 1.2 million). Democrats assert that it will raise an additional $400 billion, but the CBO says it’s likely to be much lower($124 billion). This will certainly ensnare a large number of taxpayers earning less than $400,000 and impose substantial compliance costs on individuals and businesses. A simplified tax code would obviate much of this wasteful activity, but our elected representatives can’t seem to find their way to that obvious solution. In any case, pardon my suspicions that this increase in funding to enforce a Byzantine tax code might be used to weaponize the IRS against parties harboring disfavored political positions. Shades of Lois Lerner!

2. Carried Interest: Oops! Apparently the Democrat leadership just bought off Kyrsten Sinema by eliminating this provision and replacing it with another awful tax…. See #3 below. The next paragraph briefly discusses what the tax change for carried interest would have entailed:

The original bill sought to end the favorable tax treatment of “carried interest”, which is earned by private equity managers but is akin to the “sweat equity” earned by anyone making a contribution to the value of an investment without actually contributing a proportionate amount of capital. I’ve written about this before here. Carried interest income is taxed at the long-term capital gains tax rate, which is usually lower than tax rates on ordinary income. This treatment is really the same as for any partnership that allocates gains to partners, but populist rhetoric has it that it is used exclusively by nasty private equity managers. Changing this treatment for private equity firms would represent gross discrimination against firms that make a valuable contribution to the market for the ownership control of business enterprises, which helps to discipline the management of resources in the private sector.

3. Tax on Corporate Stock Buy-Backs: it’s not uncommon for firms to use cash they’ve generated from operations to repurchase shares of stock issued in past. Unaccountably, Democrats regard this as a “wasteful” activity designed to unfairly enrich shareholders. However, it is a perfectly legitimate way for firms to return capital to owners. The tax would create an incentive for managers to choose less efficient alternatives for the use of excess funds. In any case, the unrestricted freedom of owners to empower managers to repurchase shares is a fundamental property right.

A tax on corporate stock buybacks can result in the triple taxation of corporate profits. Profits are taxed at the firm level, and if the firm uses after-tax profits to repurchases shares, then the profits are taxed again, and further, any gain to shareholders would be subject to capital gains tax. This is one more violation of the old principle that income should be taxed once and only once.

The proposed excise tax on buy-backs now added to the IRA is *expected* to raise more revenue than the carried interest revision would have, but adjustments to behavior have a way of stymying expectations. Research has demonstrated that firms who buy back their shares often outperform their peers. But again, there are always politicians who wish to create more frictions in capital markets because firms and investors are easy political marks, and because these politocos do not understand the key role of capital markets in allocating resources efficiently between uses and across time.

4. Corporate taxes: Imposing a minimum tax rate of 15% on corporate book income above $1 billion is a highly controversial part of the IRA. While supporters contend that the burden would fall only on wealthy shareholders, in fact the burden would be heavily distributed across lower income ranges. First, a great many working people are corporate shareholders through their individual or employer-sponsored savings plans. Second, corporate employees shoulder a large percentage of the burden of corporate taxes via reduced wages and benefits. Here’s Brad Polumbo on the incidence of the corporate tax burden:

“William C. Randolph of the Congressional Budget Office found that for every dollar raised by the corporate tax, approximately 70 cents comes out of workers’ wages. Further confirming this finding, research from the Kansas City Federal Reserve concluded that a 10% increase in corporate taxes reduces wages by 7%.”

This again demonstrates the dishonesty of claims that no one with an income below $400,000 will be taxed under the IRA. In addition, almost 50% of the revenue from this minimum tax will come from the manufacturing sector:

As Eric Boehm states at the last link, “So much for improving American manufacturers’ competitiveness!” Incidentally, it’s estimated that the bill would cause differential increases in the effective corporate tax on investments in equipment, structures, and inventories. This is not exactly a prescription for deepening the stock of capital or for insulating the American economy from supply shocks!

5. Medicare Drug Prices: A final source of deficit reduction is the de facto imposition of price controls on certain prescription drugs under Medicare Part D. A small amount of savings to the government are claimed to begin in 2023. However, the rules under which this will be administered probably won’t be established for some time, so the savings may well be exaggerated. It’s unclear when the so-called “negotiations” with drug companies will begin, but they will take place under the threat of massive fines for failing to agree to CMS’s terms. And as with any price control, it’s likely to impinge on supply — the availability of drugs to seniors, and it is questionable whether seniors will reap any savings on drugs that will remain available.

