George Sarant

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Posts Tagged ‘tax

CAN THE IRS SURVIVE?

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Many people may be angry about scandals that have emerged with regard to the Benghazi attacks, IRS political shenanigans, and government actions against the press, but more are oblivious to it all. It requires a modicum of civic knowledge to understand the nature of these offenses, a characteristic that is sorely missing among a substantial part of the population, who are more aware of celebrities and television shows, having never learned any of the basic principles of government while attending failing schools. Thus, without relentless media attention, they will likely blow over. That is why the actions against certain media figures are  unbelievably stupid. Why James Rosen? He is not even a partisan. Why CBS and the Associated Press? Whether that is enough for the press to do a turnabout from their uncritical coverage and stay with these stories remains to be seen. 

 But what is likely to be more lasting is the scandal of the IRS targeting conservative groups for political reasons. A lesser known corollary to this is the vast network of left-wing “nonprofit” groups engaged in political activity who not only are given a pass but are even funded by the government. People tolerate the IRS because the assumption is that everyone gets treated the same. Once it becomes clear this is not true, the basic foundations of the revenue system are undermined. 

While this partisan activity  is an ominous abuse of government power, the damage may run deeper. The IRS has the authority to gather a considerable amount of personal information about citizens; in fact, it is sanctioned to compel disclosure from recalcitrants. With that there is a basic trust that this information will be handled discreetly and objectively by an impersonal bureaucracy. This trust has now been shattered, and with it there has been a loss of legitimacy, for it is no longer a disinterested public institution. Now it is nothing more than another part of the cluster of institutions aligned with the left, which is unsurprisingly providing cheering section condoning and applauding these abuses, and revealing a troubling totalitarian mindset.

It was natural all along for the IRS and its personnel to be aligned with the party of government, both having an interest in ever increasing revenue. But it is more than revenue. In the process they get to peruse and evaluated your life, assuming you’re part of that half of the population that files and pays taxes. Think about it. When you file your taxes the government is basically compelling you to account for yourself over the past year, and if you don’t meet the deadline you’re in trouble. You must report to the government every year. If you get audited, you’re guilty until proven innocent, and the IRS holds most of the cards. As the agency has expanded the powers and activities it has been allowed to pursue since its inception,  it has been able to infringe on basic freedoms, reducing your privacy and ability to be left alone. 

Can its legitimacy ever be restored? Should it be restored? There are many alternative revenue schemes that could be adopted that are far less intrusive. I’m not advocating any particular solution here, so much as the idea that we ought to be looking at alternatives that are far less intrusive on private life. This would restore some basic liberties while reducing the power of government, and hence the potential for that power to be abused. It would allow for a single standard applicable to everyone. Whether politicians will actually adapt such a system is another question, for they love tinkering with the tax code to appease various interests, or provide “incentives” and exemptions for what they want done. This results in a system that is not only unfair, but now clearly is illegitimate. The IRS is beyond salvation.  It’s tainted. We should just get rid of it. 

 

 

 

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Written by georgesarant

May 24, 2013 at 6:28 PM

TAXING THE BANKS

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The administration is proposing a tax on banks to cover presumed losses in the TARP program. The trouble is that none of these losses have come from the banks, who by and large have or are paying back their TARP money as quickly as they can. The government has made a healthy profit on these loans. Losses have been incurred on the part of GM, Chrysler, Fannie Mae and Freddie Mac (the latter two government entities). Guess who won’t be taxed under this proposal. GM, Chrysler, Fannie Mae and Freddie Mac. So the government is penalizing banks for other losses, while so far there have been no losses on banks; only profits. The successful are being penalized for the profligate and hopeless. Meanwhile the public has been convinced that the banks are the beneficiaries of government largess, when the opposite is true.

Some banks, like JPMorgan Chase did not want or need TARP funds, but were forced to take them by the government. They ran their companies prudently and were never in trouble. That is also true of Goldman Sachs, but they sold derivatives and then turned around and sold them short. If Goldman were taxed that would be fine, since they play and contribute to all sides, but there’s no way to do that. What we should do is at least resolve that no Treasury Secretary ever come from Goldman Sachs again.

The proposed tax would be based on the level of risk exposure a bank has, which is not a bad idea, except that such things are usually passed on to customers. What is really needed is a review of capital requirements. We don’t need to bring back the depression era Glass-Steagall banking act (which separated investment and commercial banking). However some of its spirit could be revived. There should be separate requirements for the capitalization of the commercial banking sector. These should be stringent enough to cover depositors funds safely. The capitalization requirements for investment banking could be different. The banks capital would not be combined but treated separately. That way if officials are dumb enough to speculate excessively through the investment bank it would not affect the commercial bank, which would remain solvent. Then the losses, if any would accrue to the stockholders, not the public. At the same time, as far as bonuses and compensation go, these are matters for the stockholders to decide, not the government. Some trading bonuses are overly lucrative, given that they share in the profits but not the losses, and this is money that would otherwise go to the stockholders through dividends or reinvestment in the firm. There is certainly an imbalance in what traders earn versus the rest of the firm in many cases, but despite public “outrage,” decisions on this matter properly reside with the people who are actually paying for it. For contrary to the impression left by the media, the public is not paying for any of this.

The real losers are the aforementioned General Motors et al. After stealing the stockholders and bondholders property and giving it to the UAW, the administration now proposes to further subsidize them at the expense of the banks. As with the “stimulus,” which has mainly benefited public employee unions through government expansion this government is clearly beholden to the unions on an unprecedented scale.

Written by georgesarant

January 15, 2010 at 5:34 PM

Posted in economy, government

Tagged with , ,