Wednesday, March 15, 2017

Do Only Suckers Pay Taxes?



                                         DO ONLY SUCKERS PAY TAXES?

I’ve always thought of taxes as the price of civilization, and while grumbling along with everyone else about the tax codes complexity, I have never felt anything but pride in my ability to contribute larger amounts to our shared enterprise.   Once, when I was audited, I was particularly proud of the fact that the only mistakes found were in the government’s failure.  I ended up with a small refund!! 

 For many years, I think the vast majority of citizens shared my view.  In recent years, however, the number of people who disagree with the existence, intent or performance of the government has increased dramatically and as a consequence, there seems to be growing acceptance of tax evasion and a near constant chorus of calls - often from very wealthy people – for lower tax rates.

In my view, a collective disdain for tax compliance threatens both our solvency and our form of government.    In a large country like the US, where most people do not run for public office or otherwise participate actively in governance,   preserving representative government  depends, at least in part,  on sustaining the rituals of participation that establish  a common interest. In years past, one of the most important of those rituals was mandatory military service, which touched virtually every family’s life directly or indirectly.  Mandatory service has given way to a volunteer military about which most of us know very little and with which we have little interaction.
Another weakened ritual is voting. In the most recent Presidential election, only 58% of eligible voters bothered to cast a ballot; 90 million citizens simply didn’t bother and by implication, care little about voting rights. 
       
One of the most important remaining rituals is obeying our tax laws, which rest on a presumption of compliance.     Unhappily, the Congress – which levies taxes and should seek to encourage honest tax reporting – seems intent on making tax compliance a “suckers only” game.  In addition to echoing calls for lower taxes, lawmakers have been gradually eviscerating the IRS, which is no longer capable of enforcing our tax laws. In 2014, the latest year for which I could find records, the IRS audited less than 1% of all returns, and only 16% of those returns which reported income of more than $10 million.  The reason is simple: fewer auditors.  In 2016, enforcement staffing fell to less than 16,000, fewer than were on the job back in 2010.  

The lack of investigative manpower leads, inevitably, to widespread tax evasion.  Following each of the last several Presidential elections, one or more cabinet appointees have been revealed as having failed to pay taxes on household help.  Last year, fewer than 200,000 taxpayers paid these taxes, a number implying massive non-compliance. It doesn’t seem to matter to these evaders that the helpers will end up, years in the future, without the retirement benefits everyone needs. 

 In addition to doing far too few audits, the agency is doing fewer investigations of identity theft, money laundering, and public corruption.  Moreover, taxpayers seeking IRS assistance increasingly find their written queries unanswered and the agency’s telephones unmanned.  

None of this makes sense, since we have a huge tax gap – the difference between the amount paid and the amount owed – and the IRS is extremely efficient, spending just 35 cents to collect every $100 of revenue collected.    Moreover, incremental spending produces huge incremental gains: for every $1 spent on additional agents, the government recovers $4 of additional revenue.  And the government needs the money.  Last year’s budget deficit was $587 billion, but more than $450 billion in taxes went uncollected.  Collecting the money due but unpaid would nearly eliminate the deficit and free up funds that are needed to improve our infrastructure, improve health care and revitalize our educational system. 

Unhappily, things seem to be getting worse, not better.  The Trump Administration has proposed a 14.1 percent cut to the IRS for the fiscal year that begins in October, which would reduce the agency’s budget to about 70% of what it was six years ago.   If that proposal becomes reality, agency effectiveness will decline still further. 

I don’t understand why our government follows policies seemingly designed to minimize tax collections and create a nation of scofflaws.  In years past, Americans mocked countries unable or unwilling to collect taxes; today, we seemed determined to emulate them.

There will always be disagreements about what roles government should or should not take on.    But if we want to sustain self- governance, we need to recognize that doing so requires adherence to the rule of law, including calculating and paying all the taxes that are due.  Only by doing so can we be sure that citizens who pay their taxes will see themselves as patriots, not suckers!!!!






Sunday, February 21, 2016

WRONG ON THIS ONE

                                                        WRONG ON THIS ONE

On  February 15, the New York Times editorialized against a proposal to remove management of America's air traffic control system from the FAA, and hand responsibility to a non-profit corporation governed by the system's customers and participants. More than 50 countries around the world have already taken equivalent steps, with outstanding results. The US has fallen behind in aviation, and without this change, is unlikely to catch up.

