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During the ongoing court case between Judicial Watch and the IRS, the IRS recently filed a “Defendant’s Opposition to the Plaintiff’s Motion Seeking Recovery”, protesting the continued FOIA requests regarding Lerner’s tapes.
Some remarkable information emerged. In the document, the IRS wrote that they have not searched IRS servers because “the servers would not result in the recovery of any information.”
The IRS further claimed no search was performed on the back-up tapes, because there was “no reason to believe that the tapes are a potential source of recovering” any lost emails.
What’s more, the IRS stated no there had not been a search on the government-wide back-up system because they had “no reason to believe such a system … even exists.” (contrary to earlier statements), and that the IRS didn’t submit “declarations about any of the foregoing items because it had no reason to believe that they were sources from which to recover information lost as a result of Lerner’s hard drive failure.”
So what did the IRS do? The IRS described how it collected information from IRS employees likely to be involved, “loaded that information onto an electronic server, processed it, and searched it”, creating what it calls “the Congressional database” for the purposes of the investigation. It is from there, and only there, that the IRS “is reviewing all documents in the Congressional database to determine whether they are responsive to Judical Watch’s FOIA requests”. Not email servers. Not back-up tapes. Not back-up systems.
So the IRS made a separate database, created from information it selected to go into the database, and searches that — hoping that database and search is satisfactory enough for the courts.
The IRS also protested Judicial Watch’s Motion Seeking Recovery on these grounds:
I. Judicial Watch is not Entitled to Discovery
II. Judicial Watch’s Motion is Premature
III. Judicial Watch’s Request for Discover is Inappropriately Broad and Vague|
The IRS specifically argued in its document that “the discovery is the rare exception in FOIA cases and should only be allowed under extraordinary circumstances, such as agency bad faith or conflicting declarations. No extraordinary circumstances are present here, and Judicial Watch cannot manufacture extraordinary circumstances through hearsay, innuendo, and bald assertions.”
In case anyone was wondering whether or not extraordinary circumstances, agency bad faith, or conflicting declarations applies, here’s a quick summary timeline produced by IJReview.
August 2013 – Congress issues the first subpoena for Lois Lerner’s emails from 1/1/2009 through 8/2/2013
September 2013 – Lerner resigns from the IRS.
October 2013 – House Oversight Committee issues second subpoena for the emails.
February 2014 – President Obama asserts to Bill O’Reilly that there was “not even a smidgen of corruption” at the IRS.
March 2014 – The IRS states the the emails from Lerner’s computers were removed, put in storage, but that they “are in fact searching” for them.
June 2014 – The IRS states that it has lost emails of other employees, all of which had been subpoenaed as well.
July 2014 – The IRS admits that it was told that the drives were likely able to be repaired, but opted to destroy them instead.
September 2014 – The IRS states that emails from more than 20 employees, all of which were were subpoenaed, were lost due to drive crashes.
November 2014 – The IRS admits that it never looked for the emails in the first place.
This court case will continue to drag on and on, hoping that enough time will pass that Americans will forget or lose interest in this scandal. Kudos to Judicial Watch for continuing to insist on information and integrity.
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Will the Republicans take the Senate? Election Day Links (to be updated periodically)
Republicans sense power shift; Dems rev up damage control
WASH POST: 97% CHANCE GOP TAKES SENATE
CNN 95%
NYT: 70%
PAPER: Where did O go wrong?
NYT: Irate Electorate…
Most ads on Obamacare…
WH Strategist: Dems Running from President ‘Look Like Chickensh*t’…
Guide to What to Watch for on Election Night…
Harry Reid’s fateful evening…
30 year old Republican set to be youngest congresswoman in history…
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The idea of “disparate impact” is an abomination that has taken root in the business world and is being pushed into other sectors as well, such as housing and labor. This idea holds that “a defendant can be held liable for discrimination for a race-neutral policy that statistically disadvantages a specific minority group even if that negative “impact” was neither foreseen nor intended. In such cases, defendants can be forced to pay for harm caused not by their own actions, but by economic and statistical realities, even if beyond their control.”