Do Words Have No Meaning?

The IRA’s vaunted anti-inflationary effects are a pipe dream. A Wharton Study found that the reduction in inflation would be minuscule:

“We estimate that the Inflation Reduction Act will produce a very small increase in inflation for the first few years, up to 0.05 percent points in 2024. We estimate a 0.25 percentage point fall in the PCE price index by the late 2020s. These point estimates, however, are not statistically different than zero, thereby indicating a very low level of confidence that the legislation will have any impact on inflation.”

Over 230 economists have weighed in on the poor prospects that the IRA will achieve what its name suggests. And let’s face it: not even the general public has any confidence that the IRA will actually reduce inflation:

Conclusion

The Inflation Reduction Act is a destructive piece of legislation and rather galling in its many pretenses. I’m all for deficit reduction, but the key to doing so is to cut the growth in spending! Reducing the government’s coerced absorption of resources relative to the size of the economy prevents “crowding out” of private, voluntary, market-tested activity. It also prevents the need for greater tax distortions that undermine economic performance.

The federal government has played host to huge pandemic relief bills over the past two years. Then we have Joe Biden’s move to forgive student debt, a benefit flowing largely to higher income individuals having accumulated debt while in graduate programs. And then, Congress passed a bill to subsidize chip manufacturers who were already investing heavily in domestic production facilities. All the while, the Biden Administration was doing everything in its power to destroy the fossil fuel industry. So now, Democrats hope to follow-up on all that with a bill stuffed with rewards for cronies in the form of renewable energy subsidies, financed largely on the backs of the same individuals who they’ve sworn they won’t tax! The dishonesty is breathtaking! This crowd is so eager to do anything before the midterm elections that they’ll shoot for the nation’s feet!

Tax Returns, Politics and Privacy

12 Sunday May 2019

Posted by in Privacy, Taxes

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It’s a constitutional crisis! Or so claim congressional Democrats, but at this point it looks more like a one-party panic attack. They keep sniffing the trailing fumes of the Mueller investigation, which turned up nothing on the President, or at least nothing worth prosecuting. There is also an ongoing dispute over the President’s tax returns, which he has chosen not to make public. Last week, House Ways and Means Committee Chairman Richard Neal subpoenaed the IRS for six years of Trump’s tax returns, but that is likely to be ignored. There is no law or requirement that Trump release the returns, and the IRS would be under no obligation to comply with the subpoena if it has “no legislative purpose”, as Treasury Secretary Steve Mnuchin said of an earlier request by Neal. For his part, Trump has falsely claimed to the public that an ongoing audit prevents him from releasing his tax documents, but he is fully within his legal rights to withhold his returns, at least for now. His decision is, no doubt, political and it may be wise to that extent. Nevertheless, the suspicion that Trump is a tax cheat is fueled by his very reluctance to make the returns public.

Constitutional Protection

The legality of Trump’s refusals to make the returns public is established in the Constitution, according to law professor Adam Grewal of the University of Iowa:

“Though a federal statute seemingly compels the IRS to furnish, on request, anyone’s tax returns to some congressional committees, a statute cannot transcend the constitutional limits on Congress’s investigative authority. Congress enjoys a near-automatic right to review a President’s tax returns only in the impeachment context.”

If explicit action is taken to impeach the President, justifiably or not, then presumably he or the IRS would be forced to turn over his tax returns to Congress. Even then, however, it would probably become the subject of a protracted court fight.

Partisan Charges

It’s not surprising that Trump has engaged expensive tax experts for the Trump organization and his personal taxes. Of course he has! Anyone in his position would be crazy not to. Minimizing taxes is a complex undertaking even for those having far less wealth and business complexity than a Donald Trump. There is no reason why he should have foregone any tax advantages for which he or his business was entitled. And in fact, he was entitled to use losses on a number of failed enterprises over the years to offset other income for tax purposes. Under these circumstances, a tax liability of zero is not terribly surprising.

