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Erie Times E-Edition Article-What’s a ‘wealth tax’ and how would it work?

Posted by M. C. on October 27, 2021

Biden has vowed his programs will not add a penny to the deficit,

House Speaker Nancy Pelosi estimated Sunday on CNN the tax would raise $200billion to $250billion. This is a meaningful sum, but it’s well shy of the nearly $2trillion in proposed additional spending over 10 years being negotiated right now. This means additional levies such as the global minimum tax and increased enforcement dollars for the IRS would still be needed to help close the gap.

Global minimum tax, IRS…scary. I am guessing the definition of “wealthy” will change dramatically in the not too distant future.

https://erietimes-pa-app.newsmemory.com/?publink=2fe8dc74b_1345f77

Josh Boak ASSOCIATED PRESS To help pay for his big economic and social agenda, President Joe Biden is looking to go where the big money is: billionaires.

Biden never endorsed an outright ‘wealth tax’ when campaigning last year. But his more conventional proposed rate hikes on the income of large corporations and the wealthiest Americans have hit a roadblock.

That leaves a special tax on the assets, not the income, of billionaires being proposed by a Senate Democrat as a possible vehicle to help pay for child care, universal pre-kindergarten, child tax credits, family leave and environmental initiatives.

Biden has vowed his programs will not add a penny to the deficit, which means selling to Congress and voters a tax on the wealthiest .0005% of Americans. Some details on the proposed billionaires tax:

How would it work? Essentially, billionaires earn the bulk of their money off their wealth. This might be from the stock market. It could include, once sold, beachfront mansions or the ownership of rare art and antiquities. A triceratops skeleton.

This new tax would apply solely to people with at least $1billion in assets or $100million in income for three straight years. These standards mean that just 700 taxpayers would face the additional tax on increases to their wealth, according to a description obtained by The Associated Press of the proposal of Senate Finance Committee Chairman Ron Wyden of Oregon.

On tradeable items such as stocks, billionaires would still pay a tax even if they held on to the asset. They would be taxed on any increases in value and take deductions on losses. Under current law, those assets get taxed only when they’re sold.

Billionaires would also face an additional tax on non-tradeable assets such as real estate and business interests once those assets are sold. During the first year of the proposed tax, the billionaires would also owe taxes on any built-in gains that predate the tax.

How much money would it raise? House Speaker Nancy Pelosi estimated Sunday on CNN the tax would raise $200billion to $250billion. This is a meaningful sum, but it’s well shy of the nearly $2trillion in proposed additional spending over 10 years being negotiated right now. This means additional levies such as the global minimum tax and increased enforcement dollars for the IRS would still be needed to help close the gap.

And the forecasts for revenue from the wealth tax are highly debatable.

‘It’s just impossible to implement,’ said Allison Schrager, a senior fellow at the conservative Manhattan Institute. ‘There’s a lot of evidence that these things don’t work, and I’ve never heard an explanation of how this could be workable.’

Why would Biden go this route? The president would rather raise corporate tax rates and rates on wealthy individuals. That was his initial proposal, but he’s got to appease West Virginia Sen. Joe Manchin and Arizona Sen. Kyrsten Sinema. Those are the two make-or-break Democratic votes in the evenly split Senate. Sinema objected to higher rates, which brought the wealth tax into play as an alternative.

The idea gained steam after the publication of French economist Thomas Piketty’s book ‘Capital in the Twenty-First Century.’ Massachusetts Sen. Elizabeth Warren made a 2% wealth tax a trademark policy in the 2020 Democratic presidential primaries, and fellow candidate Bernie Sanders, the senator from Vermont, proposed his own wealth tax.

Biden never jumped on that bandwagon. But he did make higher taxes on the wealthy a key promise, saying no one earning less than $400,000 would pay more.

Are billionaires really that rich? Seems that way.

There is a legitimate debate about the optimal forms of taxation. Is it better for the economy for the wealthy to keep their assets invested in new businesses? Or, is it better for some of their money to go to the government to help fund programs like child care, universal pre-K and shifts to renewable energy?

What is clear is the wealthy do have money to tax, should the government wish to do it.

America’s billionaires have seen their collected wealth surge 70% since the start of the pandemic to over $5trillion, according to an analysis by the pro-wealth-tax Americans for Tax Fairness and the Institute for Policy Studies Program on Inequality. That gain from March18, 2020, to this past month is equal in size to Biden’s spending plans over 10 years.

‘Right now, billionaires are not paying a dime in taxes on their fabulous income gains from their stock holdings during the pandemic,’ said Frank Clemente, executive director of Americans for Tax Fairness. ‘The billionaires income tax would tax the increase in the value of those assets each year just like workers’ wages are taxed.’

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The Future of Direct Taxation – Doug Casey’s International Man

Posted by M. C. on October 12, 2021

“The Free World,” notably the EU, U.S., and Canada, have passed “bail-in” legislation; that is, legislation that allows banks to confiscate deposits, should the banks decide that an “emergency” exists. The depositor would have no rights, no recourse. The bank right now can simply rob you of your deposits, with the full approval of the government.

