Mark Steyn Says America is Committing “Slow Suicide”

While I haven’t had a chance yet to read Mark Steyn’s new book “After America,” from what I’ve read and heard about it he is right on. Below is a 10 minute interview that he did with Sun News that does an excellent job of summarizing his positions. BTW, Mark Steyn lives in New Hamsphire . . . where America’s few remaining tax havens still exist.

Tax Fraud by Illegal Immigrants Costs Uncle Sam $4.2 Billion

Chart Showing The Amount of Tax Fraud for the Additional Child Tax Credit has Grown Tremendously

This story clearly falls into the category: “you just can’t make this stuff up.” First, who knew that illegal immigrants in America could even file a tax return, but they can and do. Even though they don’t have a Social Security number, they can get an Individual Taxpayer Identification Number (ITIN). The ITIN was created because everyone in the U.S., legal or not, is required to pay federal income taxes.

Of course, the whole idea that an illegal immigrant would go through the trouble of obtaining an ITIN just to pay Uncle Sam is ludicrous–and only exists in a bureaucrat’s dream. However, they would go through the trouble if they discovered that they could get Uncle Sam to pay them. And that’s exactly what has happened.

Some enterprising tax accountant, perhaps illegal, discovered that the “Additional Child Tax Credit” (ACTC) could be paid through an ITIN. The ACTC is the refundable portion of the child tax credit which is currently worth $1,000 per child. So, let’s say a taxpayer has a tax liability of $2,000, but has three children yielding a child tax credit worth $3,000 . . . that taxpayer would receive a refund of $1,000 since the child tax credit exceeds their tax liability by $1,000 ($3,000 minus $2,000).

The Treasury Inspector General for Tax Administration recently looked into this problem in a report titled “Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits” (pdf) As you can see in the chart above, this ACTC fraud has been exploding. In 2010, over 3 million ITINs claimed $4.2 billion in ACTC payments.

But wait, there’s more . . . according to the report:

The payment of Federal funds through this tax benefit appears to provide an additional incentive for aliens to enter, reside, and work in the United States without authorization, which contradicts Federal law and policy to remove such incentives.

HHHmmm, so Uncle Sam’s left hand doesn’t know what his right hand is doing.

OK, let’s put this $4.2 billion into perspective. According to state data published by the IRS, in 2009, New Hampshire paid $4.5 billion in income taxes to Uncle Sam. Now imagine if a foreign power sailed to our shores and stole New Hampshire’s entire booty meant for Uncle Sam. In such a case, Uncle Sam would have declared war on that foreign power. Yet, such thievery is happening everyday via illegal immigrants and Uncle Sam does nothing.

Of course, I could have inserted a great many other states, even multiple states, other than New Hampshire such as: Alaska ($2.7 billion), Delaware ($2.7 billion), Washington, D.C. ($3.6 billion), Hawaii ($3.7 billion), Idaho ($2.9 billion), Maine ($3.1 billion), Montana ($2.3 billion), North Dakota ($2 billion), Rhode Island ($3.2 billion), South Dakota ($2.3 billion), Vermont ($1.7 billion), West Virginia ($3.7 billion), and Wyoming ($2.1 billion).

Additionally, in FY 2010, the ACTC cost $22.7 billion so $4.2 billion in fraud represents 19 percent of all ACTC payments . . . how many private businesses would still be in business if 19 percent of vendor payments were fraudulent?!

Also, being an economist, I found this passage particularly funny:

Another reason for the increase is that a significant number of individuals are filing multiple claims to obtain the ACTC for prior year tax returns (e.g., filing Tax Years 2007, 2008, and 2009 returns at the same time).  In Processing Year 2010, approximately 238,000 ITIN filers submitted more than 608,000 tax returns for multiple years at the same time and claimed just more than a billion dollars in ACTCs on those returns.  The ACTC claims for these individuals for the combined tax periods can be substantial . . . Moreover, in our analysis of returns filed in Processing Year 2010, some individuals had submitted duplicate tax returns for multiple years to multiple IRS processing centers and received ACTC refunds.

