Breaking: IRS Just Made Huge Announcement That Could Affect Many Taxpayers

As Americans prepare their tax returns ahead of April’s deadline, the Internal Revenue Service on Wednesday announced a “hardware failure” within its computer system had prevented taxpayers from digitally submitting their applicable records.

“At this time, the IRS does not anticipate major refund disruptions,” a statement confirmed, though the exact cause or potential effects of the disruption were not revealed.

According to developing reports, the issues are expected to be resolved by sometime Thursday. While agency officials work to make sure all needed repairs are completed, individuals hoping to file during that period are encouraged to finalize their returns.

Some features of the official IRS site remain active, though the agency specified certain programs that remained offline as of the announcement.

“A number of taxpayer and tax practitioner tools are unavailable,” the agency advised. “IRS.gov remains available, although a number of the services on the site are not, including Where’s My Refund.”

Despite the system setback, the IRS is optimistic that it can maintain the pace it has set for itself. The agency is set to complete the refund process within three weeks for 9 out of 10 U.S. taxpayers.

Computer failures hit several U.S. Internal Revenue Service systems Wednesday in the midst of tax season, leaving the agency unable to accept some taxpayer returns.

The scope of the system issue was not immediately clear, but the IRS called it a “hardware failure.” The IRS has started repairs and expects that some systems may remain unavailable until Thursday.

Will The IRS Take Your Passport?

A little-noticed provision in the highway funding bill Congress passed last week threatens a right most Americans take for granted: the right to travel abroad. The provision in question gives the Internal Revenue Service the authority to revoke the passport of anyone the IRS claims owes more than $50,000 in back taxes.

Congress is giving the IRS this new power because a decline in gas tax receipts has bankrupted the federal highway trust fund. Of course, Congress would rather squeeze more money from the American people than reduce spending, repeal costly regulations, or return responsibility for highway construction to the states, local governments, and the private sector. On the other hand, most in Congress fear the political consequences of raising gas, or other, taxes. Giving the IRS new powers allows politicians to increase government revenue without having to increase tax rates. Some even brag about how they are “cracking down on tax cheats.”

Pro-IRS politicians ignore how this new power will punish Americans who have actually paid all the taxes they are legally obligated to pay. This is because the provision does not provide taxpayers an opportunity to challenge a finding that they owe back taxes in federal court before their passport is revoked. Because IRS employees are not infallible, it is inevitable that many Americans will lose their right to travel because of a bureaucrat’s mistake.

It is particularly odd that a Republican Congress would give this type of power to the IRS considering the continuing outrage over IRS targeting of “Tea Party” organizations. This is hardly the first time the IRS has been used to intimidate its opponents and/or powerful politicians. Presidents of both parties have used the IRS to target political enemies.

For example, one of the articles of impeachment brought against Richard Nixon dealt with his attempt to have the IRS audit those Nixon perceived as political enemies. During the 1990s, an IRS agent allegedly told the head of an organization supporting then-President Bill Clinton’s impeachment, “What do you expect when you target the President?” Can anyone doubt that some Americans will be targeted because an IRS bureaucrat does not approve of their political beliefs and activities?

Some support giving the IRS new powers because they think that those who underpay their taxes somehow raise everyone else’s taxes. This argument assumes that the federal government must collect the maximum amount of taxes because the people cannot do without big government. Of course, the truth is that the people would be better off without the welfare-warfare state.

Wouldn’t we be better off without a national health care program that increases health care costs, or without a war on terrorism that led to the rise of ISIS? Freeing the people from taxation, including the regressive and hidden inflation tax, is just one of the many ways the people will benefit from restoring constitutionally limited government.

As the federal debt increases and the American economy declines, an increasingly desperate Congress will look for new ways to squeeze more revenue from taxpayers. Thus, the IRS will increasingly gain new and ever more tyrannical powers over Americans, including new restrictions on the right to travel or even move capital out of the country.

The only way to end the IRS’s assault on our liberties is for the people to force Congress to stop looking for new ways to pick our pockets, and instead usher in a new era of liberty, peace, and prosperity by demolishing the welfare-warfare state.