Specific claims that Trump is a tax cheat are as yet unfounded. As Jeffrey Carter explains, there is an array of tax provisions intended to provide incentives to businesses precisely because tax law has been crafted to encourage business activity; real estate development is no exception. The idea is that businesses encourage employment, income, incremental tax revenue, and eventually more development. While I generally oppose tax provisions that impinge on specific kinds of human activity, there is nothing illegal or even immoral about taking advantage of tax rules that exist. In fact, there are legal tax maneuvers that can allow a successful real estate development business to generate continuing tax losses.

There are allegations that the Trump organization used fraudulent appraisals to understate values of buildings as a means of minimizing taxes. A variety of appraisal techniques are used in commercial real estate, each involving a series of assumptions and possible adjustments. Appraisals might be especially difficult for complex properties such as large, high-end gambling developments. Perhaps reviews of appraisals are part of the ongoing IRS audit to which Trump referred. There’s little doubt that Trump’s tax advisors would have sought to use the most advantageous techniques and assumptions that would pass scrutiny by the IRS and other tax authorities. However, it is unlikely that he was intimately involved in the appraisal process himself. The audit should determine whether their methods were excessive, not a swarm of politicians and leftist journalists. The penalties for any past understatement of taxes might be financially significant, but his presidency would almost certainly survive such a finding.

Again, Trump may be wise to withhold his tax returns. In today’s political environment, every deduction, credit, and loss carry-forward would be characterized by Democrats and the media as an affront to the American people. In fact, most American taxpayers attempt to minimize their taxes, as well they should. In a world with a simple, sane tax code, a simple definition of taxable income, and a competent IRS, there would be little reason for the clamor over public disclosure of tax data by public officials or candidates for office.

Universal Tax Disclosure? No

That brings me to the subject of a rather striking proposal: Robin Hanson believes that all tax returns should be made publicly available: yours, mine and Donald Trump’s. That change was made in the U.S. in 1924, but soon reversed, according to Hanson. It is done today in Norway, though the identity of anyone seeking that information on a taxpayer is made available to the taxpayer. Without the latter condition, the idea seems like an invitation to voyeurism, or worse. The several rationales offered by Hanson all tend to fall under the rubric that “transparency is good”. He includes critical remarks from Tyler Cowan on the proposal, dismissing them all on various grounds. But I happen to agree with Cowan that not all transparency is good. In fact, my first reaction is that the proposal would be an unnecessary extension of the intrusion into private affairs made by government taxation of income.

Universal tax disclosure might have some value in discouraging tax evasion, and perhaps the IRS could create a schedule of buy-off rates by income level at which tax information would be kept private. However, I’m skeptical of the other benefits cited by Hanson. For one thing, if the identity of the inquirer is revealed, many of the purported benefits would be nullified by discouraging the queries. To the extent that transparency has value, many credit transactions or credit payment mechanisms already require verification of income. Insurance underwriting is also sometimes dependent on proof of income. I am skeptical that the ability of workers to collect information from the tax returns of other individuals would greatly improve the efficiency of labor markets. The value of income data to counter-parties in other kinds of relationships, such as prospective marriage, would seem to be balanced by the value of privacy. Hanson says that people don’t place a high value on privacy, but it clearly has value, and I’m not sure his Twitter poll with a single price point is a valid test of the proposition. And again, with the simple tax code we should have, the benefits of acquiring the tax returns of politicians would boil down to an opportunity for shaming the rich and “tax pinchfists” (successful tax minimizers), which is what some of this is about anyway.

Conclusion

Donald Trump’s tax returns are a prize that his detractors hope will reveal an abundance of classist political fodder and perhaps even evidence of misdeeds. They can only hope. Unless Articles of Impeachment are drafted in the House of Representatives, the Constitution protects President Trump’s tax returns from congressional scrutiny. Trump is probably wise to resist disclosure of his taxes, since the returns would be picked over by the Left and criticized for any whiff of tax management, legal or otherwise. Trump’s businesses hired experts to aggressively minimize tax liabilities, but there is no evidence that they engineered any illegal maneuvers.

Finally, to suggest that all tax returns be made publicly accessible is to support a massive invasion of privacy. Then again, the very imposition of our complex income tax code is a massive invasion of privacy, and one that creates a substantial compliance burden on all income earners.

