In yet another example of how government bureaucrats only look out for their own interests, the U.S. Internal Revenue Service is paying out over $1 million in bonuses to 1,150 of its employees who have failed to pay their tax bills in previous years. Stephen Ohlemacher of the Associated Press reports on the findings of the U.S. Treasury’s Inspector General for tax administration:
The Internal Revenue Service has paid more than $2.8 million in bonuses to employees with recent disciplinary problems, including $1 million to workers who owed back taxes, a government investigator said Tuesday.
More than 2,800 workers got bonuses despite facing a disciplinary action in the previous year, including 1,150 who owed back taxes, said a report by J. Russell George, the Treasury inspector general for tax administration. The bonuses were awarded from October 2010 through December 2012.
George’s report said the bonus program doesn’t violate federal regulations, but it’s inconsistent with the IRS mission to enforce tax laws.
“These awards are designed to recognize and reward IRS employees for a job well done, and that is appropriate, because the IRS should encourage good performance,” George said. “However, while not prohibited, providing awards to employees who have been disciplined for failing to pay federal taxes appears to create a conflict with the IRS’s charge of ensuring the integrity of the system of tax administration.”
Here are 10 tips that the IRS provides to regular taxpayers for paying their delinquent tax bills:
- Tax bill payments If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
- Additional time to pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at www.irs.gov or by calling 800-829-1040.
- Credit card payments You can pay your bill with a credit card. The interest rate on a credit card may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Link2Gov at 888-PAY-1040 (or www.pay1040.com), RBS WorldPay, Inc. at 888-9PAY-TAX (or www.payUSAtax.com), or Official Payments Corporation at 888-UPAY-TAX (or www.officialpayments.com/fed).
- Electronic Funds Transfer You can pay the balance by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer, use the Electronic Federal Tax Payment System by either calling 800-555-4477 or using the online access at www.eftps.gov.
- Installment Agreement You may request an installment agreement if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all required returns and be current with estimated tax payments.
- Online Payment Agreement If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at www.irs.gov.
- Form 9465 You can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope you received from the IRS. The IRS will inform you (usually within 30 days) whether your request is approved, denied, or if additional information is needed.
- Collection Information Statement You may still qualify for an installment agreement if you owe more than $25,000, but you are required to complete a Form 433F, Collection Information Statement, before the IRS will consider an installment agreement.
- User fees If an installment agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with lower incomes, the fee can be reduced to $43.
- Check withholding Taxpayers who have a balance due may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. A withholding calculator at www.irs.gov can help taxpayers determine the amount that should be withheld.
At no time are regular U.S. taxpayers excused from having to pay their taxes. And while 1.1% of the employees of the IRS are delinquent on their taxes, which compares to 8.2% of regular taxpayers in the general public, employees of the IRS do not have the excuse of not understanding the excessive complexity of the U.S. tax code.
Because of that fact, the number of IRS employees who owe back taxes is really an example of their fellow bureaucrats, who are aware of their situation, looking the other way as they selectively enforce the nation’s laws. And now we know that selectively blind eye extends to the IRS’ employee bonus programs.
The current salary of a U.S. congressman is $174,000 a year, with party leaders in both houses bagging more. House Speaker John Boehner leads the pack with an annual salary of $223,500. The push is now on to increase congressional pay led by Rep. Jim Moran, Virginia Democrat, who laments that members of Congress are “underpaid” and that “a lot of members can’t even afford to live decently when they’re at their job in Washington.”
Some argue that Congressmen haven’t had a raise in while and that salaries are at their lowest levels since 1990 when one accounts for inflation. Promoters of a pay raise argue that this perpetuates a political culture where mostly the rich can afford to serve in office. A cost-of-living adjustment of 1.6 percent is set for January 2015. That would boost annual pay by $2800, so does Rep. Moran have a case?
With economic growth at a paltry 2.4 percent for the last quarter of 2013, it’s hard to argue that booming times warrant the increase. Moran argues that members of Congress are the “board of directors for the largest economic entity in the world.” But Moran also says that “it’s widely felt that they underperform,” and one notes that the pay raise is not tied to any performance measure. Nobody is talking about tying a pay raise to an increase in government accountability, transparency, the trimming of waste, or the elimination of redundant bureaucracies.
Members of Congress supposedly deserve a raise because it is expense to serve in Washington. Actually, when one “serves” the salary is not the major consideration. If an annual $174,000, plus generous benefits, is not enough, people should decline to run for Congress and do something else.
Sen. David Vitter, a Louisiana Republican, contends that “It makes no sense for Congress to continue automatically receiving annual raises without having to publicly vote on it.” That might have some merit but nobody is talking about embattled American workers having a vote on the issue. For American workers a congressional pay raise is more evidence that the federal government always gets bigger, more expensive, and more resistant to reform.