If we do not focus on substantially curbing or ending it, it will continue to grow, extorting huge sums from innocent companies and parties, creating an enormous economic burden on society, and allowing the tort bar to run amok. Yet it is vigorously being expanded by one man in particular: Thomas Perez.
There are many areas in business where charges of “discrimination”, often regarding race, could and are being made every day. Employment and mortgage origination are two of the most prevalent. The law requires — as it should — that for a company to be guilty of such discrimination, there must be an intent to discriminate.
But government agencies have found a way to overrule that requirement by developing the idea of “disparate impact”. Disparate impact allows if a protected class of citizens has a statistically lesser representation with respect to a business (hiring, mortgages origination, etc) it may be implied that the business has intentionally discriminated — because there is an adverse impact as a result. This is clearly irrational, since there may be many economic, societal, and local reasons for the particular statistical representation. Unfortunately, disparate impact puts the burden to show lack of discrimination on the employer, meaning he is guilty until proven innocent. In fact, in order for an employer to defend himself against such a charge, he would have to show that the “offending rule or practice” was a “business necessity”.
The current administration has been keen on applying disparate impact theory to a number of private companies, and appears intent on ramping up the practice. For example, Obama’s current Labor Secretary, Thomas Perez, had been particularly lucrative in this regard while serving as the Assistant Attorney General for the Civil Rights Division of the United States Department of Justice, his position prior to joining Obama’s cabinet. Last summer, National Review Online (NRO) covered some of Perez’s cases in recent years in his role of , noting that Perez “has applied that theory vigorously to force large settlements from financial companies even in cases where there was no evidence of actual racial discrimination”. In other words, employers can be sought after for violating the law, whether or not there was actual intent.
The White House in general, and Perez in particular, like disparate impact theory because it, as NRO noted, it “sets a very low bar for proving discrimination. Under it, prosecutors need not prove intent, merely that minorities have suffered a disparate impact from some action”.
This is the person who is currently the front-runner for Attorney General to succeed Eric Holder.
The Wall Street Journal has taken note of Perez’s penchant for “disparate impact” as well, calling it “Mr. Perez’s most controversial, and constitutionally questionable, position”, “as a measure of discrimination. According to this theory, if fewer blacks or Hispanics are hired than their percentage of the “relevant” population, then the employer must have discriminated, even if all hiring procedures were fair and racially neutral.” Again, intent need not actually be proven, but merely the affect of a practice or policy is enough to gain the attention of disparate impact advocates.
Current labor leaders have expressed unease with the possibility of now-Labor Secretary Thomas Perez assuming the role of AG, as his bias is pervasive:
“Ryan Williams of Worker Center Watch said that the labor secretary’s brief stint at the Labor Department has been defined by divisiveness and political ideology, rather than effective leadership or unbiased regulation. He pointed to the department’s funding of union front groups known as worker centers as an example of his bias.
“Perez has been charged with enforcing existing labor law. Unfortunately, he’s chosen only to enforce the law when it applies to employers, not to the Administration’s union allies,” Williams said in a release. “While the politicization of federal agencies is running critique of the Obama administration, the Justice Department is the one agency that should remain above the fray of politics, and Perez has demonstrated that he is incapable of serving as a neutral arbiter of the law.”
Patrick Semmens, a spokesman for the National Right to Work Foundation, said that Perez’s record gives no indication that he will abandon his politics to administer the law in a neutral manner.
“Tom Perez as Attorney General is a scary thought. If Perez is allowed to operate the Department of Justice the way he has run the Labor Department, he will consistently put the priorities of the president’s key political backers ahead of the rights of regular Americans,” he said.”
