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Category: Economics

The Taxman - and the quarter-trillion gap

By csmonitor.com staff


It is hard not to like Mark Everson. Even though he is the taxman.

Everson, who became the 46th commissioner of the Internal Revenue Service last May is friendly, warm, and funny.

Not exactly typecasting for the job of overseeing 100,000 government employees who extracted $2 trillion in tax revenue from all of us in the most recent year for which statistics are available. However his background does include a masters degree in accounting, a CPA, and a stint at Arthur Andersen & Co.

The commissioner showed up early for breakfast today, with a bodyguard in tow to ward off any violently unhappy taxpayers who might be lurking. I do not fall into that category so we talk about kids.

The IRS czar has an adult foster daughter from Cambodia who he met while serving in the Reagan administration as deputy commissioner of the Immigration and Naturalization Service. Everson and his wife, Nanette Rutka, a White House lawyer, adopted their teenage son and daughter from an orphanage in Turkey.

Like both President Bush and Senator John Kerry, Everson is a Yale graduate. Unlike Messrs. Bush and Kerry, he was not a member of the secret society “Skull and Bones.” He makes a quip about lacking the requisite family connections.

Now that he is an IRS employee, Everson gets mail from the agency at home. “And I still twinge when I come home and see I have a letter from the IRS.”

Part of Everson’s job is to make sure the agency does not lose its ability to make other taxpayers twinge.

As a result of a law enacted in the late 1990’s, the IRS cut back on tax law enforcement ‘at exactly the wrong moment,” Everson says.

His management approach is "about re-centering the agency and making sure we are doing both, the service side and the enforcement side, not one to the exclusion of the other. We are not going to retreat on services, we are going to continue to work on that … But at this stage, we do need to do more on the enforcement side," Everson says.

Visible enforcement of the tax law is essential, Everson notes, "so that Americans have a clear faith that if they pay their taxes they know their neighbor or their competitor is doing the same." The White House has recommended a sharp increase in the IRS budget to allow for stepped up enforcement.

The task ahead for Everson is massive. By some estimates, there is a quarter trillion – yes trillion—gap between what Americans owe in taxes and what they actually fork over to Uncle Sam.

"President Kennedy used to say paying your taxes, it's the annual price of citizenship," Everson says. "If you don’t address this over time, you will clearly affect the [future] tax gap and I would suggest you would have a much more serious problem about fundamental respect for the rule of law." (By Dave Cook)

Budget politics around the kitchen table

By csmonitor.com staff

There are issues that get voters’ juices going: abortion, gun control, the war in Iraq, gay marriage.

And then there are issues that squeeze the life out of peoples' interest in politics.

"There isn’t anybody in Iowa that is wringing their hands around their kitchen table saying 'gosh, honey, I am really worried about this federal deficit.' "

So says Jim Nussle, the Iowa Republican who chairs the House Budget Committee. He was our guest at Thursday’s Monitor breakfast.

Instead, Nussle notes, family finances are the kitchen table concern. "How is our son going to go to college? How are we going to fix the roof? They are not wringing their hands over whether or not the budget deficit is 6 percent of GDP [gross domestic product] or 4 percent of GDP," Nussle says.

The fact that few voters feel passionately about federal finances helps explain the congressional bias toward spending and makes life challenging for those, like Nussle, who would like to bring the federal budget under better control.

Last week the non-partisan Congressional Budget Office released its analysis of President Bush’s proposed budget for 2005. CBO said deficits over the next 10 years would total $2.75 trillion if Congress were to adopt the president’s plan unchanged. And the CBO analysis showed the deficit will not – as promised – be cut in half by 2009 if President Bush’s budget is adopted.

So Nussle and Senate Budget Committee Chairman Don Nickles [R] of Oklahoma have drafted budget plans that are more stringent than the president’s with the goal of cutting the deficit in half in 4 years.

Along the way, Nussle would freeze the domestic spending Congress controls and trim by $2 billion the president’s defense proposals.

"I don’t believe this is as bold as we could be, certainly not as bold as I would want to be," Nussle says.

Still, given the lack of kitchen table passion about federal budgets, the tighter spending plans rolled out by Nickles and Nussle are a tough sell on Capitol Hill in an election year.

"I hear colleagues say 'oh gosh, I don’t know if we can be this tough in an election year. It's hard to cut spending in an election year,' " Nussle says. Passing his budget trimming proposals is "going to be very tough. Do I have the votes today? No," Nussle admits.

Even if more stringent budget plans are adopted by the House and Senate, their details are not binding when appropriations committees set the level of spending for defense and other programs.

In fact, Senate Appropriations Committee Chairman Ted Stevens [R] of Alaska suggested earlier this week that he might ignore budget spending caps when it came to defense.

A visibly irritated Nussle said, "The process was threatened yesterday when Chairman Stevens said 'Well, I have heard what they are doing and we are not going to have a budget.'

Nussle continued, "Well, guess what. There is a budget committee, too, and we can say guess what, we are not going to have an appropriations process. If people want to play games because they are not spending enough money, they have obviously not been home lately to listen to their constituents who have been telling us time and time again the deficits are serious and we don’t want to raise taxes."

The deadline for passage of a congressional budget plan is April 15. (By Dave Cook)


Greenspan and inconvenient election year truths

By csmonitor.com staff

With the 2004 presidential election campaign in full swing, Alan Greenspan, arguably the second most powerful person in Washington, went to Capitol Hill Wednesday to utter inconvenient, politically explosive truths.

Greenspan told the House Budget Committee that when the baby boomers start retiring in 2008, it will place “enormous demands on our nation’s resources, demands we will almost surely be unable to meet unless action is taken.” His remedy: cutting benefits for future Social Security retirees.

Trim benefits and do it soon enough so folks can make adjustments to their finances, Greenspan said. “I am just basically saying that we are over committed at this stage,” said the chairman, who turns 78 next week. It was the most stark call for Social Security cuts in recent memory.

The two options Greenspan put on the table: adjusting the cost of living formula to make it more accurate (but less generous) and boosting the retirement age to account for increases in life span.

In an election year, Congress is unlikely to move on Greenspan’s call for action. But his comments will help shape the debate on federal spending this year and make it tougher for Republicans to extend President Bush’s tax cuts.

When asked by reporters for comment, President Bush conveniently had not heard about the chairman’s remarks and declined comment on the hard truths he spoke.

But there is no escaping the fact that the person sworn in as president next January will face a less than appetizing economic landscape. The economy is failing to generate jobs in a robust fashion. The government is spending more than it takes in, thus squeezing new programs.

And every passing day brings closer the time when Social Security’s finances must be addressed – either by boosting taxes on workers (which Greenspan warned against) or by cutting benefits for retirees.

Talk about excruciating choices.(By Dave Cook)

 
 

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