Today's Exercise in Cognitive Dissonance

Today's updates brought two items to my inbox.

First, the OECD has published a draft model template for country-by-country reporting by multinational corporations. The goal is to require companies for the first time to provide tax authorities with details of how they allocate their income, taxes and business activities on a country-by-country basis.

The draft requires companies to list its “constituent entities” (i.e., subsidiaries and affiliates), effective place of management, and important business activities for each country in which it does business. It also requires a company to report on a country-by-country basis, its revenue, earnings before income tax, income tax paid on a cash basis to the country of organization and to all other countries, total withholding tax paid, stated capital and accumulated earnings, number of employees, total employee expense, and tangible assets other than cash and cash equivalents.

This is a pretty big deal if you ask me.  I'll have more after I've been through the draft template.

But....

The second item in my inbox had this headline:  "Don't expect tax reform this year."

*Sigh*

Wrong Thinking on Taxes

David Atkins, who writes on Digby's blog (among others), links to this article in the Times on Saturday, which apparently has gone viral.  And I admit it is a good read and reflects my own perception (from years of experience) of the Wall Street mentality.

But I want to focus on David's concluding sentence, which I find troubling:

Wall Streeters often whine that people hate them without good reason. But of course that's not true. People hate them for very good reason. There are the inevitable degenerate moral cretins who watch a film like The Wolf of Wall Street (or Michael Douglas' Wall Street for that matter) and want to be that guy. But those with a moral compass read accounts like this, or ones by Michael Lewis, or films about Wall Street, and understand that while the boring business of loans, liquidity and investment has value, the destructive, wealth-addicted, deeply immoral and Objectivist culture of modern Wall Street cannot be salvaged.

It must be cleansed with the purifying fire of punitive taxation and regulation.

Can we stop talking about taxation being "punitive"?  Please?

Look, taxation fundamentally is the means by which our society, through its government, generates the resources to undertake activities that everyone benefits from.  Contrary to the views of conservatives, we don't impose taxes to punish, and we should stop characterizing taxation as a form of punishment.

Look, I agree that taxation, like other actions taken by the government, can be a means to encourage helpful actions and discourage harmful actions.  That's why we tax tobacco and alcohol products.  But this is regulation, not punishment.

Look, I think there are legitimate, regulatory reasons for imposing a marginal income tax rate of 90% on the highest incomes.  Concentration of wealth is a problem in a free market economy.  The whole concept of anti-trust laws is a recognition that concentration of wealth and economic power is anti-competitive, and anti-free market, and in the long run harmful for the economy and for society (to say nothing of the way that it distorts our democracy, and makes the government less responsive to the desires of the vast majority of our citizens).  That doesn't make a 90% tax rate "punitive."

As a liberal, I think we need to stop talking in these terms.  Labelling taxation as punitive is buying into the language of the right-wing anti-taxers.

Taxation is a way to fund the government and to regulate behavior.  It is not punishment.

IRS Budget (UPDATED)

As Forbes reports, the IRS has gotten hammered in the latest appropriations bill:

The Internal Revenue Service is one of the biggest losers in the 2014 budget deal agreed to last night by House and Senate negotiators. Under the agreement, the service would get just $11.3 billion, which is $526 million below its 2013 budget and $1.7 billion less than President Obama requested.

Read in conjunction with the Taxpayer Advocate report discussed here, this is, not surprisingly, a disaster. And there is no question that this is payback by Republicans.  After all, the appropriations bill contains the following provisions:

SEC. 107. None of the funds made available under this Act may be used by the Internal Revenue Service to target citizens of the United States for exercising any right guaranteed under the First Amendment to the Constitution of the United States.

SEC. 108. None of the funds made available in this Act may be used by the Internal Revenue Service to target groups for regulatory scrutiny based on their ideological beliefs.

And just for good measure, they added this one as well:

SEC. 105. None of funds made available to the Internal Revenue Service by this Act may be used to make a video unless the Service-Wide Video Editorial Board determines in advance that making the video is appropriate, taking into account the cost, topic, tone, and purpose of the video.