To this is added a bank policy that’s been popping up all over the world – restrictions on the size of transactions that you’re allowed to make with your own money. The higher the transaction amount, the more “suspect” you are of being involved in criminal and/or terrorist acts, which is to be reported to the authorities.

https://internationalman.com/articles/the-future-of-direct-taxation/

by Jeff Thomas

The image above may be considered by some as unfair, as it suggests that taxation is a form of robbery. Well, let’s check the dictionary for a definition:

“Robbery is defined as taking away of goods or property by force or intimidation.”

Well, that certainly fits the bill. Of course, Inland Revenue (or the IRS, CRA, etc., depending upon where you’re from) would say that it’s not robbery if it’s lawful. As I see it, the fact that a law has been passed to allow robbery does not change it from being robbery. It’s merely institutionalised robbery.

Academics might say that we elect representatives to run the central government and those representatives are then entrusted to pass the laws, which we must then meekly follow. Again, this argument doesn’t hold water for me, as these individuals may have been elected, but they most certainly do not “represent” me if they pass a law that says it’s okay to rob me. No government has ever asked me for permission to take my money simply because they want it, and I have never given it.

If there’s any question as to whether the above definition is correct, I’d be happy to see it put to the test: The internet makes possible individualised referendum. If we were to all be questioned as to whether we wish to be taxed, we could easily decide on an individual basis. I’m guessing that I wouldn’t be alone if I were to say, “No, thank you.”

But, to be fair, I do approve of taxation, but only indirect taxation – taxation based on consumption. (This is lawful in my own country, the Cayman Islands, and I receive good value for money.)

Many would say that it would be impossible to operate any government without direct taxation, yet this is not so. In the U.K., income tax was initiated in 1799 to pay for the Napoleonic Wars, and the tax never went away. In Canada, income tax was initiated in 1917 to pay for World War One, and the tax never went away. In the U.S., income tax was initiated in 1913 as a means to compensate for lost revenue due to recently decreased tariffs (clever), and the tax never went away.

In most of the world, taxation is regarded as an imposition and it’s considered understandable that no one really wants to pay tax. The U.S. government promotes a rather different view – that the payment of tax is a patriotic duty. In the U.S., a tax amount can be demanded and the onus of proof is on the citizen as to whether the IRS demand is correct. (In other words, guilty until proven innocent.)

But in almost all countries, payment of tax is described by governments as voluntary, as citizens file their tax forms, pay their income tax, and then hope for the best. The governments don’t actually break down your door and take what they have decided is the “right amount.” (In the U.S. today, through civil forfeiture, billions of dollars in money and goods have been taken from citizens without even necessarily charging the citizen with a crime, but, still, at present, tax collection is handled, “voluntarily”).

But is income tax essential to keep a government alive? Or is it possibly only essential for those countries that conduct wars? Well, a part of the answer comes in the fact that income tax is so commonly justified as repayment of war debt. Presumably, if the political leaders had not engaged in war, they never would have had to introduce income tax to pay for the war. Certainly, Canada and the U.S. went through their greatest historical expansion periods (the last half of the 19th century) and the industrial revolution, without direct taxation.

By contrast, my own country, in its 500-year history, has never declared war on another country. And it has never had direct taxation of any kind.

Let’s repeat that. It has never had income tax, corporate tax, capital gains tax, inheritance tax, or even VAT, property tax, or sales tax in all of its history. Most of our tax revenue comes from company fees and consumption tax. Of course, this means that our government is limited in how big and powerful it can become, but this is something we look upon as a highly positive by-product. Indeed, the lack of direct taxation is regarded as an insurance policy against the creation of an overly powerful government.

So, it’s entirely possible for a country to have no direct taxation. In fact, few of the world’s existing countries began their life with direct taxation (although in recent times, new countries have often regarded direct taxation as a given.)

See the rest here

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It’s Time to Abolish the Capital Gains Tax | Mises Wire

Posted by M. C. on August 12, 2021

The great explains in Economics in One Lesson (order your free copy) that when investors realize

they lose the whole dollar when they lose, but can keep only a fraction of it when they win, they decide it is foolish to take risks with their capital. In addition, the capital available for risk-taking itself shrinks enormously. It is being taxed away before it can be accumulated. In brief, capital to provide new private jobs is first prevented from coming into existence, and the part that does come into existence is then discouraged from starting new enterprises.

https://mises.org/wire/its-time-abolish-capital-gains-tax

McCoy Dorr

President Biden’s ridiculously high spending proposals require equally ridiculous tax proposals. Among the craziest proposals is a massive increase in the capital gains tax rate. According to the Tax Foundation, Biden’s proposal would raise the top federal rate on capital gains tax to 43.4 percent. When accounting for state and local rates, the average top rate would be 48 percent, up from the current 29 percent. This is about nineteen steps in the wrong direction. Progressives, the largest proponents of the tax on capital gains, believe that this tax is a necessary and just tool used to rein in the greed of the rich and ensure that the selfless government can implement righteous social programs to help the needy. This belief could not be further detached from reality. The existence of taxes on capital gains significantly distorts the natural flow of investment in markets, which harms the social welfare of all Americans, and it is past time to abolish the capital gains tax.