From Wolters Kluwer, the publishers of the CCH Standard Tax Reporter, comes the answer to the perennial question: how long is the U.S. tax code?
For the 2013 tax year (the one for which you either needed to file to pay your federal income taxes or to file for an extension on April 15, 2014), it takes 73,954 pages of material that is specifically marketed to explain the U.S. federal income tax code to the people who need to know it best: tax professionals.
Political Calculations looks at the growth trend for the number of pages needed to explain the U.S. tax code during President Obama’s tenure in office:
In President Obama’s first two years in office, when his political party also controlled both the U.S. House of Representatives and the U.S. Senate and used its control to impose massive new taxes on the American people like the Patient Protection and Affordable Care Act, the U.S. tax code grew to be 71,684 pages long, which works out to be an average exponential rate of 3.0% per year.
If it had been allowed to continue growing at that rate, the U.S. tax code would effectively double in length every 24 years.
After 2010 however, the Democratic Party lost control of the U.S. House of Representatives, with one of the outcomes of that loss being that the U.S. federal tax code has grown much more slowly in all the years since.
From 2010 to 2013, we find that the growth of the U.S. federal tax code has decelerated to grow at just a third of the rate that it did when the Democratic Party controlled the U.S. Congress and the White House. The tax code has grown at an exponential rate of just 1.0% per year since 2010, a pace that would have it double in size every 72 years.
Altogether, the U.S. federal tax code has grown at an average exponential rate of 1.8% per year since 2008.
Meanwhile, from 2009 through 2013, federal spending has increased at an average annual rate of 3.0% per year, while the total national debt has risen at an average annual rate of 10.8% per year.
None of those figures should be regarded as achievements....
The first anniversary of the Boston Marathon bombing added new confusion to the tragedy. Some politicians still blamed the FBI for not following up on tips from Russian intelligence but a government report blames the Russians for not providing sufficient information. Whatever the case, some facts remain clear.
No U.S. intelligence agency, military force, or law enforcement agency was able to prevent the Tsarnaev brothers from the April 15, 2013 attack that killed three and wounded more than 200. Likewise no U.S. intelligence, military, or law enforcement body was able to prevent U.S. Army Major Nidal Hasan from killing 13 at Ford Hood in 2009. And of course the United States was not able to stop the 9/11 attacks. These failures came despite massively intrusive surveillance by the National Security Agency but the failures do not appear to have any budgetary fallout. Indeed the actual budget of the NSA and other spy agencies remains cloaked in secrecy. That calls to mind another example from not so long ago.
The Burglary: The Discovery of J. Edgar Hoover’s Secret FBI, a new book by Betty Medsger, shows how the FBI spying operations did not lead to the prevention of any bombing by the Weather Underground or any other group, and few arrests after the bombs detonated. So J. Edgar Hoover, “lacked the capacity to shape an approach to either law enforcement or intelligence gathering that safeguarded civil liberties or protected Americans from violence.” But his FBI did not suffer on the budgetary side.
Indeed, as Medsger shows, on only two occasions when FBI did not get its budget request it got more than it requested. And each year the government spent $30,000 on a new limo for Hoover in contrast to $5,000 to lease a limo for the President of the United States. There’s a lesson here. The budgets of intelligence and law enforcement agencies should have some link to their success at preventing violent attacks on Americans while preserving their rights and liberties.
As we have noted, the IRS targets supporters of limited government, calls it “horrible customer service,” and resists inquiry. The IRS also does a poor job combatting fraud, and sends out more than $3 billion to identity thieves. The Social Security Administration has paid out more than $30 million to at least 1,546 dead people, with some of the deceased receiving benefits for 20 years. But as this Washington Post report notes, federal government agencies do so much more than that.
The federal government is now confiscating the tax refund checks of hundreds of thousands of Americans nationwide “because of a debt they never knew about – often a debt incurred by their parents.” The Post cited the case of Mary Grice, an African American woman who was four years old in 1960 when her father died leaving her mother to raise five children. The children received survivor benefits until they were 18. “Now, Social Security claims it overpaid someone in the Grice family — it’s not sure who — in 1977.”
Mary Grice told the Post, “They gave me no notice, they can’t prove that I received any overpayment, and they use intimidation tactics, threatening to report this to the credit bureaus.” Hundreds of thousand of other Americans are also being targeted in this manner, and nobody seems to know who is responsible.
The Post traces the grab to a single sentence in the farm bill “lifting the 10-year statue of limitations on old debts to Uncle Sam.” Social Security, Treasury, and Congress all disclaim responsibility for opening the long-closed cases. Regardless of who is directly responsible, this is the federal government in action. As Grice’s attorney Robert Vogel told the Post, “the craziest part of this whole thing is the way the government seizes a child’s money to satisfy a debt that child never even knew about. They’ll say that somebody got paid for that child’s benefit, but the child had no control over the money and there’s no way to know if the parent ever used the money for the benefit of that kid.”
