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View Diary: Want to Reduce the Deficit? Start by Funding the IRS (81 comments)

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  •  I must be missing something here (0+ / 0-)

    Staff cuts from 112,000 to 91,000 - first, what about the new agents supposedly being hired because of Obamacare - the right is always crying about that. But it is important to think about the computer on your desktop in 1995 and compare it to what you have today, and ask if in a business systems environment this alone could account for the 20% decline in labor force. And the answer is , oh, hell yes. Then there is that other measure given, the cost of collections? The idea that it should remain a constant rather than declining ratio is even more Luddite dogma.

    In actuality, the US is one of the most effective tax collection regimes around. It is tax policy, not the collection regime that is in trouble. Ultimately, in a modern monetary economy, based on free floating sovereign fiat currency, taxation when applied intelligently, serves the two main purposes.

    First, taxes drive the value of money. Practically, anything for sale is up for barter if you have the desired commodity to trade, else you use the convenience of the state's money. But when you owe the state, there is no barter. You must pay with the state's money. This puts almost everyone in the bind of needing state money and makes the money valuable. How valuable depends on what one is willing to do to obtain a dollar.

    The second purpose of intelligently applied taxation is to regulate the economy. The economy has a gas pedal (spending) and a bake pedal (taxes). Types of economic activity that are socially deplored but legal can be slowed by taxation applied as a form of discouragement. In classical economics, the term "Free Market" had a totally different meaning from the perversion of today. That meaning was a market free from the ravages of parasites - the collectors of unearned economic rents - the rentiers. Here the idea was to leave the production and consumption cycle free of taxation, and collect on ground rents, natural monopolies, passive capital gains, and other unearned income streams. The way we do it now just exacerbates every economic leakage already built into the system and is literally starving the labor sector, reducing consumption, encouraging savings, and destroying aggregate demand. The result is we are hovering around deflation and until there is some major deficit spending by the government the economy will continue it decline.

    •  Even the most efficient can be improved. (3+ / 0-)
      Recommended by:
      MKinTN, caul, Creosote

      With all respect, I have to disagree with parts of this post.  First, with the implicit premise that a high level of efficiency is good enough.  This ignores the well articulated argument made above concerning fairness.  The lack of an effectively fair tax rate on those, like a recently defeated presidential candidate, who benefit most from the Government creating an environment that enables massive investment income, is one side of that fairness problem.  To be truly effective, the IRS needs the personnel to close the loopholes created by tax attorneys through the rule making process, and litigation.

      Second is the inherent unfairness that undermines confidence in Government where the lack of resources leaves pockets of nonenforcement.  We all know about huge corporations that freeload off society and pay no taxes.  There are also less monolithic pockets of tax invasion that are equally insidious.  A couple of years ago we tried to find a nanny for our child on the suburban Philly mainline.  We looked at about a dozen candidates and all were willing to work only under the table.  We even looked at a nanny share with another couple which feel through over the sticking point of paying the relevant payroll taxes and doing proper withholding.  Further inquiries suggest that virtually nobody in the western Philly suburbs who has a nanny or works as a nanny is complying with the tax obligations.  Amazingly, people are not particularly shy about revealing their participation in this culture of evasion.  

      This is an example of an environment, much like the multinational corporate environment,  where evasion becomes the accepted norm.  No matter how efficient enforcement is, improving effectiveness pays off when it shifts the norms toward compliance and increases the perception of fairness.  

      If we do not maintain Justice, Justice will not maintain us. -Sir Francis Bacon.

      by Res Ipsa Loquitor on Thu Jan 31, 2013 at 06:46:19 AM PST

      [ Parent ]

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