The capital gains tax is imposed on the profits gained from the sale of an asset. This increases the costs involved in realizing the profits of an investment, therefore altering individuals and businesses’ cost-benefit analysis and decision process when evaluating investment opportunities. This has a substantial impact on the reallocation of capital and the availability of capital, because investors have to take the capital gains tax into account when weighing if a new investment is worthy. Investors are forced to decide if the new investment has a profit potential that outweighs the impact of the capital gains tax and the future profit potential of whatever asset they may currently be invested in. Many investors decide it is not. This creates the “lock-in effect.” The capital gains tax creates the incentive for investors to retain their current subpar-performing investments even when more profitable investment opportunities are present. This keeps capital locked into inefficient and underperforming assets as opposed to more efficient and profitable assets. Therefore, these inefficient assets have an inflated value and worth compared to what a free market, undistorted by the capital gains tax, would have allocated to them. As capital is a scarce and limited resource, these distortions inhibit the growth of other industries and assets that are more worthy of investment and consequently harm the social welfare of all Americans, as these industries with a deflated worth are unable to provide the goods, services, and jobs the market would have otherwise provided. This is why an unaltered flow of capital and investment is integral to the health of a free economy. The great Henry Hazlitt explains in Economics in One Lesson (order your free copy) that when investors realize

they lose the whole dollar when they lose, but can keep only a fraction of it when they win, they decide it is foolish to take risks with their capital. In addition, the capital available for risk-taking itself shrinks enormously. It is being taxed away before it can be accumulated. In brief, capital to provide new private jobs is first prevented from coming into existence, and the part that does come into existence is then discouraged from starting new enterprises.

These new enterprises that are blocked from coming into existence would have otherwise created better and cheaper goods. In the end, not only is the investor harmed but so are the consumers and producers that are deprived of an improved standard of living. It is nearly impossible to dissect and weigh all of the societal harms that have occurred due to the implementation of the capital gains tax, because we have been robbed of a reality we could use as a control. The industries and companies that have been deprived of growth due to the capital gains tax are invisible.

However, we can examine the effects previous changes in the capital gains tax rate have had on investments. The clearest metric we can use to examine the flow of capital into new enterprises is seed-capital funding. Seed-capital funding is funding provided by investors to the creators of a new start-up venture in exchange for equity. This seed-capital funding is linked to the capital gains tax, because investors likely have to divest their capital from another firm or asset, a taxable event, to then invest in a new company in exchange for equity, which would then be taxed again if ever sold. In an examination of past changes in the tax rate of capital gains and the volume of new seed-capital funding, an article published by National Review  found that when the capital gains tax rate was cut in 1977 from 49 percent to 20 percent, there was an increase in seed-capital funding from $68 million to $5.1 billion, a 700 percent increase. A later increase of the rate to 28 percent in 1986 resulted in a 60 percent decrease in seed-capital funding. This shows that funding for new ventures is intrinsically linked to the free flow of capital, which is instead obstructed by the capital gains tax. Investors are deprived of healthy returns on investment, producers are denied economic opportunity, and consumers are impoverished.

Examining just a few studies on the effects of the capital gains tax demonstrates the effects an abolition would have in boosting the quality of life for the lower and middle classes. First, economists from the Tax Foundation examined IRS data and found “that more than 80 percent of taxpayers who claim dividend income earn less than $100,000 and 76.4 percent of those who claim capital gains earn less than $100,000.” This shows that the burden of the capital gains tax falls on the middle class. This burden can be alleviated by removing the capital gains tax. Furthermore, the Cato Institute discovered that a capital gains tax reduction is a way to attract investment funds to capital-starved areas and minority groups. In the ’80s, when the capital gains tax was slashed, the number of black-owned businesses increased by one-third. And later when it was cut again, that number increased by an additional 38 percent. While the precise results that the elimination of the capital gains tax would have are incalculable due to the stubborn fact that we lack omniscience, an elimination would unequivocally lead to the creation of a large number of jobs and economic growth, which would bring an improvement to the quality of life of poverty-stricken communities by encouraging a culture of private ownership and entrepreneurship.

Eliminating the capital gains tax would free up an unprecedented amount of capital, create countless new jobs, and result in the formation of new enterprises dedicated to providing cheaper and improved goods and services. The abolition of the capital gains tax would create an economically productive and stable society, yet the fallacy persists that the capital gains tax is beneficial. The failure of progressives to see beyond the increased government revenues is the reason we are shackled with the capital gains tax today. Progressives are failing Hazlitt’s one lesson (not that anyone has ever accused progressives of being economically literate). As Hazlitt states at the end of his magnum opus, economics “is a science of recognizing secondary consequences. It’s also a science of seeing general consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run.” Progressives look at the immediate effects, increase in government revenue and funding for their social programs, and are blind to the havoc they have wrought in the market. This failure to comprehend the impacts of distorting the flow of capital results in the average American consumer being deprived of an indecipherable higher standard of living. Author:

McCoy Dorr

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The Ron Paul Institute for Peace and Prosperity : True Civil Libertarians Must Oppose the IRS

Posted by M. C. on July 13, 2021

Another frightening proposal is for the government to impose a “mileage tax” to fund highway construction. A mileage tax would require government to keep track of how many miles every American drives. Some claim that a mileage tax can be implemented without creating a massive new system of government surveillance. Even If this were true, anyone who expects the government not to use this new power for nefarious purposes needs to Google Edward Snowden.

http://ronpaulinstitute.org/archives/featured-articles/2021/july/12/true-civil-libertarians-must-oppose-the-irs/

Written by Ron Paul Monday July 12, 2021
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Progressives who work to end individual rights violations committed by the NSA, FBI, DEA, CIA, and other federal agencies usually overlook, or even support, the routine violations of Americans’ rights by the IRS.