Housing is another area where “disparate impact” theory has entered the arena more frequently. In 2013, “The U.S. Department of Housing and Urban Development issued a regulation on “disparate impact,” codifying a long-used legal precedent that says the Fair Housing Act prohibits practices that result in discrimination “regardless of whether there was an intent to discriminate.”
A challenge to “disparate impact” policy in housing has been given the green light by the Supreme Court earlier this month, the third time to do so in the last 2 years. But the Obama administration has been so desperate to keep SCOTUS from potentially ruling against it, it vigorously mounted pressure to have the prior cases dropped. Guess who was the key player in the first case? Thomas Perez. Both the WSJ and The Weekly Standard covered this extensively, noting how Perez “made a Supreme Court case disappear”.
Forbes describes the deals more in depth: “The disparate-income case the Obama administration scuttled also had perverse implications for the supposed victims of discrimination. In Magner v. Gallagher, antidiscrimination advocates accused Minneapolis of reducing the stock of affordable housing for minority residents by aggressively enforcing housing codes. Those codes, of course, also benefit poor residents by insuring their dwelling units are safe. In the end, future Labor Secretary Thomas Perez, then an assistant U.S. Attorney, flew to Minneapolis and worked out a settlement to prevent the case from being heard.
In the second challenge, Twp. of Mount Holly v. Mt. Holly Gardens Citizens in Action, the Soros-funded Open Society Foundation, Ford Foundation and other groups contributed money to a developer to provide low-income housing units and settle a lawsuit challenging the New Jersey city’s redevelopment program.”
For the newest case to be heard next year, Texas officials were “sued under the U.S. Fair Housing Act over tax credits for low-income building projects. The question is whether people can sue by showing a practice had a “disparate impact” on racial minorities, or whether they must meet a higher standard by proving intentional bias.” That will be decided on next year. Will Thomas Perez be the next Attorney General by then?
The battle for Thomas Perez will wait until after midterm elections. He follows the footsteps of Eric Holder in theory and tactic and expanding “disparate impact” theory is one of his most important gimmicks. This is one fight that should be watched closely.
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During a speech at UNLV this week, Hillary Clinton discussed higher education and her opinion that “more needs to be done to assure young people can achieve their dreams and free students from debt.”
While making higher education more affordable is certainly a worthwhile endeavor, the means by which the Democrats have made changes — and continue to push for more change — to the student loan system will cause even higher tuition costs, unsustainable taxpayer debt, and create another rail of entitlement.
The first wave of detrimental change came in 2010 with the Pay-As-You-Earn Program implemented in 2010. Essentially, PAYE has repayment options based on 10% of discretionary income. However, if the payment doesn’t cover the accruing interest, the government pays your unpaid accruing interested for up to three years from when you begin paying back your loan under the PAYE program.” That means the taxpayer.
Obama expanded that 10% income cap this past June with an Executive Order. Its purpose is to extend “such relief to an estimated five million people with older loans who are currently ineligible”, according to the New York Times.
Though this Executive Order — and its 2010 law counterpart — may sound well and good, financially it is a disaster. The 10% income repayment does not help any young person get off on a solid financial footing. Likewise, because some sectors allow for loan forgiveness after a period of time, that amount gets written off by the federal government, thereby substantially adding to the federal debt.
And what of the federal debt? Earlier this summer, CNS News compared the current cumulative outstanding balance on federal student loans to the balance owed in January 2009, and found it had skyrocketed 517.4 percent:
“The balance owed as of the end of May was $739,641,000,000.00. That is an increase of $619,838,000,000.00 from the balance that was owed as of the end of January 2009, when it was $119,803,000,000.00, according to the Monthly Treasury Statement”.
They then compared it to George Bush’s tenure:
“During President George W. Bush’s time in office, the amount of outstanding loans increased from $67,979,000,000.00 in January of 2001 to $119,803,000,000 in January of 2009, an increase of 76.2%. This means that under President Obama, the amount of federal direct student loans increased 579% more than under President Bush.”
