Wednesday, August 19, 2009

More on why is the IRS doing everyone's work?

Earlier today I posted Why the IRS is doing everyone's work in response to a post by Professor Maule.

Professor Maule has now pointed out a related post from Wandering Tax Pro Robert Flach that also addresses the subject of why the IRS is doing everyone else's work. Robert in turns links to another related post by Trish McIntire here.

Why so many posts on this subject right now?

Two reasons that I think they are timely.

Reason #1) The Cash for Clunkers program (which is NOT administered by the IRS) has run into a lot of problems.

New York franchised new car dealers are beginning to voice concerns over the Federal Government's inability to administer the 'Cash for Clunkers' program effectively. Many are in talks to stop offering the up to $4,500 rebate program because the government is not approving transactions and reimbursing dealers in a timely manner, according to the Greater New York Automobile Dealers Association (GNYADA), an organization which represents 450 franchised new car dealerships in metro New York.

"In many cases, dealers have shelled out hundreds of thousands of dollars in rebates to consumers since the program began six weeks ago," said GNYADA president Mark Schienberg. "And only a very small percentage of that money has been paid back to the dealers, leaving these small business owners too cash strapped to continue offering consumers the discounts. Even in the best of times, carrying this much debt would cause problems, but in today's credit-strained economy, it's simply too much for the dealers to handle," added Schienberg.

Lack of reimbursement for paid-out rebates is not the only issue causing problems for dealers.

Many dealers complain that valid deals are being rejected by the government for small mistakes and typos with little or no guidance on how to correct the paperwork problem.

Dealers can't get a "yes" or "no" answer about qualification in a timely manner from program administrators.

The government's system has rampant computer glitches which prevent dealers from applying for rebates.

Customer service phone lines often take several hours to get through.

Additionally, dealers do not know when the $3 billion allocation will run out but are expected to pass on the rebates to consumers which they may not get paid back for. GNYADA is calling on the Federal Government to initiate a real-time notification system which would alert dealers when the program is out of money.

Cash for Clunkers, I repeat, is NOT administered by the IRS--it's administered by the National Highway Safety Transportation Administration. And NHTSA clearly does not have the infrastructure or organizational capacity to run it.

NHTSA's demonstrable incompetence made me better appreciate the enormous load that the IRS routinely carries, year in and year out, in administering so many other "tax expenditure" programs.

Reason #2) Five months ago, back in March, the White House announced--with much funfare--that President Obama was appointing the eminent and accomplished Paul Volcker to head a Presidential panel on Tax Reform. They were supposed to work fast and submit a report in early December.

According to a recent news story, that panel has shown no visible signs of progress, and Congressional leaders, including House Ways and Means Chairman Rangel, appear to be dismissing the panel's mission.

The Tax Reform Task Force President Obama created in March has yet to schedule any public meetings but does not plan on asking for an extension of its early-December deadline for filing a report, according to an administration official.

The task force is led by Paul Volcker, chairman of the President's Economic Recovery Advisory Board, and Austan Goolsbee, a member of the White House Council of Economic Advisers and PERAB's staff director. Goolsbee recently told an Internal Revenue Service Research Conference that the task force members are still in the information-gathering stage.

Despite the panel's lack of public activity, interested parties around Washington, D.C., have recently expressed some strong thoughts about it, with congressional tax writers expressing skepticism and seeking to reassert their jurisdiction and lobbyists calling it unnecessary.

There was a similar bipartisan presidential panel that did a lot of good work four years ago--Congress let that report gather dust as well. The official government website for that 2005 report has disappeared, but you can still read it in the Tax Policy Center's archives here.

Professor Maule thinks all members of Congress should be required to do their own taxes, because then they'd see the need for simplification.

I'd go a step farther:

All members of Congress who serve on the House Ways and Means Committee or the Senate Finance Committee as well as the Commissioner of Internal Revenue and the Secretary of the Treasury should annually take and pass the VITA volunteer tax preparer certification test and then volunteer a few hours each year at a VITA site preparing and explaining tax returns to a random cross-section of low-income working families and senior citizens.

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