July 31, 2006

Policy by Pink Slip?

Imagine if President Bush favored the legalization of marijuana. Now, imagine he was able to get the House of Representatives to support his position, but found resistance in the Senate. A bipartisan coalition of Senators blocked his scheme on the grounds that it would be harmful for America’s youth. Instead of respecting the legislative process, President Bush decided to start firing key personal at the FBI, Department of Justice, and other important agencies. It would provoke quite a bit of outcry.

Well, this outrageous form of policy by pink slip seems to be the new strategy for Estate Tax elimination. Last week, the New York Times reported that the Internal Revenue Service was planning to eliminate up to half of the positions that are responsible auditing the tax returns of the ultra-rich. The policy implications are pretty simple: if there are fewer people to look for tax cheaters, less tax cheaters will be caught.

Linda Beale, a law professor at the University of Illinois, pointed out that this decision will hurt the ability of the federal government to find and prosecute tax cheaters:

As for collection efficiency, one need not look further than the IRS's own statistics. As noted in the Times article, "10 percent of the estate audits brought in 80 percent of the additional taxes." In other words, wealthy people are the ones with the most to gain from cheating, and estate tax is one of the ways they can cheat most easily, with fake family partnerships and ridiculously low prefab valuations of their valuable property

According to sources cited by the article, the decision to eliminate these positions was purely political. There is a great of opposition within the IRS and also from the National Treasury Employees Union. According to the national union president, “''If these lawyers are not there to audit the gift and estate tax returns, then a lot of taxes that should be paid will go uncollected, and that impacts every taxpayer who is paying their fair share.''

Eliminating positions is simply a bad way to execute public policy. Instead of just firing people who do a job he doesn’t like, President Bush should respect the will of the Congress and abandon the idea of repealing the Estate Tax.


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