The most influential factor in this rapid rise of student loan debt is the PAYE program repayment terms. Besides the 10% option, students also have two other possibilities of loan help, known as “forgiveness:”
1) The balance of your loan can be forgiven after 20 years if you meet certain criteria, OR 2) Your loan can be forgiven after 10 years if you go to work for a public service organization (known as Public Service Loan Forgiveness, or PSLF).
The Wall Street Journal recently discussed the impact of “loan forgiveness” when it highlighted a report from the New America Foundation, which analyzed the PLSF impact. The WSJ noted that the report found “it will not be a small population of borrowers standing in line for this gift from taxpayers. The federal government estimates that a quarter of all jobs may qualify”.
Furthermore, the study concluded that:
“it could become common for the government to pay for a student’s entire graduate education via loan forgiveness” if those kids take jobs at a nonprofit or in government. The new payment terms for such borrowers “are unlikely to cause many graduate and professional students to fully repay their loans—even if they earn a competitive salary in their chosen careers or a salary that places them among upper-income Americans.”
and also,
“This will likely provide an incentive for graduate and professional students to borrow more rather than less, particularly for some professions. It should also make graduate students less sensitive to the price of a graduate or professional degree, allowing institutions to charge higher tuitions, especially for certain programs like healthcare, social work, education, and government, where borrowers would go on to qualify for PSLF.”
The government meddling in higher education and loan programs has perpetuated more crises, which in turn has created more government “fixes”, and hence, a new-tier of entitlements — this time, for education. And that’s not all. Senator Elizabeth Warren proposed a bill earlier this year allowing student loan holders to refinance their loans at a lower rate. How? You guessed it: a bailout to be paid for by yet another tax on the wealthy. President Obama, of course, has endorsed this legislation, but it has yet to pass Congress.
The long-term effect of such an education policy is that a new generation of youth will be raised to pursue careers in the public and non-profit sectors by the dangling carrot of free education money — instead of slugging it out in the private sector.
Do we need more regulators and bureaucrats? Where is the encouragement for innovation, for entrepreneurship, for capitalism? Where is the risk-taking? Why risk-take when you can get your education paid for by taxpayer-funded loan forgiveness and a comfortable government or non-profit job?
Small businesses have been the backbone of America. Our country was built upon those who were willing to invest their time and money to become great. This approach to education is undeniably detrimental to our future by saddling taxpayers with unseemly debt while discouraging our young people from seeking private enterprise. That is not the American Dream.
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Last week on October 7, it was reported that Liberia’s President, Ellen Johnson Sirleaf, asked for more emergency powers to help contain and prevent the current Ebola crisis. Liberia is already under a state of emergency and curfew, which began in August. But according to VOA News:
“In a letter to the Plenary of the House of Representatives and the Senate, Sirleaf asked for powers to amend seven different articles under the constitution, including freedom of movement, speech, religion, confiscation of private property, and elections.”
Besides asking for extra powers, and citing the current “state of emergency”, President Sirleaf then proceeded on October 8th to suspend nationwide elections for Senate due to be held later this month. Yahoo News reported that,
“Almost three million voters had been due to take part in Senate polls on Tuesday but organisers said there was no way a “mass movement, deployment and gathering of people” could go ahead without endangering lives.”. A presidential proclamation claimed the state of emergency allowed her to “to suspend… any and all rights ordinarily exercised, enjoyed and guaranteed to citizens.”
You can read her power request letter here.
One chilling request is that “the president has asked for a temporary extension of the state of emergency removing a constitutional right to make public speeches which could “undermine” the response to the epidemic.”
Opposition to the election suspension was swift. Tokpa Mulbah, a member of the House of Representatives from the People Unification Party, stated that “The Chief Executive, Madam Sirleaf, does not have that constitutional authority to make such a pronouncement. So based on that, we will be drafting a resolution Thursday to be sent to the Liberian Senate for a vote and placed in front Madam Sirleaf to sign so that the Elections Commission can go ahead to conduct elections from now till December 30 so that come second Tuesday in January the new 15 senators will be able to take their seats.”