© Copyright 2015 Ron Paul

Exposed: A New Strategy For Tax Cheats

Suppose you’ve been using some creative data, accounting and legal interpretations for years to reduce your tax bill – and the IRS suddenly flags you for a full-blown audit. Instead of trembling in your boots, shredding your records, calling a top-flight lawyer, and preparing for an extended jail visit, just do this:

Patiently explain that your raw data, records and other documents are your private property. Your legal analyses, accounting methods, and unique computer codes and algorithms are proprietary. The IRS has no right to see them. When the agents ask you questions, explain that you don’t recall any details. If they get testy or threaten you with arrest, just say you resent their intimidation tactics.

Absurd? A ticket to the slammer? Maybe not. Similar ploys worked for Lois Lerner and Hillary Clinton.

More to the point, they’ve worked like a charm for scientists who’ve received millions of tax dollars to crank out studies insisting that we face increasingly serious, previously unimaginable climate and weather cataclysms, because we use fossil fuels to power our economy, create jobs and improve living standards.

These studies do not merely sit on shelves. Politicians, bureaucrats, journalists, activists and scientists cite them to justify policies that require us to dramatically reduce carbon dioxide emissions – and thus our energy use, employment rates and living standards. If the studies are biased, based on “homogenized,” exaggerated, manipulated or fabricated data, or result from garbage-in/garbage-out computer models – we need to know that, before expensive, destructive regulations are imposed on us. Or so we would think.

World leaders are meeting right now in Paris, often using absurd claims, and alarming reports, to forge a global treaty saying the world must eliminate 96% of the greenhouse gases that all humanity would likely release if we reach world population levels, economic growth and living standards predicted for 2050 – by steadily eliminating increasingly more energy efficient, low-carbon fuels and technologies.

Such reductions would mean slashing energy use and average world per capita GDP from its projected $30,600 in 2050 to a miserly $1,200 per year, says energy analyst Roger Bezdek. Average per capita GDP in 2050 would be less than what Americans “enjoyed” in 1830! Many futuristic technologies would still exist, but only wealthy families and ruling elites would be able to afford them.

Congress is therefore absolutely right to demand access to the raw data, accounting and data revision methodologies, computer codes and algorithms, emails and analytical methods that taxpayer-financed scientists and agencies used in developing and justifying the EPA’s Clean Power Plan, the NOAA’s declarations that various months were the “hottest on record,” claims that myriad disasters will occur if we don’t curb carbon dioxide emissions, and assertions that only a global treaty will save the planet and humanity.

That’s why House Science Committee Chairman Lamar Smith (R-TX) has asked NOAA director Kathryn Sullivan to turn over documents related to a study that claimed global warming has not stalled for almost 19 years, as satellite records show. The NOAA study adjusted sea-surface temperature data from a global network of buoys upward by 0.12 degrees Celsius (0.25 F), to “homogenize” the buoy data with records from engine intake systems on ships – and thereby create a previously undetected warming trend.

But the intake data were contaminated by heat from the ships, whereas the buoy network was designed for accurate environmental monitoring. A more honest, defensible study would have adjusted the ship data downward, to “homogenize” them with more reliable buoy data. But the feds needed a warming trend.

Smith has threatened to use “civil and/or criminal enforcement mechanisms” if the agency doesn’t provide the documents. The American Meteorological Society says these are “intimidation” tactics that unfairly question the integrity of NOAA scientists. However, Smith is right to defend to public interest in knowing that such studies are honest and credible.

After all, we taxpayers paid for them, and they are being used to promote policies that will affect our livelihoods, liberties, living standards and even life spans. If the scientists have nothing to hide, they should be happy to engage in a robust peer review – in essence, to defend their novel PhD thesis.

Instead, requests to see data or engage in discussion or debate are met with outright refusals. EPA Administrator Gina McCarthy has said she would “protect” her agency’s data, analyses and reports from people and organizations that she alone decides “are not qualified to analyze” the materials. The agency has implemented numerous costly regulations with no attempt to verify IPCC “science” or even consider the rules’ impacts on the health and welfare of families whose breadwinners will lose their jobs.

Other tax-funded groups have likewise refused to discuss their findings with climate disaster skeptics. Some have even asked the Justice Department to initiate RICO racketeering prosecutions of organizations that raise inconvenient questions about climate studies. The White House has enlisted virtually every US Government agency, including the Defense Department, in its determined effort to employ global warming claims to “fundamentally transform” the United States before President Obama leaves office.