The Oddly Cherished Tax Refund

13 Wednesday Feb 2019

Posted by in Taxes, Uncategorized

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Lately I’ve heard people complain bitterly that their federal tax refunds will be smaller this year. It’s as if they expected the 2017 tax package to lead to a larger refund on taxes paid in 2018, rather than a lower tax liability. Yes, those are two different things. About 80% of U.S. taxpayers are expected to see a net reduction in their federal taxes for 2018, but they might or might not receive refunds. Was your withholding reduced by the new tax law? Then you might receive a smaller refund even if your taxes are lower. Likewise, if you reduced your withholding too much, you will receive a smaller refund. Did your income rise? Then maybe you’ll pay more taxes and see a smaller refund.

The withholding tables were adjusted by the IRS in early 2018 based on the changes dictated by the tax package. Lower withholding was applied to many taxpayers, but it is often possible to manage one’s withholding rate within certain limits. How many of those pining for a refund took action to preserve a higher level of withholding? Let’s hope it was zero, for their sake.

Don’t get me wrong: if you’re not sure whether you’ll owe taxes when you file, it’s always nice to hear that a refund is coming. Moreover, the withholding allowance calculation is a very imprecise guide to one’s tax liability. Clearly the tax package did not benefit every taxpayer, especially high earners and small business people. Those in high-tax states lost a chunk of their state and local tax deduction. And another thing was somewhat irritating: continuing high compliance costs. Even under this so-called tax simplification, it remains necessary for many taxpayers to collect information related to potential deductions. After all, how else would you know whether it makes more sense to itemize rather than take the larger standard deductions now available? Small business people have some other compelling reasons to complain about this “simplification”.

Jazz Shaw at Hot Air observed that this Washington Post article about reduced tax refunds was crafted as if to inflame resentment among taxpayers:

“This is certainly a clever bit of ‘coverage’ of a story based primarily on people bitching on Twitter. Notice how the WaPo manages to promote a hashtag denigrating the tax cuts in the second paragraph. [#GOPTaxScam] The premise here is clearly that the tax cuts reduced some people’s refunds, only Republicans voted for the tax cuts, therefore the tax cuts must be bad and so are the Republicans.”

I don’t have the link now, but yesterday Alex Tabarrok had this sarcastic reaction to the WaPo article:

“Voters irate because the government didn’t force them to give it an interest-free loan…”

Perhaps no explanation is required, but the government has free use of your funds whenever too much is withheld from your regular paycheck — it pays you no interest on the “loan” as part of your ultimate refund. If getting that refund is the only way you can save, you’re doing it wrong.

 

 

Step-Up, Pay-Up & Shut-Up

23 Friday Jan 2015

Posted by in Taxes

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Predicting support among relatively affluent leftists for President Obama’s proposed elimination of the step-up in tax basis at death is probably a simple matter of knowing whether they have a surviving parent or whether they have a bequest motive of their own. Perhaps I’m too cynical: it probably depends on age as well (as that may influence awareness of the tax provision). Still, I’ll bet my predictions would be highly accurate for “affluent leftists of a certain age”.

A technical digression: the cost basis of an asset is the price originally paid. The tax basis is the same until the owner’s death. When the asset is ultimately sold, the gain over and above the tax basis is taxed at the capital gains tax rate, now 20% (plus a 3.8% Medicare surtax for incomes greater than $200,000). However, under current law, when an asset is held until death, an heir’s tax basis is “stepped-up” from cost to the asset’s value at that time. No income tax is owed at the time of the inheritance even if the asset is sold immediately. The estate tax still applies to the asset’s value (depending on the size of the estate and whether there is a surviving spouse), but there is no capital gains tax liability until an heir sells the asset at a price greater than the stepped-up tax basis.

Our rhetorically-inclined president calls this feature of the income tax code a “loophole,” despite the fact that it is a legal feature of our ridiculously-complicated income tax and that inherited assets are still subject to the estate tax.