I guess incentives really do matter 🙂

Finally, I couldn’t get this video to embed, but if you have 6 minutes or so the video shows an investigative report titled “IRS Tax Loophole” that tells the story of a tax accountant who is blowing the whistle on this fraud.

The State of America’s Private Sector 30: March, 2012

The U.S. Department of Commerce’s Bureau of Economic Analysis recently released their monthly personal income data for March, 2012 (pdf). The chart below shows the private sector share of personal income from January 1959 to March 2012. For March, the private sector share of personal income was 71.27 percent.

While the private sector continues to claw it’s way back up (after cratering in May, 2009 at 69.06 percent), the current level is still well below the pre-Great Recession level of 74.48 percent set in June 2007. With the aging of the baby boomers and Obamacare looming, it’s doubtbul that we will ever get back to pre-recession levels. We will all be poorer as a result of a smaller private sector.

 Chart Showing Private Sector Share of Personal Income by Month from January 1959 to March 2012

However, while the private sector has been gaining ground, there is other less rosy news. The chart below shows, on a monthly basis, the contributions paid into Social Security and Medicare (red line) via the payroll tax versus the benefits paid-out by Social Security and Medicare (green line). While contributions are finally growing again, benefits paid-out have been growing faster.  In fact, in March, the gap between the two set an all-time record of $351.6 billion–more benefits being paid than taxes being collected.

Chart Showing Growing Gap Between Contributions and Benefits for Social Security and Medicare January 1959 to March 2012

HGTV Green Home in Serenbe, Georgia will Cost Lots of Green–for Taxes that is!

Picture of HGTV Green Home in Serenbe, Georgia

Note: To see analysis of the most recent HGTV home giveaways, please visit my new website Key Policy Data.

This year’s HGTV 2012 Green Home Giveaway is in Serenbe, Georgia. According to the HGTV contest rules, it comes with a home and furnishings (valued at $650,000), cash ($100,000) and a 2012 GMC Terrain SLT2 ($38,535) for a grand package valued at a cool $788,535–though not quite up to par to the $2,038,755 value of the HGTV Dream Home in Utah.

If you win the dream home, be prepared for a hefty federal and state income tax bill (this analysis excludes the myriad of other taxes such as any deed or transfer taxes and, most especially, the property tax which you pay year, after year, after year . . . well, you get the picture).

Overall, the federal and state income tax bill comes to a whopping $282,807 (note: actual federal income tax will be slightly less once inflation adjustments are taken into account but that won’t be updated until later this year). Even after using the $100,000 in cash, you will still be left with a tax bill of $182,807 . . . maybe the IRS will let you pay on an installment plan?

Fortunately, HGTV does provide an escape hatch by offering $400,000 in lieu of taking possession of the home, plus the $100,000 in cash and vehicle–for a grand total of $538,535. If the winner opts for this choice, they will take home $358,228 free-and-clear after paying income taxes of $180,307.

My suggestion would be take this money and run. One could outright buy a very, very nice home with the cash. For example, check out this home in beautiful Hale’s Location, New Hampshire listed for $429,000 (a cash offer might get that down to $358,000 in today’s weak real estate market). Hale’s Location is one of a handful of America’s tax havens left (all in New Hampshire) where there are no state and local income or sales taxes and very low (in some case no) property taxes. In fact, according to the listing, the property taxes are a mere $1,495 per year.

Escalators and HealthCare

What, you may ask, has escalators got to do with healthcare? Simple. Keeping escalators in working order should be infinitely easier than keeping America’s healthcare system in shape . . . yes/no? Yes.

Well, check out this video from Reason TV showing that our nation’s capitol cannot keep their metro escalators in proper working order. Now, what happens when Washington, D.C. starts calling the shots on your healthcare . . .

Here is another look at D.C.’s metro system brought to you by Remy . . .