We should not be surprised. Billions of dollars in annual US government grants and a $1.5-trillion-per-year climate crisis and renewable energy industry mean people will jealously guard their money trains.

The EPA has paid members of its Clean Air Scientific Advisory Committee $180.8 million since 2000. Grants from the EPA and other federal agencies to the American Lung Association over the same period total $43 million, for rubber-stamping and promoting government decisions on pollution and climate change.

Courts have let former U of Virginia researcher Michael Mann refuse to provide tax-funded data and emails, even to the former Virginia Attorney General, on the ground that they are proprietary. DMD (Data Manipulation Disease) is not confined to the USA or Britain’s Climate Research Unit. Australia’s Bureau of Meteorology has also “homogenized” temperature records so thoroughly that it was able to convert a cooling trend of 1 Celsius degree per century (1.8 F) into a 2.5 degree C (4.5 F) warming trend!

And now, developing countries want $1 trillion from developed nations between 2020 and 2030, for climate “reparations and adaptation.” Otherwise, the poor countries won’t sign any document drafted in Paris. Meanwhile, those (formerly) rich countries are expected to sacrifice their jobs, economic growth and tax revenues in the name of preventing climate and extreme weather catastrophes.

The EPA, NOAA, IPCC, CRU and Meteorology Bureau are acting like unethical prosecutors, determined to convict carbon dioxide of dangerous global warming by: basing their case on circumstantial evidence, allowing tainted evidence, hiding exculpatory evidence, and denying the defendant the right to present a defense, cross-examine adverse witnesses, or even offer testimony attesting to the good conduct and character of defendant – as a vital plant-fertilizing gas that makes all life on Earth possible.

Thankfully, it’s likely the Paris climate gabfest will result in little more than a lot of “sound and fury, signifying nothing” – except more dire fear-mongering about imminent planetary doom, lofty promises of intent to do something 15-20 years from now to prevent the crisis, and plans to fly 40,000 delegates and hangers-on to more meetings, in other delightful destinations replete with 5-star hotels and restaurants. Billions more will be wasted, but no binding CO2 targets will destroy energy systems and economies.

The US Senate will not approve or appropriate money for any emission reductions or climate reparations President Obama might agree to in Paris. EU nations cannot afford to do so, even if developing countries agree to binding emission goals – which they will never do. Poor nations would face open rebellion if they stopped using fossil fuels to lift billions out of abject poverty, or ceased building the 1,800+ coal-fired power plants that are under construction or in the planning process in their countries.

So maybe relax a little on Paris – but keep railing against destructive climate deals, wind and solar production tax credits, ethanol mandates and global warming con artists. However, don’t try using those climate scientist gambits with the Internal Revenue Service.

Paul Driessen is senior policy analyst for the Committee For A Constructive Tomorrow (www.cfact.org), and coauthor of Cracking Big Green: Saving the world from the Save-the-Earth money machine.

The Good Ol’ Days: When Tax Rates Were 90 Percent

It’s quite interesting indeed when both progressives and conservatives seem to be nostalgic for those good ol’ days in the 1950s, for different reasons, of course. Conservatives want to go back to the nuclear Leave It to Beaver family and what not, while liberals like to talk about those 90-percent tax rates that we owe our prosperity to. Or something like that. We’ll focus on the latter for the time being.

Bernie Sanders noted that “When radical, socialist Dwight D. Eisenhower was president, I think the highest marginal tax rate was something like 90 percent.” Paul Krugman said the same thing, as did Michael Moore in his film Capitalism: A Love Story, and you’ll see this factoid repeated on countless memes floating around the Internet.

However, what a tax rate is and what is actually paid are two very different things. Indeed, in 1955, the only people paying 90 percent (actually 91 percent) were those making over $3,425,766 when adjusted for inflation. And these are marginal rates, so they only paid that on any earnings above that threshold.

Tax law has changed a lot over the years. As you can see by looking at the top marginal rate versus the inflation-adjusted top income bracket for those filing jointly from 1950 until 2013:

Top marginal rate versus the inflation-adjusted top income bracket
Source: Tax Foundation.