Obama’s proposal would eliminate the stepped-up basis at death. The increase in value would be subject to the capital gains tax at the time of inheritance (even if the asset is not sold) and subject to the estate tax (40%) if the size of the estate exceeds a threshold (about $5.4 million per individual). In addition, the President wants to increase the capital gains tax rate to 24.2% (plus 3.8% yields the oft-quoted 28%). These points are generally unaffected by whether the asset is held in trust for the full benefit of the heir. There are some exemptions in Obama’s proposal to eliminate stepped-up tax basis for small, family-owned businesses and for gains on primary residences. Also, gains would be taxed only after the first $100,000 per individual and only at the time of the second death for a couple.

The double taxation of capital gains in large estates might not evoke much sympathy, but it would ultimately have negative consequences for the economy. It would bleed capital out of productive, employment-generating private investments to feed a resource-hungry Leviathan, notwithstanding Obama’s high-minded pretensions. Perhaps worse is the impact on smaller estates held by conscientious middle-class savers who have understood the magic of compound growth. The aggrieved children of many such savers would find themselves in the grips of a significant income tax liability, which might require a fire-sale of assets in order to make payments to the IRS.

Complex features like the stepped-up basis are not hallmarks of a well-designed tax system. They tend to be promulgated as a way of offsetting other features of the tax code that would otherwise be punitive. If anything, this web of features is an impediment to efficient revenue generation. A simple tax code would minimize compliance costs and eliminate the many provisions that distort economic decisions. But complexity lends itself to political manipulation, which is the subtext for President Obama’s failure to propose any sort off meaningful tax simplification. Instead, he proposes even more complexity to be administered by that most trusted of institutions: the IRS. Fortunately, the president’s tax package stands no chance of becoming law, but it is illustrative of his statist agenda and his economic ignorance.

This post at Reason critiques this and other aspects of the President’s tax plan. This note in Forbes gives more detail about the proposal but is just a bit too optimistic about its potential to benefit the middle class. For a variety of reasons, the middle class is unlikely to benefit in the long-run. Slower economic growth will take its toll, and the sad truth is that Obama is seeking to increase middle-class dependence on the state.

IRS Parlance: “Difficult To Retrieve” = “Destroyed”

26 Tuesday Aug 2014

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DOJ attorneys told Judicial Watch on Friday that the federal government backs up all emails “in case of a government-wide catastrophe.” According to these attorneys, the real reason that the IRS has not provided Lois Lerner’s emails is that retrieval from back-up tapes would be “onerous.” Here is Judicial Watch’s statement on the discovery, which includes this quote from Judicial Watch President Tom Fitton: “You can bet we are going to ask the court for immediate assistance in cutting through this massive obstruction of justice.”

The latest revelations are related to the ongoing Judicial Watch v. IRS lawsuit over IRS abuses being heard by U.S. District Court Judge Emmett Sullivan. In July 10 ruling, Judge Sullivan gave the IRS 30 days to provide details regarding the missing emails. Following the agency’s response, which seemed less than forthcoming, “Judge Sullivan authorized Judicial Watch to submit a request for limited discovery into the missing IRS records after September 10.”

A Dumb Tax Code Tests Loyalty

07 Thursday Aug 2014

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The complex and punitive tax treatment of U.S. corporate income creates incentives for firms to seek relief through various maneuvers. According to the TaxProf Blog, quoting KPMG, the U.S. corporate tax rate is the highest among industrialized countries and the second highest in the world. U.S. corporations are taxed on profits earned overseas, which is disadvantageous relative to so-called “territorial” tax systems. Corporate income is taxed twice, as well: once as corporate income and again when income is paid to shareholders, though often at a favorable “qualified dividend” rate (and double taxation of dividends is not uncommon internationally). Of course, there are myriad provisions in the tax code that reduce the severity of the corporate tax bite by providing deductions (some of which are mentioned at the first link). But the code is quite complex and it creates unnecessary compliance costs; on balance, it provides compelling reasons for corporations to attempt to shift income overseas to obtain more favorable treatment. A growing number of firms have engaged in so-called corporate “tax inversions,” which involve shifting ownership to an overseas corporate parent. This is said to represent a threat to the U.S. tax base, and it has recently captured the attention of the media.