For example, progressives rarely, if ever, speak out against the IRS’s targeting of the opponents of those in power. When liberal Democrats control the White House, the IRS targets advocates of free markets. When hawkish Republicans are in power, the IRS targets antiwar activists.

The Democrats’ election reform legislation would require political organizations to divulge their top donors. Such donor disclosure requirements can be, and have been, used to intimidate donors from supporting “controversial” causes. Yet the requirements are supported by many progressives in the name of getting big money out of politics.

In order to “pay for” their massive spending schemes, President Biden and his congressional allies are planning a huge increase in the IRS budget. The declared purpose is to enable the tax agency to bring in to the government much more money by ramping up efforts to identify and punish those not paying the “proper” amount of taxes.

The tax code’s complexity guarantees many innocent Americans will be caught in the IRS’s expanded net. Yet progressives will support this because they favor the new social programs the new revenue will finance, and because they believe the IRS will only target billionaires and big corporations.

The truth is that most of the new revenue will be collected from middle-and-working-class Americans. These Americans will be targeted because, unlike billionaires and big corporations, middle-and-working-class Americans cannot afford legions of tax lawyers and accountants to level the playing field between them and the tax agency. They are more likely to simply give in to the IRS’s demands.

Waiters and waitresses may even be subjected to audits to ensure they are paying taxes on their tips.

Another frightening proposal is for the government to impose a “mileage tax” to fund highway construction. A mileage tax would require government to keep track of how many miles every American drives. Some claim that a mileage tax can be implemented without creating a massive new system of government surveillance. Even If this were true, anyone who expects the government not to use this new power for nefarious purposes needs to Google Edward Snowden.

Progressives’ blind spot toward IRS abuses of liberty is rooted in their belief that one can separate “economic” liberties from “civil” liberties. This allows them to support an abusive tax system to fund a welfare state (and, for an increasing number of progressives, a warfare state) while opposing other infringements on liberty. These progressives are the mirror image of conservatives who defend economic liberty while supporting government infringements on personal lifestyle choices. One of the most urgent tasks of those who wish to restore a free society in all areas is to end the artificial distinction between economic and civil liberties. By defending all liberty — no matter if it is classified as economic liberty or civil liberty — we can best protect against violations of any liberties.


Copyright © 2021 by RonPaul Institute. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given.
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The Real Tax Scandal – LewRockwell

Posted by M. C. on June 30, 2021

No, the real scandal is this: federal income taxes are almost entirely about control and not revenue. The byzantine rules and selective enforcement are perfectly designed to keep ordinary people with limited means in mortal fear of the IRS. A tax audit, like cancer, can come out of nowhere and ruin your life.

Federal income taxes have always been a tool for compliance. The IRS has always been a tool for presidents to go after rivals—or for rivals to go after presidents. Why would we expect otherwise?

https://www.lewrockwell.com/2021/06/jeff-deist/the-real-tax-scandal/

By Jeff Deist

Mises.org

The self-styled investigative journalism outlet ProPublica recently published private IRS tax information—presumably embarrassing private tax information—for a host of ultrawealthy and famous Americans. I say “self-styled” because the organization claims a pretty lofty and self-important mission to use the “moral force” of journalism on behalf of the public interest against abuses of power. But does this apply to state power, such as when a federal agency employee illegally leaks sensitive material to media? And why is it presumed to be in the public’s interest to have rich billionaires pay more in taxes? Maybe we’d rather have them investing in their companies, or at least buying megayachts and Gulfstream jets, rather than sending more resources to the black hole of DC? Why is the public interest always defined as “things progressives like”?

ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years. The data provides an unprecedented look inside the financial lives of America’s titans, including Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg. It shows not just their income and taxes, but also their investments, stock trades, gambling winnings and even the results of audits.

And as an aside, it’s worthwhile to recall the tremendous whopper of a lie President Franklin Delano Roosevelt told back in 1935—namely that no one other than the program’s administrators would ever know your private Social Security number. Today, of course, Social Security numbers are the absolute linchpin of one’s entire financial identity, and known by everyone from the IRS to your local credit union.

Yet the real scandal here is not the IRS leak, which was no doubt internal and designed to gin up public support for Biden’s proposed tax increases while advancing a progressive inequality narrative. Political capture of federal agencies is nothing new or shocking; that’s what presidents do (or have done to them). Nor is it particularly scandalous that the wealthiest people sometime pay little in federal income tax, at least relative to their income. After all, elites by definition tend to wield power rather than fear it, especially when it comes to state power. And they have lobbyists and accountants to make sure taxes remain something the little people pay.

No, the real scandal is this: federal income taxes are almost entirely about control and not revenue. The byzantine rules and selective enforcement are perfectly designed to keep ordinary people with limited means in mortal fear of the IRS. A tax audit, like cancer, can come out of nowhere and ruin your life. In some cases it can land you in jail. Tax enforcement is the ultimate check on the public’s behavior; after all, who takes up the cause of a tax cheat? For middle-class Americans the IRS is an existential threat, but for Jeff Bezos it is another business expense to be minimized.

