Become a Multi-Millionaire… as a Tax Snitch

by Simon Black

Recently by Simon Black: IRS to Increase 'Pre-Crime' Enforcement

Recently, a small town accountant tipped off the IRS that his employer was shorting the government on taxes. He was rewarded with a big fat check for $4.5 million (minus a 28% federal tax withholding, of course).

I’m sure the government thinks this reward is money well spent – it represents 22.5% of the $20 million in taxes that were recovered in the case, which at face value looks like a sound investment.

Consider, though, that the recovered tax was enough to keep the wheels on the bus going round and round for 2 minutes 18.4 seconds under the US government’s $3.82 trillion budget.

US Senator Chuck Grassley, a key sponsor of the 2006 bill that beefed up the IRS Whistleblower Program, couldn’t be happier: “It ought to encourage a lot of other people to squeal,” said Grassley when commenting on the case.

Grassley is a career politician. He entered the Iowa state legislature in his mid-20s almost as soon as finishing his university studies and meeting the age eligibility requirements set by the Iowa Constitution. Now at age 77 1/2, Grassley has 52-years of experience in spending other people’s money without ever having worried about earning any himself.

He’s not alone. Most of his peers are career politicians with tenures so lengthy it is as if they are entitled to their position by birthright, regardless of the destructiveness of their decisions.

Long-time politicians like Grassley who have been in the nucleus of power for so long are exactly the sort of people who are responsible for decades of mismanagement and horrendous fiscal decision-making. And now, after running the government into the ground, what is their solution?

Turn people against each other. Breed mistrust. Incentivize suspicion. Reward cannibalistic witch hunts. George Orwell couldn’t have scripted it better.

Apparently it’s working. I took a look at Google’s web trends to check the popularity of search terms related to “IRS informant”. Since this much publicized whistleblower story broke, the search has spiked – apparently several thousand good citizens out there are looking to sell each other out.

I’ve argued before that these sorts of measures are not the answer… they support fear and paranoia, and additionally provide a strong impetus to drive out productive citizens who reach their breaking point and say “finally… enough is enough.”

Snitch programs, ‘pre-crime’ enforcement, and offshore witch hunts might produce a few spare nickels here and there in revenue… but none addresses the root causes of the American fiscal disaster – namely, (1) out of control spending, and (2) measures which provide a disincentive to productivity and value creation.

This is because the fundamental malignancy that has caused so much of the global economic distortion – spending your way to prosperity, borrowing your way to wealth – is still pervasive among the national leadership, not just in the United States but in the majority of countries around the world.

In a model where spending enormous amounts of money is held in such high esteem, the only perceivable solution is to commandeer as much money as possible from the citizenry… regardless of the consequences or lack of tangible results.

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April 15, 2011

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