The Harvard economist (and blogger) Greg Mankiw has written an excellent primer on the Federal Reserve’s power to influence the economy, making much of the the fact that the Fed is politically independent and can therefore afford to ignore public sentiment more than politicians can.
His piece got me thinking about what a lot of people have been thinking for years: what would happen if the I.R.S. were independent as well? If you’re interested in the subject, you might want to check out this 1998 testimony before the Senate’s Finance Committee by Margaret Milner Richardson, a onetime Commissioner of Internal Revenue. She was all in favor of independence — no big surprise, perhaps, considering her former position; but her points are well worth considering.
I still feel, as we wrote a couple of years ago, that the I.R.S. is like a big police force charged with enforcing a bunch of rules that are unpopular, constantly disputed, and set by someone else.
Judging from a pair of very interesting posts on Marginal Revolution about taxation (including this one, about who pays what share of tax and this one, about how tax money is spent), and also judging from some of the comments following our recent post about charitable donations, there are a lot of other people who feel, like me, that taxation is an inherently political enterprise as it is now configured. The I.R.S. is a convenient scapegoat, but let’s be real: if the I.R.S. were even half as independent as the Fed, would politicians (especially in campaign mode) get to constantly play yo-yo with taxes, as they do now?
FWIW, there is a pair of interesting tax-related articles in today’s Wall Street Journal. This editorial bemoans a new effort in Congress to impose an e-commerce tax, and this op-ed makes an impassioned pitch by Leo Linbeck for the FairTax. Among the questions raised by the latter: “Is it really in everyone’s interests to keep the income-tax system so that one-third of taxpayers can go on deducting a portion of their mortgage interest from their federal taxes?” Like I said, there’s no way such a fight can be fought with a politically beholden I.R.S. Which makes Linbeck’s argument, as compelling as it may be, the ultimate Catch-22.
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Two things spring to mind when considering tax rates; the first is that the wealthy maintain their unequal advantage under the umbrella of our society; and second, that a dollar above, say, $20,000 is quite different to a dollar under $20,000 in terms of how freely one may choose to spend it.
When talking about equality in terms of benefits vs. contribution, it is wise to think of society as a whole. This is something that governments do better than independent enterprise.
Two things spring to mind when considering tax rates; the first is that the wealthy maintain their unequal advantage under the umbrella of our society; and second, that a dollar above, say, $20,000 is quite different to a dollar under $20,000 in terms of how freely one may choose to spend it.
When talking about equality in terms of benefits vs. contribution, it is wise to think of society as a whole. This is something that governments do better than independent enterprise.
What does this post mean?
Is this about tax policy? If you’re suggesting tax policy should be up to the IRS, I think you’re forgetting about a fundamental issue called separation of powers and the US Constitution!?
If you’re suggesting that the IRS should be a government corporation like the AMTRAK, PBS, PBGC or USPS, then I think that list might answer your question. Are government corporations any less political or well-received? I suspect not.
If the point of the post is that tax policy isn’t entirely internally consistent, I don’t see how making the IRS ‘more independent’ would solve that.
What does this post mean?
Is this about tax policy? If you’re suggesting tax policy should be up to the IRS, I think you’re forgetting about a fundamental issue called separation of powers and the US Constitution!?
If you’re suggesting that the IRS should be a government corporation like the AMTRAK, PBS, PBGC or USPS, then I think that list might answer your question. Are government corporations any less political or well-received? I suspect not.
If the point of the post is that tax policy isn’t entirely internally consistent, I don’t see how making the IRS ‘more independent’ would solve that.
Hmm- A police force that writes the laws it has to enforce. Oh yes, I know, that’s a police state! That was an easy one. What would the IRS look like if it was “independent” like the FED? Probably like the FED it would have no concern for the little guy and would be constantly working hand in glove with the fat cats, protecting and furthering their interests as much as would be in their power to do so. Of course “taxation without representation” would be more efficient, from the tax collector’s perspective!
Hmm- A police force that writes the laws it has to enforce. Oh yes, I know, that’s a police state! That was an easy one. What would the IRS look like if it was “independent” like the FED? Probably like the FED it would have no concern for the little guy and would be constantly working hand in glove with the fat cats, protecting and furthering their interests as much as would be in their power to do so. Of course “taxation without representation” would be more efficient, from the tax collector’s perspective!
Just a clarification on Mike’s comment.
The Fairtax eliminates income tax, therefore you would not be filing a tax return on which you would claim the mortgage deduction should it be exluded from the fairtax.
However I may have mistaken where you were going with you comment.
Just a clarification on Mike’s comment.
The Fairtax eliminates income tax, therefore you would not be filing a tax return on which you would claim the mortgage deduction should it be exluded from the fairtax.
However I may have mistaken where you were going with you comment.