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US Courts Just Scored a Big Win for Limited Government against the IRS

By: Guest Contributor - Jul 4, 2017, 8:28 am
The Internal Revenue Service (IRS) building stands in Washington, D.C., U.S., on Tuesday, Nov. 13, 2012. President Barack Obama expressed confidence that he and Congress would reach an agreement that will avoid the automatic spending cuts and tax increases that are scheduled to occur at the end of the year. The fiscal cliff is the $607 billion combination of automatic spending cuts and tax increases scheduled to take effect in January. Lawmakers are trying to avert the cliff to prevent a short-term shock to the economy and reach an agreement on long-term deficit reduction. Photographer: Andrew Harrer/Bloomberg
The Court ruled that occupational licensing was outside the IRS’ scope of authority (Optimal Tax Service)

By Laura Williams and Travis Klavohn

The judicial branch exists primarily to ensure that Constitutional principles are properly upheld by the courts. And yet, constitutional victories have been troublingly rare as of late. But even though limited government and a true separation of powers seems almost non-existent, the United States District Court for the District of Columbia just handed down a precedent-setting decision that is a win for anyone who supports constitutional limits to state power.

In the class action suit of Steele v. United States, the Court ruled that the IRS would be required to return an estimated $270 million in “user fees” charged to Americans in what a U.S. District Court determined was an unlawful expansion of the agency’s authority.

In 2010, the Treasury Department and the IRS issued a tangle of new regulations, including a requirement that tax preparers register for a specific ID number (PTIN) to be entered on all returns. For anyone who had previously been preparing tax returns for others without a state-sanctioned “professional” preparer’s status, this new regulation required them to pass a competency exam before receiving the required PTIN.

After paying the required fees to take the exam and the costs associated with the mandated annual IRS “education courses,” preparers would then have to purchase the mandated PTIN from the IRS. The initial charge was $64.25, and renewal costs were $63. In 2015, the fee was lowered to $50.

A Thing of (Questionable) Value

If upheld, the ruling against agency user fees holds promise as a tool against executive branch overreach. The Court ruled that occupational licensing (the effective outcome of the PTIN mandate and fee structure) was outside the IRS’s Congressional authority, per a 2014 ruling known as Loving v. IRS.  

Judge Royce C. Lamberth wrote in the ruling:

“It appears to this court that the IRS is attempting to grant a benefit that it is not allowed to grant, and charge fees for granting such a benefit

The dispute hinged on language from two 1974 Supreme Court rulings limiting federal agencies to charging user fees only if the user received a “special benefit” (for example, a hunting license or admission to historic sites). Because PTINs do not constitute a “service or thing of value” provided by government to citizens, The Court ruled the IRS could issue and require PTINs, but could not charge fees.

Overruling a previous holding by the Northern District of Georgia, the DC court found that the only person or entity benefitting from the issuance of tax preparer ID numbers was the IRS itself who “through the use of PTINs, may better identify and keep track of tax return preparers and the returns that they have prepared.” The IRS argued that because a tax preparer could not receive compensation for preparing a federal tax return without an ID number, the PTIN did in fact, provide value. To observers, this was a familiar government trick: restrict an individual’s freedom to do something, then sell it back to him in the form of a “license.”

All associated registration and renewal fees related to PTINs (an estimated $270 million) must now be returned. If the IRS chooses to appeal this decision, then the plaintiffs will not get their money back for well over a year. Of course, determining what the IRS’ next move will be is always a bit of a guessing game, since the IRS does not comment on ongoing litigation.  

Precedent and Promise

At the root of the case is the expansion of executive powers resulting from agencies funding their operations through user fees rather than appropriations from Congress as intended by the Constitution. If heads of agencies can fund regulations without seeking appropriations from elected representatives of the people, there is no check on the expansion of their powers. Agencies would be left to grow the size and scope of the federal government without being accountable to the people. In fact, it appears that agencies have intended to do exactly that.

In a 2015 study, the Government Accountability Office informed agency insiders that federal user fees “represent a significant source of federal government revenue—some individual regulatory user fees exceed $1 billion in annual collections—and often support agencies’ regulatory missions.” Taxpayers could be made to pay the bill at both ends, agencies reasoned. What choice did they have?

A Legislative Solution?

“The Treasury Department felt confident that tax preparers would simply ‘take it’ and do nothing,” said Allen Buckley, CPA, professional tax preparer, and lead attorney for the plaintiff class of 1,000,000 other return preparers. This wasn’t Buckley’s first brush with agency overreach: as a 2016 candidate for U.S. Senate, he proposed the Balance of Powers Restoration Act to address the growing problem of unaccountable agency powers.

If passed, Buckley’s proposed legislation would hold the agency head personally liable if an alleged overreach was struck down, and would empower courts to hold the federal government responsible for the plaintiff’s attorney fees if vindicated. While no such legislation is currently pending, the victory in Steele should give pause to unelected agency heads looking to extend their authority at the expense of individual liberty.

With this ruling, the Court reaffirms that the heads of agencies must play by the rules intended by the US Constitution and have their powers checked by the appropriations process in Congress. Fundamentally, the Court asserts that agencies must be accountable to the people’s representatives and the ruling sets precedent for all user fees. While the ruling hacks only one head off the hydra of invasive government, Steele may be a weapon that can be wielded for years to come.

Dr. Laura Williams teaches communication strategy to undergraduates and executives. She is a passionate advocate for critical thinking, individual liberties, and the Oxford Comma. Travis Klavohn is a management consultant, political activist for limited government, and a resident of Georgia’s 13th Congressional District. Follow his politics blog at www.travisklavohn.com. This article was originally published on FEE.org. Read the original article.

