Tuesday, April 17, 2012

IRS regulation scandal clearly demonstrates the problem

This is a blog about things that I make, but I’ve recently become aware of an example of how governmental regulation leads to monopolies that harm the public so perfect that I feel the need to write about it.

This is a truism:

“If you give the government the power to regulate a thing, that regulation is then for sale to the highest bidder, always and without exception.”


The current action at the IRS shows how this works. The only reason that you and I even know about it is that there is a real legal problem with their writing their own regulation. They aren’t granted the power to regulate themselves so it opens the possibility of their actions being stopped by lawsuit. We might also see congress grant them that right and then all bets are off. It’s going to be very interesting to watch.

Here’s whats happened as best as I understand it: H&R Block went to the IRS and “helped” them to come up with the idea that tax preparers need more education and oversight. Well.. nothing obviously wrong with that, our tax system is the most complicated part of our entire government and it’s actually impossible to file your taxes properly, any 2 auditors will come up with 2 different amounts that you actually owe. So the more training the better.

The consequences of this are that the independent tax preparer, of which there are around 100k in the US give or take, needs to take classes regularly and take tests to prove they are able to actually do your taxes. The cost of doing this, of course, is passed on to you when you hire them. Well thats OK you think, it is protecting me from people that don’t know how to do my taxes! The cost of preparing your taxes will more than double because of this.

Here’s the interesting bit though, H&R Block suggests to the IRS that well... if you’re supervised by a CPA then you don’t need to do this. This is the kicker, the dreaded “Grandfather clause” that exempts the monopolistic company that sponsored the legislation from it’s effects. This will eliminate the competitiveness of virtually every independent tax preparer without costing the big corporate ones another dime. Their prices can stay the same while they have effectively doubled the overhead for everyone not affiliated with one of the corporations.

This is truly a classic example of how this is done in every other agency. We begin with the idea that we need to regulate something to protect us and instead it gives the government the power to sell monopolies to the highest bidder. There is not a single agency, no matter how sacred to you, that is immune to this. The Coal and Oil magnates supported the EPA and the NRC in order that nuclear power could be regulated to the point where it cannot compete with them, all the while getting their own emissions of radiation up their smoke stacks classified as “naturally occurring” and therefore not subject to regulation. BRILLIANT! (factoid for another post: the amount of uranium that goes into the air as particulate emissions from coal plants in the US is greater than the total amount of uranium mined for use in our powerplants each year, but nobody is scared to death of dying from that, even though they actually DO)

Three letter agencies began because we wanted to do good are now used for evil. This happens ALL the time. If you see abuse by a monopoly or enormous corporation that there is no competition for (hello health care insurance) it’s because that company has been allowed to draft it’s own regulation and exempt itself so that nobody can challenge it. Why would ANYBODY buy health care insurance with the power they have over you if you didn’t have to? No, you’d search around until you found one that covered you for the amounts and the things that concern you. The reason you can’t do this is because the government doesn’t allow just any insurance company to go into this business. The health insurance problem in this country was caused by government regulation in the first place, adding thousands more pages of it in the form of price fixing will not solve it. (while our government seems to have failed jr high school civics class I remember the chapter on governmental price fixing and how it’s always a failure leading to higher prices or lack of availability hurting the very people it was supposed to protect.)

When someone calls for the downsizing of the EPA or the FDA they are not trying to leave you out in the cold to be victimized by hugely powerful corporations. They are trying to save you from that, that is where you already are because of the actions of those groups. The solution is to scale back, or remove entirely the governments power to regulate some things.

Or my personal favorite, a constitutional amendment that says “NO GRANDFATHER CLAUSES” if a law is important enough to pass it is important enough to apply to everyone equally. Nobody gets a pass.

And now back to making stuff, there will be no comments on this post, teh intertubes are full of angry people.