What we have here is a predatory ruling class preying on the most vulnerable. Mary Grice knows what the deal is: “My mom used to say, ‘This country is carried on the backs of the little people,’ and now I see what she meant.”
Over the past half century, federal spending on social programs has risen like a bubbling cauldron. In 1964, it amounted to less than one-quarter of the U.S. budget. Today it accounts for about two-thirds. What effect has the spending trend had on the American psyche? Independent Institute Senior Fellow Robert Higgs offers a brilliant analogy to help us grasp the transformation.
A salmon trap, also called a pound net, is simple but ingenious, Higgs explains in the Spring 2014 issue of The Independent Review. It’s sort of like a one-way funnel. The deeper a fish swims into the trap, the harder it is to escape. It has long been banned in U.S. waters, but its design lives on, figuratively speaking, in various political schemes that direct people toward dependence on the state.
“As a salmon’s ‘mind’ tells it not to turn back, so the human mind, especially when bewitched by government propaganda and statist ideology, tells a typical person not to turn back,” Higgs writes. “Having lost the capacity for assuming individual responsibility, people are fearful of taking on such responsibilities as their forebears did routinely.”
* * *
The Salmon Trap: An Analogy for People’s Entrapment by the State, by Robert Higgs (The Independent Review, Spring 2014)
[This post first appeared in the April 15, 2014, issue of The Lighthouse. For a free subscription to the Independent Institute's weekly newsletter, enter your email address here.]
With the launch of the MyGovCost iPhone app, it’s a good time to consider the trends in government spending that generated the concerns that motivated its creation, by looking at just three numbers:
Over the last 10 years, the total public debt outstanding of the U.S. federal government has increased by ten trillion dollars. As of April 10, 2014, the official national debt of the United States was $17,539,023,466,494.92, up more than $10 trillion from the $7,160,991,855,678.41 recorded ten years earlier on April 9, 2004.
By comparison, it had taken the U.S. federal government over 214 years to rack up 2004′s $7.16 trillion national debt level. Just under $7 trillion of the national debt added since 2004 has been added since President Obama was first sworn into office.
In 20 years, conservative estimates indicate that the expected growth in benefits paid to Social Security recipients will entirely deplete Social Security’s Old Age and Survivor’s Insurance Trust Fund. When that happens, the federal government will no longer have any legal obligation to sustain those benefit payments at their currently promised level.
To keep Social Security’s Trust Fund from running out of money as expected and keep going over the next 75 years, the federal government would have to adopt any one of these alternative reforms:
Without those actions, by current law, when Social Security’s trust fund runs out of money in 20 years, all benefits will be immediately and permanently slashed by 24% at that time.
Two Hundred Five
The total net present liabilities of the U.S. federal government are far greater than the $17.539 trillion national debt. The best estimates put them at a level about 12 times greater, at approximately $205 trillion. This value is based upon the Congressional Budget Office’s Alternative Fiscal Scenario, and represents the total current day dollar value of the difference between what the federal government is likely to spend in the future and what it is likely to collect in taxes.
Laurence Kotlikoff explains what that fiscal gap means if U.S. politicians acted today to deal with it:
The $205 trillion fiscal gap is enormous. It’s 10 percent of the present value of all future GDP. Equivalently, it corresponds to 10 percent of GDP year in and year out for as far as the eye can see. To raise 10 percent of GDP each year we could (a) raise all federal taxes, immediately and permanently, by 57 percent, (b) cut all federal spending, apart from interest on the debt, by 37 percent, immediately and permanently, or (c) do some combination of (a) and (b).
As you can see, the problems with closing the whole federal fiscal gap go far beyond what it would take to make Social Security solvent.
The federal government maintains an $11.6 billion school lunch program feeding 31 million students daily. In 2010 First Lady Michelle Obama championed the Healthy, Hunger-Free Kids Act, which as this report notes “imposed a dizzying array of requirements on calories, portion sizes, even the color of fruits and vegetables to be served.” The rules, finalized in 2012, also increased the amount of fruits, vegetables and whole grains that must be offered, imposing higher costs on school districts. Students must take at least three items, including one fruit or vegetable, even if they don’t want them, or the federal government refuses to reimburse school districts for the meals. The result is massive waste.
The Los Angeles Unified School District, second largest in the nation, serves 650,000 meals a day. Students throw out at least $100,000 of food a day according to district officials, approximately $18 million a year. The Breakfast in the Classroom program, which requires students to take all items offered, is also wasteful. The federal rules also forbid taking the wasted food off campus.
According to a 2013 study by Brigham Young University based on Utah schools, the extra produce costs school districts $5.4 million a day, with $3.8 million of that being tossed in the trash. Other studies find “significant waste,” including 40 percent of all the lunches served in four Boston schools. Nationally, the annual cost of wasted food is more than $1 billion.
