Tuesday, December 19, 2006

The Federal Behemoth

A reader writes to take exception to my slighting of the federal government in Saturday’s post:

Baron — I think your indictment and snubbing of government employees is a tactical error. I was a federal employee for several decades and I was intimately involved in information research for high level decision makers in our government. Most of my co-workers were very liberal, and as with any big organization, some were time-servers, some were barely competent, and some made brown-nosing an art, but there were also a lot of very competent people with a massive amount of information, contacts, skills and resources that you, I am sure, could really use about now. So, I would not be too quick to write this whole group off.

Behemoth, from Collin de Plancy’s Dictionnaire Infernal, 1863I wrote him back to assure him that it was not the individuals who work for the government who are a problem, but the collective nature of the federal behemoth. The government as an organization is an antiquated juggernaut lumbering through the lives of ordinary people and causing random havoc, even as it tosses out huge wads of cash in all directions.

Some of my best friends work for the federal government. They’re good, decent, intelligent people. Yet somehow the government they are part of has metastasized into a monstrous growth that sucks up ever-increasing amounts of our money without in return adequately protecting us, or advancing the general welfare.

Nothing is more emblematic of federal dysfunction than the Internal Revenue Service. Citizens live their lives in fear of the IRS — not just rich people, but average working stiffs, if they happen to own a home or have some savings. The IRS is the American equivalent of the KGB, the dread hand of the State that knocks on the door in the middle of the night.

In my case, the knock on the door is replaced by the plain white envelope bearing an IRS return address, the one that makes me break out in a cold sweat the moment it appears in our mailbox. I know that when the IRS comes calling, my assets can be hauled off on a whim to the Treasury Department gulag, never to be seen again.

You don’t have to be convicted of any crime to have your valuables sequestered by Internal Revenue. If those busy folks at Treasury decide that you’ve violated the tax code, they can withdraw your assets from your control until they decide it’s OK for you to have some of them back.

Unconstitutional, you say? You betcha. But it’s legal, and there’s nothing you can do except hire the best lawyer that money can buy, assuming the IRS leaves enough in your checking account for you to do so.

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Thirty years ago I left a lucrative job in computer programming to become a self-employed artist. I spent considerable time reading through the various IRS publications to learn the ins and outs of self-employment as it was viewed by the Treasury Department.
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One of my obligations as a Sole Proprietor was to file an estimated tax report every quarter — the 1040-ES. You calculate your income in the previous quarter, annualize it, adjust for expected changes to it, and pre-pay the appropriate tax. The government keeps the money for the rest of the year without paying you any interest, but if you underpay your estimated tax, you owe them interest on the difference. Funny about that.

As an official Starving Artist, I had no income — the tiny amount of money I made selling paintings was more than offset by the cost of paint, canvas, and other expenses. But in those days you had to file a 1040-ES every quarter even if you owed the IRS no money, and, being a dutiful citizen, I complied.

One quarter I made a mistake: I filed my 1040-ES two days late. I didn’t owe any penalties since I didn’t make any money, but I did file late.

Then I made a second mistake: I included a friendly note to the IRS along with my zero-filled form, apologizing for my late filing. Whoops!

Not long afterwards I received an alarming-looking notice from the IRS, stating that interest and penalties incurred by filing late could not be waived, and that I must pay them promptly to avoid further charges. The notice was computer-generated, and it very carefully calculated the interest and penalties on zero dollars, concluding that I must pay them the amount of zero no later than such-and-such date!

Then I made a third mistake: I wrote back to the IRS. I explained that they had made a mistake, that I didn’t owe them any money; I had just filed my 1040-ES a couple of days late.

Bad move. I got an even sterner note back from them, reiterating that no penalties could be waived, and adding that if I wanted to protest the ruling or file a grievance, form TA-98956XZ-R(31)a must be filled out and filed with the IRS no later than etc blah yak (yes, I made that form number up; I have no idea what it was).

At the bottom of the notice was a reiterated computer calculation: YOU MUST PAY ZERO DOLLARS BY THE DATE SHOWN OR FACE ADDITIONAL PENALTIES.

I made the only decision that a sane person could make at that point: I tore the notice up.

I had finally learned my lesson, which was this: Leave the IRS alone.