And as for revenue, consider that Uncle Sam borrowed nearly half of the dollars spent by Congress in fiscal 2020. With covid shutdowns, federal income taxes amounted to about $3.42 trillion, while spending was $6.55 trillion. If the federal government can finance 50 percent of its annual spending through deficits, why not 80 percent or 100 percent? Why do we need the IRS terror regime at all?

Again, this is about control. Progressives will never give up the income tax for this very reason. Proponents of modern monetary theory, for example, are almost uniformly left progressive in political outlook. These are the people cheering Biden’s >$1 trillion infrastructure spending bill because of their fervent belief that deficits don’t matter.

MMT rests on two central assertions.1 First, sovereign governments with their own currencies can print as much money as needed to fund operations without fear of insolvency or bankruptcy—unless a purely political decision is made to go broke. Government deficits per se do not matter, because the only real constraint in any economy is the amount of real resources available rather than the amount of money. In fact, MMT views government debt as private financial wealth—money inserted into the economy by the central state but not taxed back.

Second, sovereign governments with their own currencies can require tax payments to be made in that currency. Therefore any overheating in the economy in the form of inflation resulting from too much money can be fixed by pulling some money back to the Treasury via tax increases. This is the ostensible reason MMTers are not quite ready to give up on taxes altogether.

Yet I’ve never heard an MMTer express support for even a one-year moratorium on taxes to stimulate a bad economy (after a shock such as a worldwide covid pandemic). Why is this? If inflation really is so low, with the economy struggling in postcovid recovery mode, why pull any money back into federal coffers? Just damn the torpedoes! The bigger the deficit, the more “private wealth” we all have! Perhaps there is a political element to all the MMT jargon after all, one which relies on taxes both for control over people and to advance an advantageous but hollow trope about taxing the rich.

Federal income taxes have always been a tool for compliance. The IRS has always been a tool for presidents to go after rivals—or for rivals to go after presidents. Why would we expect otherwise?

1.See Dr. Robert P. Murphy’s definitive critique of MMT and Professor Stephanie Kelton’s book here.

Jeff Deist [send him mail] is president of the Mises Institute, a tax attorney, and a former staffer for Ron Paul.

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The Real Tax Scandal | Mises Institute

Posted by M. C. on June 10, 2021

Yet the real scandal here is not the IRS leak, which was no doubt internal and designed to gin up public support for Biden’s proposed tax increases while advancing a progressive inequality narrative.

No, the real scandal is this: federal income taxes are almost entirely about control and not revenue. The byzantine rules and selective enforcement are perfectly designed to keep ordinary people with limited means in mortal fear of the IRS. A tax audit, like cancer, can come out of nowhere and ruin your life.

https://mises.org/power-market/real-tax-scandal

Jeff Deist

The self-styled investigative journalism outlet ProPublica recently published private IRS tax information—presumably embarrassing private tax information—for a host of ultrawealthy and famous Americans. I say “self-styled” because the organization claims a pretty lofty and self-important mission to use the “moral force” of journalism on behalf of the public interest against abuses of power. But does this apply to state power, such as when a federal agency employee illegally leaks sensitive material to media? And why is it presumed to be in the public’s interest to have rich billionaires pay more in taxes? Maybe we’d rather have them investing in their companies, or at least buying megayachts and Gulfstream jets, rather than sending more resources to the black hole of DC? Why is the public interest always defined as “things progressives like”?

ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years. The data provides an unprecedented look inside the financial lives of America’s titans, including Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg. It shows not just their income and taxes, but also their investments, stock trades, gambling winnings and even the results of audits.

And as an aside, it’s worthwhile to recall the tremendous whopper of a lie President Franklin Delano Roosevelt told back in 1935—namely that no one other than the program’s administrators would ever know your private Social Security number. Today, of course, Social Security numbers are the absolute linchpin of one’s entire financial identity, and known by everyone from the IRS to your local credit union.

Yet the real scandal here is not the IRS leak, which was no doubt internal and designed to gin up public support for Biden’s proposed tax increases while advancing a progressive inequality narrative. Political capture of federal agencies is nothing new or shocking; that’s what presidents do (or have done to them). Nor is it particularly scandalous that the wealthiest people sometime pay little in federal income tax, at least relative to their income. After all, elites by definition tend to wield power rather than fear it, especially when it comes to state power. And they have lobbyists and accountants to make sure taxes remain something the little people pay.

No, the real scandal is this: federal income taxes are almost entirely about control and not revenue. The byzantine rules and selective enforcement are perfectly designed to keep ordinary people with limited means in mortal fear of the IRS. A tax audit, like cancer, can come out of nowhere and ruin your life. In some cases it can land you in jail. Tax enforcement is the ultimate check on the public’s behavior; after all, who takes up the cause of a tax cheat? For middle-class Americans the IRS is an existential threat, but for Jeff Bezos it is another business expense to be minimized.

And as for revenue, consider that Uncle Sam borrowed nearly half of the dollars spent by Congress in fiscal 2020. With covid shutdowns, federal income taxes amounted to about $3.42 trillion, while spending was $6.55 trillion. If the federal government can finance 50 percent of its annual spending through deficits, why not 80 percent or 100 percent? Why do we need the IRS terror regime at all?