Today, there are seven tax brackets. In 1989, there were only two. In 1955, there were an utterly ridiculous twenty-four different tax brackets.

Regardless, one should ask how much the rich were actually paying. It should be noteworthy that back in the 1950s, the government wasn’t actually collecting any more in tax revenue as a percentage of GDP. There’s something called Hauser’s Law, which basically states there is a maximum threshold on how much the government can tax out of its population. I think this “law” is no such thing. If the government really wanted to expropriate more, it could do so. But Hauser’s Law is based on the fact that in pretty much every year since 1950, the government has collected between 17 to 20 percent of GDP in taxes. Here are the government tax receipts compared to the top marginal tax rate:

Total Tax Receipts vs Top Marginal Tax Rate
Sources: Tax Foundation and Tax Policy Center.

As you can see, no matter what the rate has been, the tax receipts have pretty much been the same. Whether or not you can raise the amount collected is really immaterial here; the only thing that matters is what has happened (particularly when tax rates were over 90 percent), and it’s pretty much always been the same.

Of course, there are a lot of other taxes than personal income taxes. Still, tax receipts from personal income taxes have consistently been between 7 and 9 percent. In 2014, they were 8.1 percent. Furthermore, as you can see, the chart looks pretty much the same when looking at personal income tax receipts and the top marginal tax rate.

Income Tax Receipts vs Top Marginal Tax Rate
Source: Tax Foundation.

But who is paying these taxes, a liberal might retort? Has the burden fallen more on the middle and lower classes? Well, no. In fact, the percentage of taxes paid by the highest quintile of income earners has steadily gone up since 1980. In 1980, the top 20 percent paid about 55 percent of all income taxes. Today, it’s just shy of 70 percent. The same goes for the top 1 percent, which went from about 15 percent in 1980 to just shy of 30 percent today.

The first of many reasons that this was the case is that we need to look at the effective tax rate, not the top marginal tax rate. So for example, if I make $20,000, I owe 10 percent under today’s tax code, but only on any income over $18,450 (filing jointly). So I only owe 10 percent of $1550, or $155. Yes, my marginal tax rate may be 10 percent, but my effective tax rate is 0.78 percent.

A study from the Congressional Research Service concludes that the effective tax rate for the top 0.01 percent of income earners during the period of 91-percent income taxes was actually 45 percent. Given that the top bracket is so much lower today ($3,425,766 in 1955 vs. $413,200 in 2015), the 39.6 percent top marginal rate probably yields something pretty close.

Some of this was because corporate rates have always been lower than 50 percent. And as Alan Reynolds noted, when the personal income tax rates were reduced, it “… induced thousands of businesses to switch from filing under the corporate tax system to filing under the individual tax system.” In other words, many rich people kept their money in corporate entities when personal tax rates were higher.

Another major factor was the myriad of deductions and loop holes that used to be available. Many of these were eliminated by the Tax Reform Act of 1986, which by no coincidence coincided with the biggest rate deductions. For one, interest had previously been deductible on all loans. After the act, it has only been deductible on home mortgages.

But what was probably the biggest lost deduction for wealthy individuals was the elimination of deductions on passive investment losses on real estate. Before 1986, wealthy individuals would often buy real estate with no hopes at all of it cash flowing. That wasn’t the point. The point was that real estate is depreciated every year in the eyes of the IRS. Even though in the long run, properties usually go up in value, the IRS assumes that every twenty-seven-and-a-half years, a property’s value will depreciate to zero.

This “loss” can be written off. So, for example, say a man earning $100,000 a year buys a property worth $275,000. He rents out the property and breaks even on it. The tax code allows that person to write off $10,000 as a loss which he can count against his income for that year. So now he only has to pay taxes on $90,000. If he owned ten such properties, his income would be zero, at least according to the IRS.

That deduction is now gone for everyone but “active” real estate investors, or those who invest in real estate as a career.

Indeed, one former tax accountant even made the case that there were so many deductions, loop holes and the like in the pre-1986 tax code that “… there was a massive amount of tax fraud at all income levels under the old code. It was so bad and so common that most people took pride in telling others how they cheated on their taxes.”

I’ll leave how true that statement is to the reader; but from what I’ve heard, it sounds about right.

