IRS: Internal Revenue Screw-up

I feared the worst and hoped for the best out of President Bush's tax relief package. With the IRS in charge of distribution, you can't expect much. A study released earlier this year reported that IRS employees spend 51 percent of their online time doing personal business. Even worse, 37 percent of taxpayers didn't get their calls to the IRS answered, and those that got a response were given wrong answers 47 percent of the time.\nCould they handle the task of carrying out the "Economic Growth and Tax Relief Reconciliation Act of 2001"? An old joke says that things are getting so bad in Washington, D. C. that people are tracing the meaning of "politics" to its Latin roots: Poli is for many, and tics is for blood-sucking parasites.\nOK, so it's a cheesy joke, but consider the facts. At the turn of the year, tax rates, as a percentage of GDP, were the highest they have ever been in peacetime. The government took nearly 40 percent of the typical family\'s income in taxes after accounting for all federal, state and local taxes. This is more than twice the rate paid by the typical family in 1955. Moreover, consider that according to Congressional Budget estimates, there is a projected surplus of more than $5 trillion during the next 10 years.\nIt\'s not hard to imagine why both major Presidential candidates promised a tax cut in some form or another in the 2000 election. But as even the most detached political observer knows, it was President Bush that made the issue a centerpiece in his campaign. And for that, we must give him credit. He changed the debate from IF we should have a tax cut to how big it should be.\nPeople have devoted their entire lives to studying and explaining tax rates, government revenue, economic growth and how all three interact. But to put it as simply as possible, unnecessarily high tax rates present less incentives to work, lower production and therefore lower government revenue from taxes. Conversely a lower tax rate offers more incentive to work, produce and invest. With the increased productivity, government revenue will actually rise, even with a lower tax rate. And as an added benefit, you'll be able to streamline that paragon of a government agency: the IRS.\nLike he promised, Bush signed the biggest tax relief package in a generation and opened the door to this needed reform. The key to the whole idea is, obviously, getting money back to the very people that earned it so that they can invest and spend it.\nBut the IRS, as well as the President, couldn't wait for you to get out and spend the rebate. So it sent more than 121 million letters (costing millions of dollars) to notify people that they'd soon be receiving a tax rebate. Just to make sure they knew who was responsible, President George W. Bush prominently displayed his name on the check. I got my letter last Friday, but it informed me that I "will not be receiving a check at this time." Since I didn't pay any federal taxes, I sure don't expect to get any back. \nA half-million families got a different kind of letter. Unfortunately the letter they received was a lie and won't be as big as it promised. An Internal Revenue Service computer glitch overestimated the rebates for those 500,000. Before the check arrived, as you can imagine, many people went ahead and spent the extra money they thought they would have. So when the smaller check arrives, many families will have already spent the money. Now the IRS is scrambling to send out new letters correcting the mistake, but the correction letters will arrive much later than their smaller-than-expected rebate. The result? More debt for 500,000 families!\nAh, but the IRS wants us to know that there's a good side to all of this. Agency spokesman Kevin McKeon points out that, "The good is that 99.5 percent of the people are getting the right letter." They might consider the error a minor mistake, but it threatens to destroy the very purpose and aim behind the relief. Just imagine the chaos if even more families had been affected.\nPresident Bush showed courage and political savvy by winning the tax cut battle. It will give a needed boost to a slowing economy. Now he must take the next step and ensure real long-term reform in government revenue: Overhaul the IRS.