March 30, 2010

The Expansion of Power within Government

Recently, the passing of the controversial health care bill has got many people in an uproar. A majority of the people opposed strongly disagree with the plan mainly because, under this bill, the government will grow in size, power and reach. From the Austrian econ perspective, one can examine this situation and confidently state that in many ways, the government is increasing its use of “force.” For example, under this bill, the IRS will make a person prove that he has health insurance and specifically, the "right kind" of insurance- as they define it. And he doesn’t meet their standards and their rules, he will have to put up with the wrath of the IRS. Furthermore, the bill also states the following:

The Internal Revenue Service will function as the government’s chief enforcer for health care reform... monitoring both businesses and individuals to certify whether they have the insurance coverage the government requires.

The [IRS] will [monitor and enforce] compliance with the individual and employer insurance mandates... how and when health care is paid for, when health insurance is purchased... [and] minimum level[s] of health insurance.... [The] IRS [will] monitor individuals and employers and punish those who do not comply.

Every individual and most businesses [will be] required to report to the IRS, on their tax returns, whether they have purchased or provided the required level of coverage and disclose to the IRS which months, if any, in which they failed to do so....

If the above information does not reflect the government’s expansion of power or “force,” then what does? If that information alone is not enough to convince a person of the far reaching power of the government, consider this: In order to enforce above rules and regulations, the “Congressional Budget Office estimated that the IRS will need $10 billion in additional funds… to fund an additional 16,500 new IRS agents and other personnel to monitor and enforce the new mandates” (CNS News). This means that the government, via the IRS, now has the legal right to poke their nose into our businesses, our homes, our families and our very lives. Various polls suggest that a large portion of Americans do not support the bill. This bill was, therefore, pushed or forced upon the American people against their will. With the government growing in size, scope, and control, it’s no wonder that many people are angry with the recent passage of the healthcare bill.

In another case very similar to the healthcare example, a recent article in Business Week entitled “A Caribbean Tax Holiday” provides some insightful information regarding recent investigations being done by the U.S. internal revenue service into the “$100 billion a year in retail credit-card receipts is escaping taxation” (Silver-Greenberg 46). Here, like with the healthcare bill, the government is seeking to increase its power in order to crack down on tax evasion by individuals and corporations.

The article explains how some business owners are choosing to minimize U.S. tax bills by “sending credit-card receipts to Panama, Nevis, Aruba, the Cayman Islands, and other business havens” (Silver-Greenberg 46) in order to payout less in sales and income taxes. While significant portions of the article suggest that most of these businesses are acting legally and within the legal bounds the law, it is interesting to note that in its effort to crack down on corporate tax minimization strategies, the IRS has begun to meddle within private businesses and their practices. The IRS began looking into international payment processors that help U.S.-based businesses export their card receipts. In order to search company records, the IRS issues a subpoena and demands the “names of all U.S. merchants that have retained the company to help them deposit credit-card receipts is foreign banks” (Silver-Greenberg 48). In doing so, the IRS can then determine whether or not a certain company is facilitating tax evasion.

IRS leading agent Daniel Reeves declined to talk to Bloomberg Business week about the investigation and the IRS declined to “provide specifics about the continuing probe” (Silver-Greenberg 46). Some might discount this statement as just an interesting bit of information, but such an action does beg the question, “What does the IRS have to hide?” It’s not to say that they are doing something wrong, but rather that those within the agency realize they are blurring the lines of their duties and may in fact be operating outside of its bounds. These actions may be entirely plausible, especially in light of the administration’s increased need to collect taxes. Whether it be the case of healthcare reform or the offshore tax havens, these real-life examples within the IRS agency display the latest increase in interference within American life and economy and give us a glimpse of how the government has used its growing power to “force” the American people to act how it thinks it best.

Works Cited

Cover, Matt. "IRS Needs $10 Billion to Be Nation." CNS News. N.p., 23 Mar 2010. Web. 30 Mar 2010. .

Silver-Greenberg, Jessica. "A Caribbean Tax Holiday." BusinessWeek. 22 Feb 2010: 46-49. Print.

1 comment:

Larry Eubanks said...

Let's consider the health care bill. I think you miss an opportunity to add some economic analysis. "Health care" is supposed to be a good thing for everyone, or at least that is the way it is portrayed by the proponents of "health care reform." If this is the case, it would seem that we might expect that so much government expenditure on enforcement would not be necessary. What economic insights might you use to explain (1) why do many apparently do not want to purchase the "health care" good, and (2) are there any economic reasons one might give for forcing everyone to purchase health care insurance and are such reasons relevant to this policy issue?