The FARC Are Still Armed to the Teeth: Colombians Should Be Skeptical of their Symbolic Disarmament

By: Guest Contributor - Jul 3, 2017, 10:02 pm
FARC Disarmament

By Manfred Grautoff Español Colombia's longstanding guerrilla group the Revolutionary Armed Forces of Colombia (FARC) participated in a symbolic disarmament in the Mesetas region of the country's Meta department, southeast of Bogota. This region is one of the epicenters of the group's criminal activity, where ferocious armed attacks have been carried out against local residents and military and police forces. A disarmament is, by definition, beneficial for a country that has already endured decades of political violence, instability, and drug trafficking. Nevertheless, there are at least three reasons why such an anticipated moment — one that will see an armed group that has been active in Colombia for over 50 years finally laying down its arms — is producing a laconic reaction in the population. First of all, Colombia has had at least 10 previous peace processes, all of which have only resulted in the perpetuation of increasingly efficient and powerful criminal groups. Because the public is aware of this, they're currently unwilling to trust an armed organization that has already deceived the nation on past occasions, including during negotiations that took place during ex-president Andrés Pastrana's administration. Secondly, officials are not allowing the public access to the FARC's disarmament process. Additionally, the disarmament isn't using serial numbers or accounting for ammunition, making verification a difficult process. Read More: UN Points to El Salvador Gangs as Key Link to Cross-Continent Drug Trafficking Read More: Colombia: ELN Continues to Kidnap, with Recent Abduction of Venezuelan National Because of this, the founder of El Malpensante magazine has gone on an angry tirade, claiming that erasing all traces of identifying information seems more like the behavior of a criminal organization than of a government. According to ballistic studies, there are five methods for recovering the serial numbers of weapons. Obviously, it would be very costly to apply these methods to every weapon received, but the problem could be addressed statistically. Ten percent of the arms surrendered could have been selected at random, and sent to different international forensic laboratories. This would have lent transparency to the process, something that clearly would not be acceptable to the FARC, because it requires tracing where the guns are coming from, how they were paid for and what crimes were committed with them. Thirdly, Colombians must address the issue of who is to receive the weapons: United Nations officials will be taking charge of them, and little is known about what they plan to do with them. In the few pictures taken by FARC members themselves, workers wearing UN jackets can be seen handling M4 and AR-15 assault rifles, which are not commonly used by the FARC. The UN Security Council has a long history of botched operations. Just look at the civil war in Syria, the disasters in Darfur as well as Venezuela, an autocratic country that has rapidly turned into a dictatorship. The UN wanted to sanction Israel in December of 2016, despite it being the only stable democracy in the Middle East. This is the organization that the Colombian people are being asked to trust with disarming the most dangerous criminal organization in the country's history. googletag.cmd.push(function() { googletag.display('div-gpt-ad-1459522593195-0'); }); In other words, the government and its courts are asking the FARC to act in good faith. This is a difficult proposition, unless we are talking about theology rather than the social rule of law in a liberal democracy. Under these circumstances, it becomes necessary to look to the information that the Colombian government possesses in order to extrapolate a conclusion. During Álvaro Uribe's administration, a public security policy was put in place that went straight to the heart of that government's framework. As can be seen in figure 1, the number of weapons confiscated has grown exponentially between 2003 and 2008. Figure 1. Weapons confiscated annually It is clear that trends changed in 2003. The number of confiscated weapons grew to a historic 74,581. Later on, that figure fell and remained in the vicinity of thirty thousand. This means that authorities remove an average of 48,000 weapons from the illegal market per year. Therefore, 668,970 weapons have been confiscated between 2002 and 2015. In terms of saving lives, this is a substantial figure. It may account for the fall in homicide numbers nationwide since these security policies have gained steam and popularity over time. With respect to the armed conflict, we can assume that assault rifles are the FARC's weapon of choice for crime and terrorism against the public. Figure 2: History of confiscated weapons Unpacking the statistics from figure 2, it can be seen that in 2007, there is an increase in the confiscation of war-related materials, which peaks in 2012 at 1,955. From 2002 until 2015, armed groups have lost 10,069 guns. But the information is inadequate, as it shows an abrupt fall in the confiscation of arms owing to the negotiations happening in Havana, Cuba. This leads to two possible hypotheses: that the government has relaxed its efforts against criminal organizations or that these organizations have stopped arming themselves, which would conflict with CERAC calculations. The other determining factor is the confiscation of ammunition, which can be even more important than that of actual weapons. (figure 3). Figure 3. History of confiscated ammunition The results of figure 3 show that the armed forces confiscated 569,078 bullet shells annually, meaning that since 2002, 7,967,100 bullets have been confiscated. This would suggest that the behavior of the illegal arms market follows the same tendency as the rest of the country's war materials. If that were true, then controlling the sale of arms becomes an objective of primary importance, and that leads us to the final question: How many weapons does the FARC actually have? According to a recent report, there had been five weapons for every guerrilla members. That means an estimated 34,500 weapons — a figure that does not coincide with the 7,132 figure reported by the UN. This information suggests that efforts by public officials have led to the reduction of violence on a national level, but that it remains unclear what the current magnitude of the FARC's arsenal actually is. The evidence suggests that the criminal organization exchanges weapons for cocaine and possesses the resources to acquire other war materials. They could be masking a political front while simultaneously creating alliances with other terrorist organizations that serve their strategic objectives. Manfred Grautoff is a university professor in defense economics and national security. He is also the Director of the strategic think tank Geostrategy. Follow him on @mgrautoff.

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