The Los Angeles Times editorialized that the lunch program is “afflicted by rigid, overreaching regulations that defy common sense” and the rules “practically guarantee” enormous waste. But politically correct nutritionists defend the new rules and politicians are reluctant to trim, much less toss, a federal program intended to help children. Politicians are fond of appraising programs on intentions, not results, costs or common sense. So at school nationwide the waste will continue to pile up, with taxpayers picking up the tab.
The National Taxpayer’s Union has summarized each of the major budget proposals for the U.S. federal government’s 2015 fiscal year. We threw together the following chart to make for a quick visual comparison of each:
As you can see, each of the budget proposals increase total spending over FY2014′s baseline level. Each of the proposals cuts discretionary spending below the level recorded for Fiscal Year 2014, while each increases so-called “mandatory” spending, which covers net interest payments on the national debt, Social Security, Medicare, Medicaid and the new Affordable Care Act exchange subsidies, over what is planned to be spend in FY2014.
The federal government’s 2015 fiscal year will begin on October 1, 2014.
Of these major proposals, so far, only the House Republican budget proposal has made it through the House of Representatives. President Obama’s budget proposal for federal spending in Fiscal Year 2015 was much more successful than his previous budget proposals, gaining two votes in favor, compared with the unanimous opposition to the President’s previous budget proposals.
Meanwhile, the U.S. Senate appears once again set to fail in its obligation under the law to produce any budget proposal for the next fiscal year. The U.S. Senate, controlled by President Obama’s political party, last complied with the requirements of the law to produce its own budget resolution in 2009 and in 2013.
Before we go any further, for the sake of avoiding any confusion, let’s define exactly what a deficit is. A deficit is the amount by which cash expenses exceed cash income or revenue. That makes a deficit the exact opposite of the situation that exists when there is a surplus.
In fact, if what you spend in cash is greater than the amount you collect in income or revenue, the only way you can possibly get to a surplus is to borrow the difference and then some. That borrowing however doesn’t change the fact that you really have a deficit. And if you keep running a deficit like this, you will eventually experience a fiscal train wreck.
Saying you have a surplus when you’re really running a deficit, as some leading politicians in California are doing right now, doesn’t change that outcome.
Last year, California’s Governor Jerry Brown proclaimed an end to the state’s worrisome and persistent deficit. How did he do it? In the 2012 election he had fed voters the notion that a proposed income tax increase would be spent on education. California voters treat education as a sacred cow, even though the state ranks near the bottom in test outcomes. They passed the ballot issue.
On January 31 last year, the state’s General Fund had a deficit of $15.7 billion. The higher tax rates brought in new money. This, along with internal and external borrowing, made it look as if the deficit had gone with the wind, but it hadn’t. Brown called it a surplus, amid much cheering by the spendthrift legislature.
Fast forward to the end of January this year. The deficit had been whittled down to $12.6 billion. Some surplus!
That’s quite a lot different from the story that Governor Brown was telling just several weeks earlier, as reported by the Wall Street Journal:
On Thursday, Gov. Jerry Brown called the improvement in the state’s fiscal house “good news,” and he proposed spending an additional $10 billion annually for California’s schools. But anticipating calls for further increased spending and preparing for a likely re-election bid, he also urged fiscal restraint as he officially proposed a $154.9 billion budget.
“By no means are we out of the wilderness, we have serious issues before us in terms of long-term liabilities, debts, and we must be very prudent in the way we spend public funds,” Mr. Brown said. However, “after years of drought, and cutbacks and pink slips for the teachers, we are finally able to provide a substantial amount of new money for all the schools of California.”
In the eyes of a politician, a smaller than expected deficit really means that they now have extra money to spend, because they will not consider reducing how much they are planning to borrow.
So how does Governor Brown propose to spend this newfound windfall?
Mr. Brown’s proposed budget increases kindergarten through 12th grade public education spending by $10 billion, sends new money to colleges and universities, and allocates money to expand health-care coverage to millions.
That sounds more impressive than it really is, which becomes clear in the next paragraph:
Mr. Brown also seeks to pay money owed to state schools but deferred during the years of crisis as well as pay back bonds sold to balance the budget 10 years ago, and make some infrastructure improvements. In addition, the budget endorses a plan to strengthen the rainy day fund through constitutional amendment.
In other words, most of the money for K-12 education in California will really be going to partially reset the fiscal shell game that the state government was playing with the state’s public school system in trying to make it appear that the state government was solvent, when it was really running larger deficits. But wait, there’s more!
It also reflects the governor’s commitment to a troubled $68 billion plan to bring high-speed rail to the state by proposing to help finance the project using $250 million in proceeds from selling cap-and-trade pollution credits.
And so, the inevitable fiscal train wreck, when it comes, will be a high speed one!