Don’t write to them. Don’t call them. File the forms required on the dates required, and write the checks when you have to. If they say you’re wrong, and owe them more money, pay it. If they say you paid too much, and send you a check, raise your eyes to heaven and thank the good Lord for His providence, but don’t write a thank-you note to the IRS.

And, when you make enough money, hire accountants and lawyers to do the work and file for you, thereby making the long arm of the Auditor marginally less likely to reach into your house and tighten up your sphincter for you.

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We don’t get bang for our buck from the monstrosity we know as “the federal government”. This is no one’s fault in particular. It’s not the fault of the federal employees who just want to do their jobs and live a quiet life until they collect their generous pensions. It’s not the fault of members of Congress who just want to get re-elected so that they can keep their paid staff and their franking privileges. It’s not even the fault of the average voter who votes his interests or votes by caprice, depending on how informed he is. None of them intended to create or maintain the behemoth.

Maybe Big Media are to blame, since they package and market the victim mentality to their audience, thus requiring the federal government to vacuum up an ever-increasing proportion of our wealth so that it can hand it out to ever-increasing numbers of official victims, keeping a little bit back to cover “administrative overhead”.

In any case, the behemoth is a sick and shaky monster, one which will someday have to topple, since the prosperity and productivity of the American populace are the only things keeping it standing.

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My correspondent is right about the good and competent people who inhabit the lower levels of the federal government. But I don’t think the same is true for people at the top of the pyramid.

The highest administrators in the government — both the political appointees and the permanent bureaucracy — didn’t get where they are by being high-minded and idealistic. They aren’t rewarded for creativity and risk-taking.

Getting that high requires ambition and ruthlessness. The rewards are great and the perks are generous for those who can stomach the struggle to get there.

These people — regardless of their political ideology — have the most to lose when the behemoth finally topples. Don’t expect them to let principle stand in the way of keeping their places.

We don’t need no stinkin’ Constitution.

6 comments:

Oldsmoblogger said...

"In any case, the behemoth is a sick and shaky monster, one which will someday have to topple, since the prosperity and productivity of the American populace are the only things keeping it standing."

Wait, it gets worse...it just might take our productivity and prosperity with us, when it goes.

This is of a piece with your "we're on our own" post. I think the thing to do in the meantime is to have as little to do with Leviathan as possible.

hank_F_M said...

Hi Baron

Might I suggest the real target for angst is Congress? About the only thing they do not consider is that they are effectively the board of directors and have some responsibility for the effective operation of the enterprise.

They passed the Income tax law. Even if it was perfectly enforced it would every bit the atrocity you describe. I would suggest that it is the government employees who keep it from being for worse than it is.

Of course the IRS is an easy target, the income tax is one of the worst ways to collect government revenue in terms of negative effect on the rest of society.

(NOTE: I do not have any connection with the IRS or I would not have posted, I don't post about the agency where I work)

Scott said...

Having just emerged from the IRS Doghouse ( I hope) I found actually calling them and talking to a real live person useful.

They were upset with my 2004 return and claimed I had made some $32,000 more than I claimed due to some day trading I had done and had
also illegally take an IRA deduction.

They wanted over $10,000 in tax, penalty and interest. After my initial conversation I was put in contact with another real live human being down there and we worked it out. No penalty, no interest, IRA deduction OK and they would take $813 if I paid it before November 30th. I wrote them a check immediately!

I will not be preparing my tax returns anymore though. It is simply too complex if you have any outside income especially of the 'unearned' variety.

That is the real problem. The complexity of the tax code and for that you have to blame Congress. Do these sh*theads have any idea of the work load they impose on the
average taxpayer with their insane
formulas and schedules?

agmartin said...

Your mistake was not giving the IRS what it demanded: a check for zero dollars and zero cents. Would have loved to see them try to cash it.

David said...

I hate to give the impression of defending the IRS...but there are plenty of Kafka-esque episodes perpetrated by private corporations, too. I doubt it would be very hard to find a business sending out demands to pay zero dollars and zero cents.

The average customer service operation is not well-designed: it is simultaneously overmanaged and undermanaged. (More on this theme here.)
And information systems, both in business and government, are often not well meshed with the business processes they are supposed to support.

In general, things are worse in government than in business because of the existence of competitive pressures in the latter, but my sense is that the gap is becoming narrower.

livfreerdie said...

Had a problem with those dear folks. They owed me money! Never spoke to the same person twice. Finally got the taxpayer advocate and the money, with interest.