Alan Dlugash is a member of the New York State Society of CPAs (NYSSCPAs) serving on the Individual Tax Committee (and a previous chair), and is currently also a member of the IRS Relations Committee. He has also served on the Society’s Task Force on Tax Simplification as well as on the Special Committee for Reform of the Tax System whose report had been widely circulated. Additionally, he is a member of the American Institute of CPAs (AICPA) and its Tax Division.
Mr. Dlugash has over 40 years of accounting and taxation experience and recently gave an interview to the Atlas Society talking about taxes, bailouts, and New York City. Here are some highlights.
On taxing the rich:
“The standard view of Robin Hood is that he stole from the rich to give to the poor. But that’s not really what happened. Robin Hood didn’t steal from the rich. He stole from the government, which was impoverishing the people with excessive and inappropriate taxes. He stole from tax collectors, not the rich. Robin Hood, read correctly, is a libertarian.
The rich are people who create things that people want to buy. The government, on the other hand, doesn’t do anything productive. It takes your money then redistributes it to special-interest groups.
Taxing wealthy people and giving it to poor people does not make people more equal. It does the exact opposite. High taxes mean less money reinvested in businesses, which means fewer jobs. Moreover the people who get the money transfers are less likely to risk those benefits, which keeps them dependent and relatively poor. The idea that we can tax the rich to solve our problems is just wrong. Taxing the rich is just a recipe for making everybody worse off.
There are many, many ways in which the tax code is ridiculously unfair, but because high earners are often the victims, no one cares. There hasn’t been an honest article written on taxes in the New York Times in 20 years.”
On bailouts:
“In 2008 – 2010, the need for the Treasury to get involved was legitimate. Once they determined that the economy wasn’t going to tank, however, and that the banking system wasn’t going to collapse, after the first week or ten days, that should have been the end of it. Their review showed that the banking system was safe.
But politics overruled logic. There were really only a handful of banks that were in trouble because of the mortgages that the banks were holding. Most of the banks were not in danger. They were able to quantify their situation. But the Treasury decided that they were going to force every bank to take a bailout as if it were failing. This way, people wouldn’t know which banks were in trouble but think that all the banks were in trouble instead. I don’t know what they were drinking, because it was the dumbest idea ever. And they lied. That was the other thing. The government forced the banks under threat of criminal prosecution. If anyone hasn’t read John Allison’s book, The Financial Crisis and the Free Market Cure, about his experience at BBT, then read it now.
To me, the ensuing Obama Stimulus was criminal. Either stupid or evil, I’m not sure which. Obama just called it a stimulus package, but it was nothing of the sort. A stimulus is a one-time deal. The money goes out and is spent, and the budget returns to what it was. The administrative state had grown so big, however, that nothing like a shovel-ready project was possible. What Obama did instead was increase welfare, increase teacher pay, lower the threshold for people to qualify for food stamps, and other things that would not disappear as a one-time stimulus outlay but rather remain in the budget, which created huge deficits during the rest of his Administration.
Now, with the coronavirus pandemic, things are going to get even worse. We’re in a horrific situation, because we do need to deal with the virus. And we will need to spend. The best we can hope for is that they decide on an amount to spend in that regard, then make a commitment that once the virus danger is over to cut the budget.
Without the virus problems, which are new and severe, most of the budget is Medicare, Medicaid, and Social Security. If those programs are not reformed, our budget deficits will be impossible, coronavirus or not. There will be a tipping point. For a long time people have said, “Yes, we have a massive deficit, but it hasn’t hurt us so far, so let’s keep spending.” They ignore Stein’s Law: “If something can’t go on forever, it won’t.”
Well, we will wake up one day, and the rest of the world will have decided not to buy our debt any more. Our ability to keep printing money will end. People will no longer be willing to buy our bonds. There will either be huge inflation, or we’ll be unable even to refinance our maturing bonds. When something like that happens, I don’t know how we will undo it. I think we need to practice fiscal restraint now. Deal with the virus, absolutely, but afterwards commit to cut entitlements.
And it isn’t just the responsibility of government. People have to stop electing irresponsible politicians, stop believing pie-in-the-sky promises. Government has never been the answer. It is individuals who will pay the consequences of these massive deficits, and individuals who need now to take responsibility for their own finances and their own well-being.”
The interview is worth to read in its entirety, which you can find here.