In fact, the House went on to vote to reject Sileaf’s request “for more powers to restrict freedom of Movements, speech, religion, assembly and of the press, as well as property rights, through a motion filed by Representative Brown. Both Houses, in a Joint Resolution passed on Friday, October 10, 2014, unanimously voted to overturn a President Sirleaf’s decision to indefinitely cancel the October 14 Mid Term Senatorial elections.”
Is is unclear if the Senate concurred with the House. According to AllAfrica, the Senate is torn and is still debating.
Freedom of the Press has also been under attack since the curfew. Apparently, “journalists were not included on a list of exempted professions able to move freely around the country at night. (They were added six days later.) In early October, citing privacy concerns, the government announced that reporters could be arrested for speaking with Ebola patients or photographing treatment centers without written permission from the health ministry.” Further information regarding the freedom of the press during the Ebola crisis can be found here.
Liberia spent two decades of civil war, and the election of President Sirleaf was seen as a more stable, constitutional rule. Liberians should reject this attempted power grab, even in the midst of such a tragic time in their country, in order to safeguard their liberties for the long-haul.
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This Washington Times piece did a nice overview of FY2014:
The Treasury Department unveiled its Fiscal Year 2014 numbers, which showed that the government’s revenue, for the first time ever, hit the $3 trillion mark. However, the government still overspent its revenues, leaving a $483 billion deficit.
Supporters of President Obama are touting the “success” of a $483 billion deficit by pointing out its the lowest deficit since 2008. A “mere” $483 billion deficit is not something to be celebrated. It means that, despite record revenues, the government still engages in out-of-control spending.
By comparison:
“The government first hit the $1 trillion revenue mark in 1990, then hit the $2 trillion mark in 2000. But President George W. Bush’s tax cuts and the bursting of the 1990s Internet bubble cut into revenue, dropping it to $1.8 trillion in 2003, before it began the shaky climb to $3 trillion.
Just five years ago, in 2009, the trough of the recession, revenue was only $2.1 trillion. That means it’s leapt $900 billion in just five years.”
And here’s where the dichotomy lies. The Left sees high government revenue as something to be celebrated, while the Right understands that high government revenue means less money for the private sector. “Every one of those $3 trillion is sucked out of the private-sector economy and makes the private sector smaller,” said Chris Edwards, director of tax-policy studies at the Cato Institute. “The $3 trillion isn’t free. It comes out of our pockets and from the private economy.”
Contrast his analysis with Jack Lew’s, Treasury Secretary. “The president’s policies and a strengthening U.S. economy have resulted in a reduction of the U.S. budget deficit of approximately two-thirds — the fastest sustained deficit reduction since World War II,” Mr. Lew said.
What are those “president’s policies”? Successful tax hikes. The highest 2% earners saw their tax margins increase; all earners saw their payroll taxes go up. And don’t forget the Obamacare taxes. The full list of all of Obama’s tax increases can be found here.
Perhaps the most profound statement can be summed up here: “Spending, meanwhile, has remained relatively flat at about $3.5 trillion.”
When spending is “flat” at $3.5 trillion, we definitely have a problem. Each year since 2009, the Obama Administration has spent over $3 trillion, the only president to ever do so: From 2009 – 2013 respectively, here are the numbers of spending in per year: 2009: $3,517,677; 2010: 3,457,079; 2011: $3,603,059; 2012: $3,537,127; 2013: $3,454,605. For a full chart of historical federal spending per year, go here. Federal spending has remained consistent at around $3.5 trillion/year — consistently high. Over-budget. And adding deeply to the deficit each year.
