Coyote Blog

Actually trying to understand how those you disagree with think, rather than just accepting some straw man version, can make one a much better debater.  Bryan Caplan's ideological Turing test is not just about empathy and being open to opposing arguments, but it also pays dividends in making better arguments for one's own positions.  I love how Jesse Walker begins his pitch to Conservatives against the death penalty:

The typical conservative is well informed about the careless errors routinely made by the Internal Revenue Service, the U.S. Postal Service, and city hall. If he's a policy wonk, he may have bookmarked the Office of Management and Budget's online list of federal programs that manage to issue more than $750 million in mistaken payments each year. He understands the incentives that can make an entrenched bureaucracy unwilling to acknowledge, let alone correct, its mistakes. He doesn't trust the government to manage anything properly, even the things he thinks it should be managing.

Except, apparently, the minor matter of who gets to live or die. Bring up the death penalty, and many conservatives will suddenly exhibit enough faith in government competence to keep the Center for American Progress afloat for a year. Yet the system that kills convicts is riddled with errors.

Normally this would be a good Friday story, but you can't always control when Washington is going to bring the crazy.

The Obama administration on Tuesday defended its effort to regulate the tax return preparation business for the first time in U.S. history, basing its case largely on a 19th century law dealing with horses lost or killed in the Civil War....

[the Obama Administration attorney] explained that the administration sees the "Horse Act of 1884" as providing ample authority for the U.S. Internal Revenue Service to regulate the tens of thousands of preparers who fill out millions of Americans' federal tax returns.

Here is the logic, such that it is

A post-war industry emerged of agents who would press war loss claims for a fee, usually a percentage of the claim collected. Soon, claim values were being fraudulently inflated.

In response, the government started regulating these intermediaries, barring unscrupulous ones and certifying honest ones as "enrolled agents," a title that is still used today by people who represent clients in matters before the IRS.

The IRS is arguing that tax return preparers represent their customers in much the same way that enrolled agents do, so the agency should be able to expand regulation to include preparers.

Note that tax preparers are not actually IRS enrolled agents, they just argue they are kind of sort of like them (in that they both deal with tax returns, I suppose).  But enrolled agents explicitly act as an intermediary between citizens and the government in disputes and claims.  This is not the role of tax preparers.  They merely charge a fee to fill out time-consuming and confusion paperwork.  My tax accountant has never once had any conversations with the IRS on my behalf, nor should he.  I would engage an attorney for that.

Via ABC

The Internal Revenue Service official in charge of the tax-exempt organizations at the time when the unit targeted tea party groups now runs the IRS office responsible for the health care legislation.

Sarah Hall Ingram served as commissioner of the office responsible for tax-exempt organizations between 2009 and 2012. But Ingram has since left that part of the IRS and is now the director of the IRS’ Affordable Care Act office, the IRS confirmed to ABC News today.

What Obama most needed in the IRS ACA office was someone willing to ignore the clear language of the PPACA legislation and ram through IRS tax subsidies for insurance policies in the Federal (vs. state) exchanges -- subsidies that were purposefully and explicitly denied in the plain language of the law.

Per the WSJ($):

The Internal Revenue Service dealt a serious blow to
organizations that provide down-payment assistance to home buyers in a
ruling that could curtail the ability of lower-income U.S. citizens to
purchase homes.

In the past eight years or so, a number of large
nonprofit organizations -- including Nehemiah Corp. of America, of
Sacramento, Calif., and AmeriDream Inc., of Gaithersburg, Md. -- have
doled out hundreds of millions of dollars of cash down-payment
assistance to mostly low- and moderate-income home buyers. According to
industry estimates, as many as 625,000 people were assisted by such
groups with their down payments between 2000-05. The programs have been
widely viewed as helping to increase the nation's homeownership rates,
which rose to 69% last year from 67% in 1999.

Why?  A lot of the tax code is skewed to promote home ownership.  So why is the IRS penalizing a program that seems to make a lot of sense?

In its ruling yesterday, the IRS said these aid groups funded largely
by home builders and other sellers no longer qualify for tax-exempt
status because the benefits of the programs are going to sellers and
profit-making entities. In its statement, the IRS said it has found
"that organizations claiming to be charities are being used to funnel
down-payment assistance from sellers to buyers through self-serving,
circular-financing arrangements."

Uh-oh.  Its those nasty profit making ventures again.  What's going on here?  Basically a home-builder gives the down payment for a home to a charity which in turn gives it to a buyer who in turn gives it back to the home-builder.  Let's say the down payment is 10%.  This arrangement acts as if the home-builder is giving the buyer a 10% discount, just circuitously.

So why is it so circuitous?  Why don't they just give the discount directly?  Is it some kind of tax dodge?  The answer to the latter is probably not.  From a corporate tax standpoint, the current circuitous charity method produces a 10% charitable donation on a 100% price sale.  The discount approach just produces a 90% price sale.  Tax wise, these are equivalent.  So why doesn't the home-builder, if it wants to be generous to low-income buyers, just give them the discount?

The answer is, because the government does not allow it! 

The majority of home buyers affected by this ruling are those who
qualify for mortgages insured by the Federal Housing Administration, a
federal agency responsible for aiding first-time and lower-income home
buyers. Under FHA guidelines, home buyers seeking mortgages must have
their own funds to use for a down payment or they can get assistance
from a relative, employer or a charity. They can't get assistance
directly from the seller.

The only argument against this practice made by the IRS is that the price of the house is increase by a fee added in the process by the charity that facilitates the transaction.  But this is one of those classic government regulatory jobs where the result that instead of getting a home with a bit of extra fee in the transaction, people will instead not be able to get a home at all.  No one points to anyone being hurt, and in fact the article points out that 35% of FHA loans depend on these charities for down payments.  (There is also some hint that this process may increase default rates, but the only evidence is that default rates for this type of transaction are up --  but default rates on mortgages are up across the board right now.)

And, by the way, what is wrong with charity by a business that, in addition to helping out a charitable cause, also helps out its business?  For example, my company gives coupons for free one-day jetski rentals at Lake Havasu all the time to charity auctions in our area.  We do it to support charity, but also because it provides us some free advertising and often people who win the certificate also show up with friends who become paying customers.  So what?  Is my charity tainted because I have created a win-win?