Although I am a great fan of  the Times -- and a Democrat -- I think both the paper and my party are wrong on this issue.   On February 16, I sent the Times the following response,  which it has declined to publish. 





As a long time student of the airline industry and fan of the New York Times, I am deeply disappointed by the Paper’s opposition to the proposal that the FAA’s Air Traffic Control function be moved into a non-profit corporatized ANSP (Air Navigation Service Provider).  The present system is clearly broken and I believe that the Paper is wrong on the facts.

  •    First and foremost, corporatizing is not privatizing. The proposed non-profit organization will be governed by a Board which includes representatives of the airlines, general aviation, consumers, unions and the federal government.  The organization will set and collect service fees sufficient to cover its costs and will be able to sell bonds against those fees, thus providing reliable capital funding.  It will be free to manage its business as it sees fit so long as it conforms to safety requirements established by the FAA.
  • The purpose of the proposal is to separate the  safety oversight and navigation service provider functions, as more than 50 countries have already done. Safety oversight should and will remain the responsibility of government; navigation services should and will be provided by an organization able to provide for its long term financing needs by bonding its flow of user fees, free to compete with private enterprise for the skilled personnel needed to manage the world’s largest and most complex air space, financed and governed by its customers, and free of political interference.
  • The claim that Canadian air traffic control costs have increased more rapidly than costs in the United States is incorrect. Nav Canada's charging rates are now only 5% higher than when user fees were fully implemented in 1999, but are one third lower after correcting for inflation since then. By way of contrast, FAA's  cost per unit of workload has increased sharply since 1999.  Moreover, Nav Canada’s cost per IFR flight hour is more than 30% lower than the same cost in the U. S. 
  • The notion that safety will somehow be compromised is bogus.  While the FAA has done an excellent job of operating a complex system safely, in every country in which safety and  aviation navigation service functions have been separated,  the safety record  has been equal to or better than the record prior to separation of the two. That’s only logical, since splitting the functions removes the burden of self- regulation, in which some level of conflict of interest is inherent and inevitable. 
  • The idea that creating an ANSP would disrupt the FAA's effort to implement Next Gen - a broad upgrade of the nation's airspace management system -- is a refutation of reality.  The FAA has struggled for years with  Next Gen, routinely running far behind schedule and far over budget on each of its many components.  The financial uncertainty and political meddling inherent in Congressional supervision are incompatible with optimizing technical progress. 
  • It is disingenuous to claim that the proposed bill gives short shrift to passenger interests. The public interest is never well served by inefficiency, and in the status quo too many flights are delayed and cancelled and too many passengers are left unserved.   We need a more efficient air space management system, and to get it, we need to create an organization that will be funded and governed by its customers.  Those customers will naturally demand a system optimized for both efficiency and economy. The improved system will allow airlines and others to schedule more flights, burn less fuel and make travel both less expensive and more enjoyable.

This is a change that many in the aviation community have been pursuing for decades.  I hope the New York Times Editorial Board will re-think its position and that Democratic politicians will recognize the error of their opposition and work with the bill’s sponsors to produce a change that will benefit both travelers and the nation’s economy.  
  

Wednesday, April 1, 2015

Tired of it yet?



I often wonder when we are going to decide that an individuals’ right to privacy ends when that person acts or aspires to act in a way that impacts the life and welfare of others.
In Chicago, the mayoral candidates are scrambling to outdo one another’s pledges to remove cameras at intersections, apparently because most Chicago motorists believe their  privacy rights extend to being allowed to run red lights, even if doing so is against the law and may kill other people.     
We are learning that strict German privacy regulations probably prevented Lufthansa and its subsidiary German Wings from acting as aggressively as they should have to prevent a suicidal co-pilot from slaughtering a plane full of passengers.
Similarly, we can’t know the names of the Secret Service agents involved in any of that agency’s recent failures, whether any of the agents involved in those failures have been or will be dismissed and details of the selection and training processes that made it possible for deficient personalities  to play important roles.
The privacy fixation also impacts our lives in day- to- day ways that challenge common sense and shape the social contract. Universities are not allowed to give me the grades of those for whom I pay tuition, doctors won’t talk to me about my wife’s health,  banks won’t give me credit card balances on cards issued to others on which I am joint guarantor. While these irritants do not threaten the public welfare, the imposition of legislated standards which supersede pre-existing presumptions of normality erodes the  social contract by implying that privacy has a uniquely important value.
We will never be able to identify those most likely to commit horrific acts until we are prepared to acknowledge that an application to undertake public life requires giving up personal privacy.  A person who wants to fly or drive a public conveyance, a person who wants a license to practice medicine or dentistry, a person who wants to teach or care for our children, a person who seeks the right to provide legal, brokerage or accounting services, a person who seeks the right to carry a weapon in public places – all these and others who influence the lives of others -- should be prepared for complete disclosure.  How else can we judge the character and qualifications of those to whom we trust our lives, our money and our reputations?
I’m tired of it.  Are you?