Note that the Service-Wide Video Editorial Board is an internal IRS organization created to review videos created for training and other purposes,, in response to the Inspector General's report on the 2010 training conference in Anaheim that raised so many hackles last year.  So basically, this provision mandates that the IRS do what it said it was already going to do.

There is, of course, no evidence that the IRS committed the acts described in Sec 107 and 108 either.  As the Forbes article deftly puts it:

If you like irony, you might keep in mind that the 501(c)(4) mess was caused in part by a lack of resources. The short-staffed agency was so overwhelmed by requests for tax-exempt status that poorly trained workers tried to shrink the backlog with what turned out to be clumsy shortcuts (word searches for “tea party,” “progressive,” and the like). Thanks to Congress and its budget, this will now get worse.

Yep.

UPDATE:  It's a done deal.  Gotta love this from US News: "Lawmakers hope passage of appropriations bill ushers in new era of cooperation in Congress." Yeah, right.

The Taxpayer Advocate Report

The IRS Taxpayer Advocate issued her Annual Report to Congress this week.  From the Executive Summary, here is a list of the five biggest issues noted in the report:

The Most Significant Issues Facing Taxpayers and the IRS Today

1. TAXPAYER RIGHTS: The IRS Should Adopt a Taxpayer Bill of Rights as a Framework for Effective Tax Administration

2. IRS BUDGET: The IRS Desperately Needs More Funding to Serve Taxpayers and Increase Voluntary Compliance

3. EMPLOYEE TRAINING: The Drastic Reduction in IRS Employee Training Impacts the Ability of the IRS to Assist Taxpayers and Fulfill its Mission

4. TAXPAYER RIGHTS: Insufficient Education and Training About Taxpayer Rights Impairs IRS Employees' Ability to Assist Taxpayers and Protect Their Rights

5. REGULATION OF RETURN PREPARERS: Taxpayers and Tax Administration Remain Vulnerable to Incompetent and Unscrupulous Return Preparers While the IRS Is Enjoined from Continuing its Efforts to Effectively Regulate Return Preparers.

Now, I am a big sanguine on the first issue.  The advocate doesn't say that taxpayers don't have sufficient rights.  What she says is neither taxpayers nor IRS employees knows what those rights are.  OK, I can understand this.  After all, IRS Publication Number 1, entitled "Your Rights as a Taxpayer", could have a much more prominent link on the main page of the IRS website, I guess, and could have a lot more information in it (or links to other appropriate information).

But note, this is question of education:  educating the public about what rights they have, and educating IRS personnel about the rights of taxpayers.

Of course, we know what happens when the IRS spends money for educating its workers.  You get stories like this:

IRS faces new scrutiny for excessive spending on conferences

The Internal Revenue Service spent an estimated $49 million on at least 220 conferences for employees over a three-year span beginning in fiscal 2010, according to a forthcoming report that will prompt fresh scrutiny of the already embattled agency.

The most recent report I have seen says the IRS has about 90,000 employees.  Spending $49 million on training conferences works out to about $500 per employee, spread out over a three-year period.  This is a pittance, and yet it is considered to be out of line by our politicians and our mainstream media.

Hell, I could argue that the whole "IRS targeting" scandal is as sign of a dysfunctional IRS, crippled by a lack of personnel needed to address important issues as they arise.  We have employees cutting corners creating "BOLO" lists and inquiries by the local agents in Cincinnati that made to the National Office that took months to respond to. From the report at the link:

In fiscal year 1992, the agency had 117,945 employees, according to data from TRAC-IRS at the University of Syracuse. By 2012, this had fallen 23 percent to 90,280. At the same time, the number of returns increased 27 percent, from 113.1 million to 143.4 million. How can we expect the IRS to square this circle?

But we have a bunch of people who make a good living hating on the IRS, and doing everything to do to keep it from doing its job.

We need a government.  To have a government we need taxes, and we need an agency to collect them. As our economy grows, we need that agency to grow as well.  It's not rocket science.

The second recommendation by the Taxpayer Advocate should be the first.  We need a working, functional tax collection agency.