It will be interesting to revisit this next year at the end of FY2015, when Obamacare, the crowning Obama policy achievement, really gets going. Remember how Obamacare was going to reduce deficits? About that. The Weekly Standard recently did a thorough analysis of Obamacare projections and found that:
“So, compared to the deficit surplus of $180 billion for 2015-24 that a straight extrapolation from the CBO’s 2012 scoring would yield, current projections now indicate that Obamacare’s decreased spending (in relation to prior expectations) will reduce deficits by another $83 billion (bringing the estimated surplus to $263 billion), but those projected surpluses will be more than offset by the projected $132 billion decrease in Medicare revenue and $262 billion decrease in tax revenue due to lower job growth.
In all, therefore, CBO projections indicate that Obamacare will increase deficit spending by $131 billion from 2015-24. That’s a $311 billion swing from the extrapolated 2012 numbers, a $240 billion swing from the actual 2012 numbers, and a $255 billion swing from what we were told when Obamacare was passed.
So, this fiscal year was more of the same. Government overspending, gleefully celebrated by record tax collections of your hard earned dollars. The rapacious government needs to be fed.
by | BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, HYPOCRISY, TAXES
Last week, I wrote about the population shift from the northeastern states to other parts of the country due to the high taxation. It seems that the Yankees aren’t the only ones concerned enough with crushing taxes that they are willing to relocated — the French are too.
From the Independent:
“France’s unemployment rate is hovering around 10 per cent. As for high-earners, almost 600 people subject to a wealth tax on assets of more than €800,000 (£630,000) left France in 2012, 20 per cent more than the previous year. Manuel Valls, the Prime Minister, announced in London this week that the top income tax rate of 75 per cent would be abolished next January after a number of business tycoons and celebrities moved out.”
Hélène Charveriat, the delegate-general of the Union of French Citizens Abroad, concurs. Charvariat noted that the “young people feel stuck, and they want interesting jobs. Businessmen say the labour code is complex and they’re taxed even before they start working. Pensioners can also pay less tax abroad.”
Though the repeal of the 75% is a start, the loss of French citizens to other parts of the world is going to hamper economic recovery in France. I wrote about this probability in 2012 when Hollande first proposed his “rich tax” scheme. The Laffer Curve effect has been proven here in France as it did in England last year: namely, that increasing tax rates beyond a certain point will be counterproductive for raising further tax revenue.
As we can see, high taxes drives away citizens who wish not to hand over to the government the money they have saved and earned — just to see it misspent and frittered away.
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I have written on this subject before, and now the effects of high taxes and population migration are playing out in a substantial, political way: the decline of about 40% of Congressional seats in the northeast.
According to the Census Bureau, high taxpayers are moving south. It notes that in the 11 states that comprise the Northeast, population grew at a rate of only 15% over the thirty year span from 1983-2013, while the rest of the nation grew at roughly 41%. The key factor is high taxes. The result is a loss of Congressional seats there.
The American Legislative Exchange Council recently did a comprehensive study on House representation in 1950 from Maine to Pennsylvania, and compared it to current House seats. In 1950, there were 141 House members, but today there are only 85. Remember House seats are based on population — so this change is a 40% loss of power.
Need a dramatic comparison? Texas and California combined together now have more House seats than the Northeast conglomerate. For an area that used to be a political powerhouse, it is becoming increasingly marginalized due to excessive taxes and the ensuing population shift.
In 2011, Reuters had a lengthy article detailing how northern residents were fleeing massive state and local tax hikes. I wrote about the impact of high taxes on New York population loss here in 2012. And the NYTimes reported in December 2013 that Florida was soon to pass New York in population.
High taxes are a major factor in this population and political change, and it will be interesting to watch in the next few election cycles. As the report notes above, “This result is one of the most dramatic demographic shifts in American history. This migration is shifting the power center of America right before our very eyes. The movement isn’t random or even about weather or resources. Economic freedom is the magnet and states ignore this force at their own peril.”
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Discussion began heating up again about the “internet tax” last week when lawmakers pushed back the moratorium on Internet access taxes — set to expire on Nov. 1 — until mid-December during the lame-duck session. In the meantime, let’s call it out for what it really is: a revenue grabber masquerading as “fairness”.