What should be done about this trend? The first link above, from the TaxProf, discusses two options: “… a general reform of the U.S. corporate tax and specific provisions to deal with tax-motivated international mergers.” The first option would involve a vastly simpler tax code, with fewer and less generous deductions and lower tax rates. That change would be desirable if only to reduce compliance costs, but it could also be used to make the U.S. tax code more competitive internationally. A strong case can be made for eliminating the corporate income tax entirely, based on the likely favorable impact on employment, wages and international competitiveness that it would engender.

The second option mentioned in connection with reducing tax inversions involves more targeted measures which do nothing to reduce the complexity of the tax code. Apparently, the Treasury is investigating a “long list” of alternative administrative actions to discourage inversions. Again, from the TaxProf:

The President’s FY2015 budget proposes to treat all mergers as U.S. firms if the U.S. firm’s shareholders have 50% or more ownership of the combined firm or maintains management and control in the United States. Similar legislation has also been introduced in the 113th Congress.

Public attention may have discouraged Walgreens from pursuing an inversion, and the Obama administration is clearly “jawboning” in an effort to stop the activity.

Finally, Jonathan Alter wants U.S. corporations to take “loyalty oaths” to prevent them from seeking out inversion opportunities. This proposal is certainly “creepy,” as noted by J.D. Tuccille in Reason Magazine. Loyalty oaths? Seriously? From Tuccille:

… this whole “economic patriotism” crusade starts at a bad place and spirals down into a cesspool. So, if that’s the model you work from…

To make it clear where this all goes, the National Recovery Administration once boasted, “The Fascist Principles are very similar to those we have been evolving here in America.” Its head, Hugh Johnson, noted about the adoption or rejection of the blue eagle symbol and its code, “Those who are not with us are against us.”

Where else might this go? Will “buy American” form the basis of a loyalty oath of some kind? What tax consequences might await violators? What other forms of cooperation with intrusive authorities might be enforced in this way? David Harsanyi has some interesting thoughts on the question of “properly channeled nationalism”:

It’s worth remembering that when Alter proposes that Obama discipline companies that have done nothing illegal or illegitimate, he’s simply taking Obama’s “economic patriotism” to its next logical step. He wants the administration to threaten the close “easy access to American markets” companies enjoy. And really, haven’t we all suffered enough with all this unhindered access to affordable goods, exotic merchandise and cool gadgets? Samsung. Honda. Toyota. Nestle. GlaxoSmithKline. Do you believe shoppers concern themselves with the fact that Food Lion is subsidiary of a Belgium company? I suspect that most Americans, in their everyday lives, don’t care where their favorite companies are situated, because intuitively they understand the benefits of trade.

Too many times already, I have heard statements implying disloyalty after daring to criticize the president’s initiatives. That’s a very bad sign. The U.S. achieved greatness in large part because it offered basic freedoms in personal, social and economic life. Decisions about what and with whom to do business, though not completely free of government interference, must be a person’s own, even in voluntary association with others (as in the corporate form). People should be free to transfer their assets abroad or to sell their assets to anyone, regardless of domicile. If this is a desirable place to live and do business, such freedoms should never be a source of concern. In fact, with a tax code that is simpler and more competitive, it could never be anything but a source of strength.

Killing Bitcoin

26 Wednesday Mar 2014

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The IRS just ruled that Bitcoin will be treated as property. That means any transaction conducted with Bitcoin as currency could generate a capital gain on the Bitcoins traded, which must be reported. To obtain a value, the ruling says you have to check the current rate on an exchange at the time of a transaction.

So that could pretty much put Bitcoin out of business as a medium of exchange in the U.S. There is already an exception in the tax code for foreign currencies, which can fluctuate in value relative to the dollar between transactions. Why not Bitcoin? But there may be a reprieve: “…the IRS’ guidance may not stand forever. The Treasury Department should now begin developing formal regulations tailored to digital currencies.”

 

The Intrusive Retribution Service

25 Tuesday Mar 2014

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There is good reason to question validity of IRS investigation. Make that plural: reasons! Right at the top of the list is Obama’s assertion, on national television, that there was “‘not even a smidgen of corruption’ in the IRS political targeting scandal,” just as the so-called investigation was getting underway. According to the author of the piece at the link, Obama’s statement could even be construed as obstruction of justice. Special prosecutor, please.