United We Stand, Divided We Fall

Harry, you are letting them off too easily.  Both the President and the Congress court those who provide generous donations to their campaign funds  each and every year.  How do you suspect those folks have such great tax shelters like carried interest for the hedge fund managers-some of the most generous campaign contributors in the country.  While all of the rest of us get taxed on our earning from the business we are associated with at higher ordinary income tax rates, hedge fund managers pay income taxes at the much lower capital gains rates for their earnings from the business they work at each day.  That single unexplained, unexplainable, and absolutely unfair tax shelter costs the Treasury billions of dollars each year.

Further, you see the audits going down for everyone but the folks with incomes over $10 million  have had their audits decreased from 30% in 2011 to 24.2% in 2013.  Congress and the President are giving their generous donors a pass again.  The Congress substantially cuts the IRS budget and the IRS is forced to economize. The President’s man at the IRS, as part of this process, cuts down the number of audits especially of the high earners and generally the best contributors.  He could keep these audit numbers up, but chooses not to.  These actions are simply payoffs by both the Congress and the President to reward their contributors.  Outrageous behavior as the national debt continues to climb steeply.  

Sam Allen

We will begin a series on how decreased funding of the IRS is hurting the IRS’s performance and hurting our collection of tax receipts needed to sustain our federal budget and decrease our budget deficit. It is not only imperative that the IRS funding be restored to its former level but be expanded by $3 billion per year above that former level.
In March 2014, the IRS released its audit results for 2013. They were not encouraging. Total audits of 1.4 million individual tax returns were down by 5% from 2012 and were the lowest since 2008. Audits of high income tax payers with adjusted gross income of $10 million or more have decreased from 30% in 2011 to 24.2% in 2013. This is due to budget cuts since 2010 and these budget cuts have continued in FY2014 as the IRS budget was cut by 4%.
When is Congress and the President going to wake up and spend the money to insure our IRS collects the taxes owed under our current tax laws. It is not fair that most of us are paying our fair share and others are allowed to pay less than their fair share. We need a responsible Congress and President.
Harry Pukay-Martin

Let me get several things off my chest on this embarrassment of a report.  The Trustees are asleep or not performing their fiduciary duty.  Jacob (Jack) Lew, Secretary of the Treasury and Managing Trustee of the Trust Funds, is a tough budget specialist and yet he allows this ‘hope’ projection a pass. He is the managing trustee and should be driving a fairer result.  Has he lost  his sense of reason and his commitment to the American people?  Sylvia Burwell, Secretary of Health and Human Services, is newly appointed.  However, how did she not ask her own staff about these low assumptions for health care inflation?  That staff just produced a report that indicated health inflation will resume its assent shortly.  Do you homework next time, Sylvia before you sign off on a report for Medicare.  The American people deserve better from you.  The outside Trustees,  Charles Blahous and Robert Reischauer, ought to be protecting the public better than this rather than going along with this politically motivated ‘hope’ projection.    And where are these two in pushing the Congress and the President on stabilizing these Trust Funds so that we, our children, and our grandchildren can continue to enjoy the benefits of these programs.

Straighten out and do your jobs. 

Sam Allen

It was greeted as great news that the Medicare Trust Fund has moved its bankruptcy out 4 years from 2026 to 2030 according to the Trustees Report on the Medicare Trust Fund released on July 28, 2014. Is this news too good to be true? After thinking about this favorable Report, it is very unusual that such an actuarial study would change that quickly in one year. Some major assumption must have been altered. After reviewing the study, the change that led to the great increase in the years until bankruptcy was the assumption that the low level of healthcare inflation, noted in the last couple years, would continue to occur in the near term. With these words on page 3 of the Report, that is what the Trustees assumed. ‘The Trustees are hopeful that U.S. health care practices are in the process of becoming more efficient as providers anticipate a future in which the rapid cost growth rates of previous decades, in both the public and private sectors, do not return. Indeed, the Trustees have revised down their projections for near term Medicare expenditure growth in response to the recent favorable experience.’ The Trustees are hopeful and because of that, they make such a drastic change in their projections about the health of our Medicare program? Wow, hope is an amazingly rational basis for changing an estimate! What is also concerning is that the report was released 2 months later than last year’s Report and that the physician cuts, contained in the law but always overridden by Congress, are in the estimates at full value. One could surmise that the report was delayed for these several months and the physician costs were included because the initial assumption change about the lower healthcare costs would have moved the bankruptcy date out much too far making it much more likely to draw attention and more profound skepticism.
Harry Pukay-Martin

The report is out with much the same problems noted.  When are the President and Congress going to act?  The Social Security Disability Fund will be bankrupt by 2016 unless legislation is passed.  It is totally unfair to have my retirement benefits cut because the Social Security Disability Fund is bankrupt but that is one proposal from the Administration and Senate Democrats.  Why not review the recipients again as required by law?  Many of these recipients are not disabled but judged to have back problems and depression.  Many back problems can be treated with exercise, alternative therapies, and drugs.  Many depressives can be treated with exercise, counseling, and drugs.  The program is being scammed by recipients, too helpful doctors, states such as Oregon and Washington, and consultants who receive $2,000 to $3,000 by converting Medicaid recipients to Disability recipients.  No wonder the program is bankrupt!  I ask your support in demanding immediate action to save the Social Security Disability Fund from bankruptcy and to put the two other critical trust funds on a stable path. 

