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WSJ: This is Your IRS at Work

You have the Editorial Board at the WSJ taking the IRS to task. The following article outlines numerous problems listed in multiple agency audits, and yet Congress is still eager to give the IRS an extra $80 billion. I’ve reprinted it below.

The new Inflation Reduction Act has many damaging provisions, but for sheer government gall the $80 billion reward to the Internal Revenue Service stands out. The money will go to hire 87,000 new employees, doubling its current payroll. This is also doubling down on incompetence, as anyone can see in the official reports of the Treasury Inspector General for Tax Administration (Tigta).

We’ve read those reports for the last several years so you don’t have to, and the experience is a government version of finding yourself in a blighted neighborhood for the first time. You can’t believe it’s that bad. The trouble goes beyond the oft-cited failures like answering only 10% of taxpayer calls, or a backlog of 17 million unprocessed tax returns. The audits reveal an agency that can’t do its basic job well but will terrorize taxpayers whether deserving or not.

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Consider the agency’s chronic mishandling of tax credits. By the IRS’s own admission, some $19 billion—or 28%—of earned-income tax credit payments in fiscal 2021 were “improper.” The amount hasn’t improved despite years of IRS promises to do better.

• A January Tigta audit found that an estimated 67,000 claims—totaling $15.6 billion—for the low-income housing tax credit from 2015 to 2019 “lacked or did not match supporting documentation due to potential reporting errors or noncompliance.”

• A May audit found that 26% ($1.9 billion) of its American opportunity tax credits for education expenses were improper in fiscal 2021, and 27% ($541 million) of its net premium tax credits (ObamaCare) were improper in fiscal 2019 (the most recent year it estimated). The same May audit said the IRS acknowledged that 13% ($5.2 billion) of its enhanced child tax credit payments were improper.

• How did it handle $1,200 stimulus checks, the sick and paid family leave credit, or the employee retention tax credit? Unknown, since the agency didn’t estimate failure rates—for which Tigta rapped its knuckles.

• A September 2021 audit found the IRS in 2020 issued 89,338 notices to taxpayers insisting that “balances were owed even though the taxes were not actually due.” Why? Because the feds had extended the filing deadline amid Covid but the IRS apparently didn’t notice.

• A February audit found the IRS department responsible for ensuring retirement-plan tax compliance suffered a 23% decline in the quality of its examinations from fiscal 2018 to fiscal 2020. In the past seven months, Tigta has issued searing reports on IRS mismanagement of everything from its partial-payment program for delinquent taxpayers, to its auditing of partnerships, to its struggle to handle internal employee misconduct.

• This ineptitude extends to programs Democrats insist will now raise revenue—those targeting higher earners. In 2010 Congress passed the Foreign Account Tax Compliance Act, which was supposed to identify wealthy Americans using undisclosed foreign accounts. Congress’s Joint Committee on Taxation said this would raise some $9 billion in revenue by fiscal 2020. Yet an April Tigta audit noted that while the IRS has spent $574 million to implement the law, the agency has drummed up only $14 million in compliance revenue.

• A July 2021 audit related the failure of the IRS small-business/self-employed division’s strategy, which began in 2010 to examine more returns from “high-income individual taxpayers.” The IRS defines high earners as those with income greater than $200,000. Yet from fiscal 2015 to the end of fiscal 2017 (when the strategy was shut down), 73% of returns targeted by the strategy fell below $200,000.

Democrats say a turbocharged IRS won’t pursue taxpayers earning less than $400,000, but don’t believe it. Middle-income Americans are easier marks, as they are more likely to write a check than engage in years of costly litigation.

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The Tigta site shows the IRS is good at one thing: punishing those who resist its demands. A March audit chastised the IRS for using lien foreclosure suits to confiscate “principal residences” from delinquent taxpayers, a process that does “not provide [taxpayers] the same legal protections as seizures.”

A March 2017 report related the agency’s crackdown on businesses flagged as potentially evading a law that requires financial institutions to report currency transactions exceeding $10,000. The IRS took to seizing property from its targets before even conducting interviews. Tigta reports that even when interviews were conducted, the IRS failed to advise the accused of their rights or the purpose of the interview, and failed to consider “realistic defenses or explanations.” Tigta found that “most” of those targeted (owners of gas stations, jewelry stores, scrap-metal dealers, restaurants) had not committed crimes, though many were never able to regain their property.

This is the IRS that Democrats are now arming with more money and manpower to unleash on Americans. The $80 billion is a demonstration of their priorities, and further proof of the rule that failure in government is invariably rewarded with a bigger budget.