Last year the Senate passed the online sales tax bill, formally known as the “Marketplace Fairness Act”. There is nothing fair about this act. It is a back-door way for states to add additional levies on their citizens under the guise of leveling the playing field . From an accountant’s perspective, here’s how:
Most proponents of the bill suggest that there is somehow a dearth of tax revenue from which states are suffering terribly. This sentiment was echoed at the time in the pages of the WSJ by Arthur Laffer. He wrote that “the exemption of Internet and out-of-state retailers from collecting state sales taxes reduced state revenues by $23.3 billion in 2012 alone, according to an estimate by the National Conference of State Legislatures. The absence of these revenues has not served to put a lid on state-government spending. Instead, it has led to higher marginal rates in the 43 states that levy income taxes”.
But this is simply and patently untrue. State legislatures have always set their tax rates with the full understanding that they would not actually collect that supposed $23.3 billion of internet “slippage”. It’s not like there is a line item in state budgets that lists “uncollected online tax” or “tax cheats” with a number attached. Sales tax is one of many levies whose revenues positively fund government spending. This online tax, if passed by the House next and signed into law, will just be yet another tax (and therefore revenue) for the coffers. Higher marginal rates exists because state-government spending levels are higher, not because of some “absence of tax” nonsense that forces states to raise rates.
In our states’ budgets, current taxes rates (income + sales, if applicable) are set at levels appropriate to cover the calculations of state spending. 49 out of 50 states require a balanced budget. These states are fully aware that taxes are “avoided” (internet and out-of-state) and therefore don’t even count them in their budget calculations. So there is no concrete “absence of revenue”. Instead, by passing this new internet tax, you are merely giving the states a free reign to add a tax without taking the political heat for it, under the guise of “fairness”.
Looked at it another way, it is unconscionable for Congress to pass this legislation without requiring that states lower their marginal rates so that the new tax makes everything revenue neutral. Higher marginal rates as they are already burden taxpayers. This internet tax doesn’t fix anything — because there is nothing in their budgets to be “fixed”. True tax reform (a true “fix”) always means broadening the base and thereby reducing the overall burden of taxes. Instead of that, what we have with this bill is a revenue grab.
Another fallacy for supporters is that including the internet tax in transactions is simply a matter of adding a quick, little tax line where there was none before. But it is highly irrational for legislators to believe that compliance with multiple tax jurisdictions for vendors will be an easy and unburdensome process. The recordkeeping will be excruciating.
This tax nightmare is similar to the 1099 fiasco originally included in Obamacare a couple of years ago, which expanded the reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee. Because of the insurmountable amount of reporting and paperwork that would have been associated with it, that provision was highly protested and swiftly and subsequently repealed.
The effect of distressing our businesses to comply with this online tax collection will be a drag on the economy. Can you imagine vendors needing to figure such things as whether marshmallows are a taxable food/candy in some jurisdictions while it might be a non-taxable food in others? To think that software can seamlessly make this distinction is ludicrous, especially software run by the government. When has the government ever actually streamlined anything? And implementing such a convoluted tax while businesses are already having to deal with sorting out the egregious complexities of Obamacare compliance will certainly hurt businesses even more.
Internet tax collection for 9,600 local tax jurisdictions or even just 50 states is too much. If such a tax is to be passed, it should be either a tax in which every state accepts one set of rules OR a tax payable to the state-of-sale only — which would ultimately be better for tax competition overall.
The economy is suffering enough. Adding yet another tax for citizens, which also requires burdensome compliance for businesses, is not the way to do it.
Laffer was correct regarding taxes when he observed that “the principle of levying the lowest possible tax rate on the broadest possible tax base is the way to improve the incentives to work, save and produce which are necessary to reinvigorate the American economy and cope with the nation’s fiscal problems”. But the “internet tax” doesn’t do that. In its current form, it is just another revenue stream for our bloated, overspending government.