Regardless, the simple fact is that the rich never paid 90 percent of their income in taxes or anything even remotely close to that. Unfortunately though, some memes die hard.

This commentary originally appeared at Mises.org and is reprinted here under a Creative Commons license

Here Is By Far The Stupidest Tax Americans Pay–Are You Paying It?

One of the stupidest, most asinine, and most evil things that Americans will encounter this tax season is the gift tax.

According to the IRS:

The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.

The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

How bad does the IRS want to tax you for giving someone a gift? Here is your answer: “The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.”

  • Gifts that are not more than the annual exclusion for the calendar year.
  • Tuition or medical expenses you pay for someone (the educational and medical exclusions).
  • Gifts to your spouse.
  • Gifts to a political organization for its use.
  • In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.

And what is the annual exclusion amount? Again, according to the IRS: “All of the gifts made during the calendar year to a donee are fully excluded under the annual exclusion if they are all gifts of present interest and they total $13,000 or less.”

My, how generous is the federal government! As long as you don’t give someone a gift worth over $13,000 then you don’t have to pay any gift tax.

But why do we have a gift tax in the first place? Don’t we already pay taxes on the money we earn? Why should we be taxed again just because we give away money instead of spend it? Is this not double taxation? Of course it is. But the federal government loves taxing money twice. Is there a tax deduction for Social Security and Medicare taxes paid? Of course not. Are dividends taxed after corporations already paid taxes on their profits? Of course they are.

The reason why we have a gift tax is because we have an estate tax. Without a gift tax, the rich could give away all their money before they die and thus avoid paying the estate tax. But what’s wrong with that? Haven’t they already paid taxes on not only the money they earned, but also on their capital gains and interest they received? For more on the estate tax, see my article “A Libertarian View of the Estate Tax.”

The rule that you cannot give away to someone more than $13,000 in a year without paying a gift tax is a stupid rule.

Stupid rule; stupid Republicans.

Republicans? How can I possibly blame this stupid rule on Republicans? Hasn’t the gift tax been around since 1932?

First of all, let’s be clear why I am singling out the Republicans. It is Republicans that talk about cutting taxes, not Democrats. It is Republicans that talk about limiting government, not Democrats. It is Republicans that talk about smaller government, not Democrats. It is Republicans that talk about getting the government out of our lives, not Democrats. This doesn’t mean that Republicans really believe any of these things, but they are the ones talking about them, not Democrats.

The Republicans gained a majority in the House and Senate in the third year of Clinton’s first term as president. This was the first time that the Republicans had controlled the entire Congress since the 83rd Congress of 1953-1955 under President Eisenhower. The Republicans could have put a bill to repeal the gift tax on Clinton’s desk every day. When Clinton refused to sign it, they could have garnered enough public opinion in support of repealing the gift tax so that Clinton was forced to sign it. The Republicans made absolutely no attempt to do so. Instead, all we heard from them were excuses about needing a larger, veto-proof majority in Congress or a Republican in the White House to ensure the passage of Republican bills.

Well, they got their Republican president in 2000, and what happened to the gift tax? Absolutely nothing. Why wasn’t the elimination of the gift tax made part of the Bush tax cuts? The Republicans controlled the Congress and the presidency from the inauguration of George Bush on January 20, 2001, until May 24, 2001, when Republican senator Jim Jeffords switched from Republican to independent. After the 2002 election, the Republicans regained control of the Senate. The Republicans lost both the House and the Senate in the 2006 election. This means that for four years without interruption, the Republicans controlled the Congress and the White House. If ever in history the gift tax could have been repealed, then that was the time. But it wasn’t repealed any more than any other wealth redistribution scheme was repealed. Instead, the government grew by leaps and bounds. It is not government that Republicans want to limit, make smaller, and get out of our lives, it is only government controlled by Democrats.

The late Sam Francis (1947-2005) used to call the Republican Party the Stupid Party. Is there any doubt that he was entirely correct?

Laurence M. Vance [send him mail] writes from Pensacola, FL. He is the author of Christianity and War and Other Essays Against the Warfare State and The Revolution that Wasn’t. His newest book is Rethinking the Good War. Visit his website.

Copyright © 2012 by LewRockwell.com.

This article originally appeared at LewRockwell.com and is reprinted here under a Creative Commons license