Alan Blinder’s Blunder

Alan Blinder is a distinguished economist who insists on misleading the public about economic matters. The latest affair is found in Blinder’s Op-Ed, “A Speedy Recovery Depends on More Aid: Will Trump Deliver?” wherein Blinder deliberately misleads his readers about the economy and the road to recovery. Here are some of his statements:

  • “Mr. McConnell is a roadblock to more relief funds.”  It wasn’t McConnell, but Pelosi who refused to talk. McConnell put forth a relief package but because it did not include the extra state and local bailout funds desired by Pelosi, Pelosi would not even consider it. Yet, Blinder omits this. The assertion that McConnell is the one who is a “roadblock” is not only a difference of opinion, it’s an outright lie.
  • “Senators and the public need to understand that it was CARES and the rest that propped up the economy “artificially” as the virus was pulling it down.”  The economy is not artificially propped up. It is well on it’s way back to where it was prior to COVID.  In fact, just a paragraph prior to this one, Blinder notes that the recovery has been V-shaped, yet he suggests here that the relief given by CARES somehow wasn’t real relief. And if relief packages are indeed “artificial props”, why does he want another one? But what’s even worse is that Blinder, an economist mind you, believes so much in the CARES Act, but if anything, CARES restricted economic growth in the economy by paying people not to work and reducing incentives to work, so the recovery that we have experienced is despite the CARES Act, not because of it. 
  • “Americans are suffering from the tragic results of the Trump administration’s malign neglect of the virus.” Nothing could be more politically upside down. Trump was the first to restrict travel while the Dems screamed it was wrong to do so. Likewise, his vaccine programs have been aggressive enough to produce multiple vaccines that are now being implemented in the public. Blinder puts the blame on Trump, yet it was the states, not Trump, who imposed the lockdowns — many excessive and some still ongoing — that have shuttered industries and businesses. Some of these will never recover, yet the economic consequences of prolonged shutdowns are real, and rest squarely on the shoulders of states.   
  • “State and local governments, which are on the front lines in the battle against the virus, urgently need several hundred billion dollars in federal aid. They must balance their budgets.” Here’s the biggest falsehood. Blinder fails to mention that many states and local governments were in economic dire straits prior to COVID as a result of profligate spending and fiscal mismanagement, and this irresponsibility directly affects those particular governments’ recovery efforts today. The states with the biggest budget problems pre-COVID are the ones begging for the biggest bailouts. They are also the ones who have implemented some of the harshest and irrational lockdowns that have made things even worse. What’s more, these same governments have steadfastly refused to institute common sense restrictions on themselves such as freezing pay, furloughing workers, etc. It’s egregious, but Blinder just wants to paper over that part by calling for “balanced budgets.” None of these people who spent recklessly never cared for balanced budgets prior to now. And without changing spending habits nor making drastic cuts to the budget in the future will go right back to being in the hole.
  • “These folks have pretty straightforward needs: cash income, food, shelter and health care. The federal government knows how to provide these things.” This is cringe-worthy. Blinder forgets that it’s the American people who are the source of economic prosperity and he forgets that it is their taxpayer money earned through hard work and ingenuity. 

This article reveals that Blinder really is a shill for the Democrats, and used his column to mislead people into believing that bailing out states and local governments is the only way our economy is to be “saved.”  But it makes virtually no economic sense to spend massive amounts of taxpayer funds to cover up fiduciary irresponsibility. It would be reckless for Congress to commit any more money to such endeavors. McConnell knows this. We know this. Just about everyone knows this except for those leaders and governments who have never shown themselves to be accountable with someone else’s money — which is how they got in their financial budget shortfalls in the first place. 

Those are not leaders.  Blinder does a disservice to his readers by espousing some of the worst economic fallacies that will ultimately hurt, rather than help, fellow Americans.

“Notes on the News” Ineptitude

The Wall Street Journal has a feature called “Notes on the News” which is supposed to “walk you through the biggest news stories of the week.”  Unfortunately, their writer, Tyler Blint-Welsh is so inept and full of bias that he misses key points in his summaries to the detriment of WSJ readers. 

For instance, on July 26, while writing about federal agents being sent to US cities, he describes how federal officers have been patrolling Portland, Oregon since July 2, but utterly leaves out the fact that violence in Portland has been going on for much longer; many people and property have been injured, yet he ignores that fact in order to focus on the presence of federal authorities. He further mishandles the scenario by describing the use of force on protesters as “apparently without provocation.” However, anyone watching the videos of the circumstances can’t possibly make the assumption of apparent provocation; doing so is utterly inappropriate and dishonest. The protesters were trying to set the courthouse on fire with people in it, but he completely omits that from his analysis. He also chooses not to include the fact that the federal agents were there to protect the federal buildings that the mayor refused to protect but managed to mention that the mayor was tear-gassed by federal agents. The lopsided point-of-view is ridiculous.