Again, this is about control. Progressives will never give up the income tax for this very reason. Proponents of modern monetary theory, for example, are almost uniformly left progressive in political outlook. These are the people cheering Biden’s >$1 trillion infrastructure spending bill because of their fervent belief that deficits don’t matter.

MMT rests on two central assertions.1 First, sovereign governments with their own currencies can print as much money as needed to fund operations without fear of insolvency or bankruptcy—unless a purely political decision is made to go broke. Government deficits per se do not matter, because the only real constraint in any economy is the amount of real resources available rather than the amount of money. In fact, MMT views government debt as private financial wealth—money inserted into the economy by the central state but not taxed back. 

Second, sovereign governments with their own currencies can require tax payments to be made in that currency. Therefore any overheating in the economy in the form of inflation resulting from too much money can be fixed by pulling some money back to the Treasury via tax increases. This is the ostensible reason MMTers are not quite ready to give up on taxes altogether.

Yet I’ve never heard an MMTer express support for even a one-year moratorium on taxes to stimulate a bad economy (after a shock such as a worldwide covid pandemic). Why is this? If inflation really is so low, with the economy struggling in postcovid recovery mode, why pull any money back into federal coffers? Just damn the torpedoes! The bigger the deficit, the more “private wealth” we all have! Perhaps there is a political element to all the MMT jargon after all, one which relies on taxes both for control over people and to advance an advantageous but hollow trope about taxing the rich.

Federal income taxes have always been a tool for compliance. The IRS has always been a tool for presidents to go after rivals—or for rivals to go after presidents. Why would we expect otherwise?

  • 1. See Dr. Robert P. Murphy’s definitive critique of MMT and Professor Stephanie Kelton’s book here.

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Erie Times E-Edition Article-Audits eyed for infrastructure cash

Posted by M. C. on May 16, 2021

The Penn Wharton Budget Model, a research organization associated with the University of Pennsylvania, projected the proposed spending on IRS collection efforts would bring in about $480billion from 2022 to 2031.

Is more government brownshirt misery worth $48B a year?

20 years and $Trillions worth of endless wars and government malfeasance, such as the F-35 fiasco, makes $480B pale in comparison.

Government never has “enough”. How long before you are considered “rich”?

Why is smaller, accountable government never an option?

https://erietimes-pa-app.newsmemory.com/?publink=08b007527_1345d78

Kevin Freking and Marcy Gordon ASSOCIATED PRESS WASHINGTON – Republicans said they won’t raise taxes on corporations. Democrats said they won’t raise taxes on people making less than $400,000 a year. So who is going to pay for the big public works boost that lawmakers and President Joe Biden said is necessary for the country?

Enter the IRS.

Biden is proposing that Congress build up the depleted and often-maligned agency, saying that a more aggressive collection of unpaid taxes could help cover the cost of his multitrillion-dollar plan to boost infrastructure, families and education. More resources to boost audits of businesses, estates and the wealthy would raise $700billion over 10 years, the White House estimated.

It’s just the latest idea emerging in the bipartisan talks over an infrastructure bill, which saw Biden huddle at the White House this week with congressional leaders and a group of Republican senators.

The GOP senators, touting a $568billion infrastructure plan of their own, said they were ‘encouraged’ by the discussion with Biden, but all sides acknowledged that how to pay for the public works plan remains a difficult problem.

House Speaker Nancy Pelosi said Biden brought up his IRS proposal as he met Wednesday with the top four congressional leaders.

‘My understanding is it’s at least $1trillion, it could be a trillion-and-quarter, a trillion-and-a-half dollars of illegally, unpaid taxes in the country,’ Pelosi said. ‘Part of the answer is to beef up the IRS so they could take in those taxes, and that’s a big chunk. That could go a long way.’

She was referring to the tax gap, which is the difference between taxes paid and taxes owed. In a politically charged climate, there isn’t agreement on how big the tax gap is, let alone how much of it could be captured. But it’s a tantalizing target for lawmakers, raising the potential to raise hundreds of billions in revenue without needing to raise taxes at all.

The question is how big the tax gap really is – and how much it can realistically be closed.

The Internal Revenue Service has estimated the tax gap is $440billion a year. But IRS Commissioner Charles Rettig stunned his audience at a recent Senate hearing when he offered a new number: about $1trillion annually.

The old estimates don’t take into account the recent boom in income made by self-employed ‘gig’ workers, which can be underreported, concealed offshore income and the rising use of cryptocurrency, which makes it hard for the IRS to identify taxpayers in third-party transactions, experts said.

The $1trillion figure ‘is not crazy. That’s totally possible,’ said Steve Wamhoff, director of federal tax policy at the left-leaning Institute on Taxation and Economic Policy.

But Sen. Mike Crapo of Idaho, the senior Republican on the Senate Finance Committee, called it ‘speculation.’ And he’s worried it could push the IRS toward overzealous enforcement.

The IRS has been on the losing end of congressional funding fights in recent years, taking a cut of about 20% since 2010, adjusting for inflation, even as its responsibilities have grown. Biden’s new spending proposals include an extra $80billion over 10 years to bolster IRS audits of upper-income individuals and corporations.

But some experts said bolstered audits could fall far short of a $700billion windfall.