Sam Allen

The report was finally published after a 2 month delay from its normal publishing time. There is some good news. The Medicare Trust Fund has 4 more years before bankruptcy to 2030 from 2026. This is due to the deceleration in healthcare costs incurred over the last several years. The bad news is that Social Security overall will be bankrupt by 2033 requiring a 23% cut in benefits at that point. In addition, the Social Security Disability Trust Fund will be bankrupt by 2016, just 2 years from now. This will require a 19% decrease in benefits. It is imperative that the President and Congress pass legislation to fix these critical problems.
Harry Pukay-Martin

In the 2/17/2014 Boston Globe, Michael Kranish wrote an article “IRS is America’s Feared and Failing agency”. He asked the question, “Is the IRS, which collects 90% of the nations revenues, up to the basics of its job”. His conclusion, “It often is not”. He further notes that the IRS “fails at detecting refund fraud before paying out billions of dollars a year”. Further, he indicates that “many taxpayers and their preparers can’t contact the IRS to answer questions or complaints” and even those that are received are not answered in a timely manner. He goes on to indicate that the IRS “cannot answer nearly 40% of phone calls and it has failed to meet its own 45 day deadline to respond to millions of letters per year from taxpayers”. As we noted before at United We Stand, the IRS has had it budget cut by over $1 billion since 2011. Mr. Kranish pointed out that Nina Olson, the National Taxpayer Advocate, June 2013 declared the IRS to be “an institution in crises’. Her January 2014 report was more urgent as she indicated that the IRS ‘will fail at its missions unless changes are made’.
No positive changes have yet been made by the President or the Congress. It is time they pay attention to the IRS and provide it with a budget that will allow it to collect the monies owed to our government. Curtail refund fraud and insure everyone pays their fair share.
Harry Pukay-Martin

In the 2/16/2014 Boston Globe, Michael Kranish’s article was subtitled ‘Billions wrongly paid out as scammers find the agency an easy target’. He notes that anyone with ‘a stolen social security number, a computer, and the basic knowledge to file a tax return’ can get into the business of defrauding the IRS. Though the IRS is catching onto the schemes and thwarting many of them using a series of more sophisticated filters, $21 billion may be paid out over the next 5 years to fraudsters at least according to the US Treasury. The number of taxpayers who have had their identities stolen has risen from 260,000 in 2010 to 1,630,000 in 2013 according to US Treasury figures. This fraud involves everyone but especially the young, the old, the dead, those in prison, and anyone who does not usually file a tax return. For those with their identities stolen, it takes an average of 312 days to get the issue resolved with the IRS and involves much agony and frustration with an understaffed IRS. The solution is to have the Congress pass changes in statutes that authorize the IRS to implement many new safeguards. These include slowing down the early refund process, requiring employers, brokers, and others to file wage reports, dividend and other investment reports earlier, giving the IRS timely access to the ‘Death Master File’, and allowing the IRS to investigate multiple payments to the same address and the same bank account before issuing the refund. Above all, it calls for more staffing at the IRS.
The President and the Congress need to act today to resolve these problems and make sure refunds are not paid to crooks and that all taxpayers pay the taxes they owe.
Harry Pukay-Martin

Robert Samuelson in his recent opinion piece entitled ‘We’re spending more on government, getting less’ in the Columbus Dispatch last week talks about the central federal budget story that is being missed. Social Security benefits and healthcare expenditures (Medicare, Medicaid, Obamacare, and governmental employee healthcare) are crowding out all the other programs and priorities including the Defense Department, Food Stamps, Medical research, Federal Courts, and infrastructure maintenance and expansion. He goes on to indicate that ‘by 2024, everything else (besides Social Security and Healthcare) will represent only 7.4% of … GDP , the lowest share since 1940‘. We need to address these two programs and eliminate the deficit so that the interest expense of our debt does not further squeeze out these other programs. To address the deficit, we need $700 billion of tax increases or expenditure cuts. To address the Social Security increases and to avert bankruptcy in 2033, we could increase the full retirement age from 67 to 70 (covers 44% of the deficit), increase the income taxed to 90% of the median wage (covers 36% of the deficit), freeze social security payments for 3 years, and change the cost of living increase from CPI to the chained CPI (covers 23% of the deficit). This would increase taxes by $100 billion per year and decrease expenditures by $24 billion in the first year and by $81 billion by year 3. To control healthcare expenditures, we need to move to a model of prevention and public health and away from sick care. We also need to constrain healthcare updates to the lower of actual costs or 50% of the CPI increase or 50% of the GDP growth. Finally, we can increase user fees on the Medicare population making over $100,000. This will reduce expenditures by $55 billion in the first year and increase taxes by $10 billion.
Harry Pukay-Martin

The Pew survey of January 15-19, 2014 of a national sample of 1,504 adults shows that we as citizens are beginning to take the federal budget deficit for granted and not insisting that it be resolved. Remember, the current deficit for FY2013 is over $700 billion, $241 billion over that for FY2008, the last year of George Bush’s spendthrift Presidency. The current FY2014 deficit is projected to be $100 billion over that same figure. That deficit grows from there. President Bush started two wars and funded the Drug benefit for seniors under Medicare and decreased taxes. He was the most fiscally irresponsible President we have had to that point and doubled the deficit in his two terms. President Obama makes Bush look like a fiscal conservative as he had tripled the deficits run by Bush in his first term and will more than double the US debt before he is through. The interest on that debt will begin to crowd out our other priorities as interest rates rise to more normal historical levels. To make this point clearer, Bush in 8 years increased out debt more than all the other Presidents combined before him. Obama will one up Bush by increasing our debt more than all the other Presidents combined before him including Bush. What a sorry fiscal performance we have from our last 2 Presidents. This fiscal madness must stop. We deserve better. Our children and grandchildren deserve better. Sadly, we will be paying for this. The price we pay will depend on whether we address the issue now or wait until it gets worse. At some point it will become unmanageable and unbearable. Let us hope we taken action now. The choice is ours.
Harry Pukay-Martin