Monday, August 4, 2014

DOING EVERYTHING WRONG



It isn’t very often than any individual, company or government gets everything wrong simultaneously.  But the members of Congress, clinging fiercely to ideology, expediency and cynicism, are doing so regularly.  There can be no better illustration than the pathetically ignorant and immoral “solution” fashioned this week to forestall the pending insolvency of the Highway Trust Fund.
No thinking person – Democrat, Republican or Unicorn – can possibly believe that encouraging companies to further shortchange already inadequately financed pension plans is a sensible approach to funding highway construction. Nevertheless, that’s what Congress just did, before rushing off to an ill deserved “vacation”.   
Anyone who pays attention to public affairs knows that the US has been seriously underfunding maintenance of the country’s physical infrastructure for many years.  We spend roughly half as much, as a percentage of GDP, on infrastructure maintenance as most developed countries.  The Highway Trust Fund, which provides a large percentage of the money needed to sustain and expand our roads, is supported by a federal gasoline tax of 18.4 cents per gallon, which has not been increased since 1993.  Since building and maintaining our roads is more expensive now than when the tax was last increased, the Trust Fund is expected to run out of money at the end of August. Should that happen, about 600,000 jobs will be lost as highway construction and maintenance projects across the country shut down.

Shutting down projects that are providing good  jobs is bad for the re-election prospects of incumbents,  so Congress went looking for a way to keep those projects going – without raising taxes (perceived as bad by politicians) or increasing the deficit (also perceived as  bad by politicians) .  To accomplish its goal, Congress  decided to make another problem even worse than it already is—counting on the fact that most of us won’t notice and even if we do, won’t do anything about our outrage. 
To prevent the Trust Fund from running dry, Congress authorized the transfer of $10 Billion from the General Fund to the Highway Trust Fund.  Normally, increasing the government’s expenses by paying for road building would count as an increase in the deficit. However, since most members lack the courage to acknowledge that truth, Congress decided to “finance” the fund transfer by allowing corporations to make smaller pension contributions under certain circumstances.  Doing so allows Congress to forecast larger corporate profits and increased tax receipts, thus – theoretically – covering the cost of the payment to the Highway Trust fund.   
Since smaller pension contributions now will mean higher contributions later, arguing that such an arrangement generates additional revenue for the government is nonsensical.  Moreover, since many pension plans are already underfunded, and since the government agency responsible for replacing benefits owed by failed pension plans -- the Pension Benefit Guaranty Corporation ( PBGC)—is itself in financial difficulty, allowing more plans to be more underfunded is clearly contrary to common sense.   Nonetheless, because underfunded pension plans make news only when they actually go broke, Congress feels confident that its chicanery will go unnoticed and has proceeded to “solve” the problem of a depleted Highway Trust Fund by making the pension funding problem worse.
This nonsensical legerdemain is extraordinarily troubling and goes on only because most citizens pay little attention to what Congress does.  Even fewer write, call, or otherwise complain about irresponsible behavior. 
Every member of Congress knows that this “solution” to the Highway Trust Fund’s illiquidity is both illusory and fraudulent.   Each member, whatever their ideology, knows that without world class infrastructure, our country cannot create or sustain the constantly growing economy needed to sustain the US way of life. Each member, by participating in such charades, makes a mockery of the leadership he or she pledged to provide when seeking office. 
Until a larger percentage of our citizens realize that our government isn’t working well, the US is not going to find solutions to the many great issues that challenge us  --infrastructure, education, energy, research and development, immigration, inequality, taxation, debt, you name it.  While these are all hard problems – requiring careful thought and serious deliberation – they are no more difficult than other problems we have faced and overcome in times past.  Solutions are not beyond us, but will surely continue to elude us until we choose our leaders more wisely and pay more careful attention to what those leaders are doing.  Those who choose to lead must be held accountable for getting things right, but so far, seem to be doing just the opposite.