The Penn Wharton Budget Model, a research organization associated with the University of Pennsylvania, projected the proposed spending on IRS collection efforts would bring in about $480billion from 2022 to 2031.

In selling its plan, the White House has emphasized what it described as fixing a ‘two-tiered system of tax administration’ in the U.S. While regular workers pay taxes on the wages they earn, some wealthy taxpayers find ways to maneuver around them.

Those with annual incomes under $25,000 are audited at a higher rate (0.69%) than those with incomes up to $500,000 (0.53%), according to IRS data. Taxpayers who receive the earned-income tax credit, which applies mainly to low-income workers with children, are audited at a higher rate than all but the wealthiest filers. The audit rate for millionaires plunged from 8.4% in 2010 to 2.4% in 2019.

The IRS rejected the notion of unfair audit treatment, saying that critics have misinterpreted the data. Rettig bristled at the suggestion at the Senate hearing. High-income taxpayers ‘are audited more than any other taxpayer,’ he said, at a rate over 8% for those earning more than $10million.

So far, Republicans are only ruling out revisiting the 2017 tax cuts that they passed without any Democratic support. How much they are willing to boost the IRS as part of an infrastructure bill remains to be seen. Senate Minority Leader Mitch McConnell of Kentucky said Republicans would rather finance infrastructure through user fees such as tolls and gasoline taxes.

But after pushing the agency’s steep budget cuts over the past decade, it would be a remarkable shift for the GOP to back the kind of sustained investment in the IRS that Biden is talking about – and that experts said is necessary to narrow the tax gap.

Republican lawmakers with control over funding for the IRS have long accused it of overreaching into ordinary taxpayers’ lives. Their hostility toward the IRS erupted into outrage in 2013 during the Obama administration, when the agency admitted targeting conservative tea party groups with heightened, often burdensome scrutiny when they applied for tax-exempt status.

Sen. Chuck Grassley, R-Iowa, wrote in his home state newspaper, the Des Moines Register, that he’s not opposed to closing the tax gap, but he has concerns about the scope of the White House’s efforts.

‘Instead of promising a chicken in every pot, Biden’s plan promises an auditor at every kitchen table,’ Grassley wrote.

Sen. Chuck Grassley, R-Iowa

Internal Revenue Service Commissioner Charles Rettig stunned a House Committee on Wednesday by suggesting Americans underpay their taxes by about $1trillion annually

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BOVARD: The Coming IRS Reign Of Terror | The Daily Caller

Posted by M. C. on May 10, 2021

A 2013 Inspector General report confirmed that IRS employees had devoted far more scrutiny to nonprofit applications that used the terms “tea party” or “patriot” or that criticized government spending or federal deficits. In 2017, the IRS formally apologized to scores of conservative groups that it had wrongfully targeted in tax audits.

https://dailycaller.com/2021/05/06/bovard-biden-taxes-irs-reign-of-terror/

James Bovard Contributor

The power to tax has long conferred the power to destroy political opponents. But in the glorious era of President Joe Biden, all previous cases of government abuse of power are being expunged, at least by the media and Biden supporters. That is why it is supposedly safe to vastly increase the power of perhaps the most feared federal agency, the Internal Revenue Service.

After announcing his endless wish list for new federal spending, Biden told Congress last week: “I’ve made clear that we can do it without increasing deficits.” Biden believes he has found a goose that will lay golden eggs for federal revenue — a new army of IRS agents to hound Americans and corporations to pay far more taxes.

The Washington Post reported that “the single biggest source of new revenue in the plan comes from dramatically expanding the clout of the nation’s tax agency.” Slate reported, “Biden wants to fund a massive upgrade to the American welfare state by making the IRS great at audits again.” (RELATED: ‘Everyone Loves The IRS’: Chris Christie Jokes Biden May Finally Unify America — Against Himself — With Tax Hikes)

But the agency Biden seeks to expand and unleash has an appalling record. As author David Burnham noted in “A Law Unto Itself: The IRS and the Abuse of Power” (1990), “In almost every administration since the IRS’s inception the information and power of the tax agency have been mobilized for explicitly political purposes.”

President Franklin Roosevelt used the IRS to harass newspaper publishers who were opposed to the New Deal, including William Randolph Hearst. FDR also dropped the IRS hammer on political rivals such as the populist firebrand Huey Long and radio agitator Father Coughlin, and prominent Republicans such as former Treasury Secretary Andrew Mellon. President John F. Kennedy spurred the IRS to launch the Ideological Organizations Audit Project, which targeted right-leaning groups, including the Christian Anti-Communist Crusade, the American Enterprise Institute and the Foundation for Economic Education. Nixon Administration officials gave the IRS a list of official enemies to, in the words of presidential assistant John Dean, “use the available federal machinery to screw our political enemies.” Congress enacted legislation to severely restrict political contacts between the White House and the IRS.

But the power of IRS agents continued to increase decade by decade. In 1988, then-Sen. David Pryor, a moderate Democrat from Arkansas, warned that the IRS “operates a near totalitarian system.” Pryor complained that the IRS had encouraged a “bounty-hunter mentality among revenue officers” and called for reforms to assure that the IRS “operates on the basis of public respect rather than fear.” Congress enacted a so-called Taxpayer Bill of Rights but it failed to curb the revenuers.