This is no “Marketplace Fairness Act”. It is an atrocity.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
The Department of the Treasury announced last night that it has implemented new rules aimed at making it more difficult for U.S. companies to move their headquarters abroad, which is known as an “inversion”. The rules take immediate effect.
Interestingly enough, when Obama began his crusade against inversions earlier this summer, Secretary of the Treasury Jack Lew was adamant enough that rules changes must originate in Congress, he wrote a letter to Congress and he penned an Op-Ed about it in for the Washington Post, both in July. From the Op-Ed:
I call on Congress to close this loophole and pass anti-inversion legislation as soon as possible. Our tax system should not reward U.S. companies for giving up their U.S. citizenship, and unless we tackle this problem, these transactions will continue. Closing the inversion loophole is no substitute for comprehensive business tax reform, but it is a necessary step down the path toward a fair and more efficient tax system, and a step that needs to be in a place for tax reform to work.
Now suddenly it seems Jack Lew has inverted own his position and announced new rules originating from the Treasury Department, not Congress — and did so as soon as Congress left town for a break. Obama referred to that loophole in his statement to the press:
“We’ve recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill. I’m glad that Secretary Lew is exploring additional actions to help reverse this trend.”
Except there is no loophole. Business inversions are merely a movement from the U.S. to a foreign HQ. The reasons for doing so is not to avoid paying taxes as the Obama administration would have you believe. And there is no “lost tax bill” either that the middle class is “left to pay”. U.S. companies face a kind of double taxation — taxing both domestic and foreign earned corporate income — and we are the only major industrial nation to this to our businesses.
At a time when many industries are truly global, in the present environment U.S. companies are at a severe financial disadvantage compared to foreign companies. This foreign-earned income is what the United States government currently lays claim to — and is the only country in the world to do so. So under this tax law, U.S. companies therefore pay higher tax rates than other foreign companies do on the income they make in foreign countries, putting U.S. companies at a competitive disadvantage.
Jack Lew was right, in a tragic sense, when he stated that “this action will significantly diminish the ability of inverted companies to escape U.S. taxation”. That “U.S. taxation” from which some companies are trying to “escape” is that wretched double taxation on both its domestic and foreign earned income. All an inversion does is allow a U.S. company to change its HQ from the U.S. to a foreign country, for the sole purpose to have the ability to be on par with foreign companies and eliminate the severe tax disadvantage that the U.S. puts on its own businesses in a global setting. Enacting these rules will indeed “significantly diminish” some companies from inverting — and likely diminish their ability to stay competitive around the world in doing so.
Besides the double taxation rules, the United States has the highest corporate tax rate in the world at 35%. At a time when other countries have lowered their corporate tax rates, the U.S. has stayed stubbornly high, thereby earning them the 32 spot out of 34 countries in the new “International Tax Competitiveness Index”. This index measured two criteria, competitiveness and neutrality, by examining the extent to which a country’s tax system adheres to these two important principles of tax policy. Responding to that ranking, the Wall Street Journal wryly noted that if punitive legislation on inversions were to be enacted, ”the U.S. could fall to dead last on next year’s ranking. Now there’s a second-term legacy project for the President.” And now we have such measures suddenly implemented.
Sadly, the crusade against inversions is really less about money than it is about scoring rhetoric points by throwing around words like “loopholes” and “unpatriotic” when discussing businesses. Bloomberg noted that “the congressional Joint Committee on Taxation has estimated that legislation to curb inversions would raise about $20 billion over the next decade”. That is $2 billion a year, a drop in the bucket for tax income.
Making it harder to invert now — which is what some corporations might need to do in order to stay in business — is repugnant. The business climate in this country is difficult and to insinuate that a company is a “deserter” casts the blame squarely in the wrong place — which is a government that over-taxes and over-regulates. Those are the real problems, and the recent uptick in inversions are merely a symptom of the strident anti-business environment that pervades this administration.