Unfortunately, it doesn’t end there. Blint-Welsh also analyzes the situation with unemployment benefits which face an expiration at the end of the month, saying “that lack of progress could jeopardize the $600 weekly unemployment supplement that millions of Americans have been relying on since the pandemic triggered record numbers of jobless claims.” He further describes how the Democrats want to extend the $600 until January 2021 while noting that the Republicans want to reduce the benefit amount. However, he conveniently leaves out the fact that the reason the Republicans want to cut back payments is because a large number of recipients are paying more to stay home than if they went to work — which is hampering economic recovery. Forget about the fact that it shouldn’t be so readily available to collect because jobs are available. The extension that the Democrats want is unconscionable but he’s making it seem like the Democrat position is reasonable and that the Republicans are selfish and cold-hearted.

It’s hard to imagine that Blint-Welsh is so uninformed as to not know what’s actually going on, so the only conclusion is that he is intentionally distorting these situations. That is egregious for both the integrity of the Wall Street Journal and those who have to read his diatribes.

WSJ: NYC Business Proposals Are Unreasonable

Charles Passy’s article in the WSJ was a veiled plea to save the culinary scene of New York City. With two specific outrageous proposals, Passy’s economic bias here is unbearable. 

First, he describes how “bar and restaurant owners throughout the city say such claims are being denied at the present time because of policy exclusions, despite the businesses having paid thousands of dollars for their property and casualty insurance over the years.” As a result, Passy argues that insurance companies should be forced to cover things they never intended to cover (nor could it ever have been an insurable event).

Second, Passy endorses a “measure to prevent landlords of commercial properties from enforcing provisions that hold tenants, such as bar and restaurant owners, personally liable for rent should they be unable to pay because of the pandemic.” In other words, Passy wants to allow tenants to not be personally responsible for paying rents though they specifically agreed to it.

New York doesn’t have the right to pass such laws, giving money out and interfering in contractual relationships in which they are not a party. Not only is it illegal and immoral, but unconscionable. It is astounding that the WSJ would allow such an outrageous article.

WSJ: Do Quick Shutdowns Work to Fight the Spread of COVID?

The WSJ had a thoughtful opinion piece a couple of days ago. The author wanted to “quantify how many deaths were caused by delayed shutdown orders on a state-by-state basis”as a means to examine the efficacy of quick shutdown. Below are some key takeaways, and you can read the piece in full here.

“To normalize for an unambiguous comparison of deaths between states at the midpoint of an epidemic, we counted deaths per million population for a fixed 21-day period, measured from when the death rate first hit 1 per million—e.g.,‒three deaths in Iowa or 19 in New York state. A state’s “days to shutdown” was the time after a state crossed the 1 per million threshold until it ordered businesses shut down.

We ran a simple one-variable correlation of deaths per million and days to shutdown, which ranged from minus-10 days (some states shut down before any sign of Covid-19) to 35 days for South Dakota, one of seven states with limited or no shutdown. The correlation coefficient was 5.5%—so low that the engineers I used to employ would have summarized it as “no correlation” and moved on to find the real cause of the problem. (The trendline sloped downward—states that delayed more tended to have lower death rates—but that’s also a meaningless result due to the low correlation coefficient.)

No conclusions can be drawn about the states that sheltered quickly, because their death rates ran the full gamut, from 20 per million in Oregon to 360 in New York. This wide variation means that other variables—like population density or subway use—were more important. Our correlation coefficient for per-capita death rates vs. the population density was 44%. That suggests New York City might have benefited from its shutdown—but blindly copying New York’s policies in places with low Covid-19 death rates, such as my native Wisconsin, doesn’t make sense.”

The author then went on to examine Sweden’s policies (less restrictive than ours) and integrated those into his analysis:

“How did the Swedes do? They suffered 80 deaths per million 21 days after crossing the 1 per million threshold level. With 10 million people, Sweden’s death rate‒without a shutdown and massive unemployment‒is lower than that of the seven hardest-hit U.S. states—Massachusetts, Rhode Island, Louisiana, Connecticut, Michigan, New Jersey and New York—all of which, except Louisiana, shut down in three days or less.

We should cheer for Sweden to succeed, not ghoulishly bash them. They may prove that many aspects of the U.S. shutdown were mistakes—ineffective but economically devastating—and point the way to correcting them.”

Only time will tell what methodologies worked and what didn’t, but this is an important conversation to have, especially since the economy continues to worsen.