The Clinton administration, like many of its predecessors, exploited the IRS to punish its political enemies. In 1995, the White House and the Democratic National Committee produced a 331-page report entitled “Communication Stream of Conspiracy Commerce” that attacked magazines, think tanks, and other entities and individuals who had criticized President Bill Clinton. In the subsequent years, many organizations mentioned in the White House report were hit by IRS audits. More than 20 conservative organizations — including the Heritage Foundation and the American Spectator magazine — and almost a dozen individual high-profile Clinton accusers, such as Paula Jones and Gennifer Flowers, were audited. (RELATED: GOP Lawmakers Call On Trump Admin To End Tax Breaks For Abortions)

Members of Congress also routinely exploited their power to send the secret financial police against their enemies. The Associated Press reported in 1999 that “members of both parties in Congress have prompted hundreds of audits of political opponents in the 1990s,” including “personal demands for audits from members of Congress.” Audit requests from congressmen were marked “expedite” or “hot politically” and IRS officials were obliged to respond within 15 days. Because the abuse was bipartisan, there was little enthusiasm on Capitol Hill for an investigation.

In the Obama era, the IRS again became a political hit squad. The IRS demanded donor lists from 24 conservative nonprofits and proceeded to audit 10% of their donors — an audit rate ten times higher than average for the country. A 2013 Inspector General report confirmed that IRS employees had devoted far more scrutiny to nonprofit applications that used the terms “tea party” or “patriot” or that criticized government spending or federal deficits. In 2017, the IRS formally apologized to scores of conservative groups that it had wrongfully targeted in tax audits.

See the rest here

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Erie Times E-Edition Article-House Dems object to Biden tax plan

Posted by M. C. on May 8, 2021

Good for farmers. Apparently your bought and paid for family inheritance is not so worthy.

https://erietimes-pa-app.newsmemory.com/?publink=0eb6e3c01_1345d70

Exemption for family farms needed, group of rural lawmakers says

Lindsey McPherson

Cq-Roll Call

WASHINGTON – A group of 13 House Democrats, led by Iowa’s Cindy Axne and California’s Jim Costa, is pressing party leaders to exempt family farms from a tax increase President Joe Biden has proposed on inherited assets to help pay for new child care, education and other spending.

Under Biden’s $1.8 trillion package of family related assistance, heirs would no longer receive “stepped up basis” for capital gains tax purposes, which resets the value of inherited property to the date of death.

Instead they’d be liable for the tax on the full appreciation in value from the time the original owner purchased the assets, in some cases decades earlier.

“The requirement to recognize capital gains at death runs the risk of forcing farms and ranches to sell part, or all, of a farm that may have been passed down for several generations in order to pay the tax burden,” the group wrote in a letter to Speaker Nancy Pelosi, House Majority Leader Steny H. Hoyer and Ways and Means Chairman Richard E. Neal.

Biden’s proposal would start taxing gains on inherited assets above $1 million, or $2.5 million per couple factoring in the current tax exclusion for up to $500,000 in gains on a primary residence. Biden also would raise the top capital gains tax rate from the current 23.8%to 43.4% for those earning above $1 million annually.

Biden’s proposal calls for “protections so that family owned businesses and farms will not have to pay taxes when given to heirs who continue to run the business,” sparing them from having to pay the tax immediately upon the original owner’s death.

But the White House’s fact sheet doesn’t provide detail on how that would work. And when the Joint Committee on Taxation analyzed a similar proposal from former President Obama, it found that such rules “are likely to be highly complex and, because of the attractiveness of the deferral benefit they provide, could become a significant source of disputes with” the IRS.

The rural Democrats joining Axne and Costa in the letter expressing concern about Biden’s proposal are Illinois’ Cheri Bustos; Minnesota’s Angie Craig; New York’s Antonio Delgado; Oregon’s Kurt Schrader; Virginia’s Abigail Spanberger; Arizona’s Tom O’Halleran; Washington’s Kim Schrier; and Californians Julia Brownley, Salud Carbajal, John Garamendi and Josh Harder.

The House Republicans’ campaign arm is targeting most of those 13 Democrats in the 2022 midterms. Brownley and Carbajal are the only two not on the National Republican Congressional Committee’s list of incumbents they think they can oust.

Of those signing the letter, six are on the Democratic Congressional Campaign Committee’s Frontline program list of lawmakers set for special help with their midterm races: Axne, Craig, Spanberger, O’Halleran, Harder and Schrier. “The repeal of stepped-up basis for capital gains and immediate taxation could especially hurt family farms, some of which have been in families for generations; therefore, we strongly urge you to provide full exemptions for these family farms and small businesses that are critical to our communities,” the group wrote.

Groups like the American Farm Bureau Federation have fought against proposals to repeal stepped up basis for years.

In a report last month, the Farm Bureau co-authored with the American Soybean Association, the groups looked at Agriculture Department data going back to 1997 and found the average value of cropland has risen 223% since. That could lead to such steep tax bills that affected farms would need years to pay it off, the report said. In a handful of states, including Iowa and Minnesota, the average increase in value tops 300%.

The Democratic letter-writers acknowledged that Biden’s intent is to ensure vast fortunes are not passed on without any taxation and that the president promised protections for familyowned businesses and farms.

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Get Ready

Posted by M. C. on April 14, 2021

Taxes

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