Once again, IRS caught in pockets

It is no wonder the federal government is confused about what is fair and right, when it comes to consideration of the Social Security Administration’s now-halted program in which tax refunds were seized to recoup decades-old overpayments. The Internal Revenue Service is a model of the right hand not knowing what the right is doing. If it is the IRS’s job to ensure the integrity of the tax administration system, the agency is handling its duties rather poorly.

According to a report by J. Russell George, Treasury inspector general for tax administration, the IRS has paid nearly $3 million in bonuses to its own employees who had recent disciplinary problems. That figure includes $1 million to employees who actually owed back taxes at the time.

Some of these workers were also caught misusing government credit cards for travel, using drugs, threatening violence and fraudulently claiming unemployment benefits. And your federal government handed them nearly $3 million. It makes more sense then that Acting Social Security Commissioner Carolyn W. Colvin suspended for review instead of outright ending the forced seizure of tax refunds in order to collect long-ago overpayments that were sometimes paid to Social Security recipients’ parents or guardians when the recipients were children, and had no knowledge of the situation.

When George reported on the IRS debacle, his attempt to clarify the moral and legal code by which the federal agency should guide its actions went something like this: The program does not violate federal regulations, but it is inconsistent with the IRS mission to enforce tax laws. That is a rather muddy way of saying a federal agency is operating as though it is above the laws it enforces – sometimes rather harshly – for the rest of us.

Of course, the IRS says it has new policies in place, now that it has been caught. But these latest news items out of Washington, D.C., are only the most recent in a drumbeat of reminders the federal government believes every dollar you earn belongs to them, no matter how badly they plan to mismanage it.

Perhaps the most important report on the U.S. economy in years was released last week by a private consulting company. It indicates American manufacturers are growing more competitive in comparison to overseas industries.

Manufacturing in China cost 14 percent less than in the U.S. in 2004, according to the report by the Boston Consulting Group. By this year the gap had narrowed to just 5 percent.

By 2018 it will be cheaper to manufacture goods here than in China, the consultant concluded – but only if current trends continue. That is an enormous “if.”

Manufacturing cost gaps between the U.S. and many other countries also have narrowed, according to the report. In some cases, the U.S. has regained the edge it once enjoyed. Brazilian industries, once able to produce at lower cost than American counterparts, now are 23 percent more expensive.

Back to that “if,” however. Whether the U.S. can continue to improve depends on a variety of factors, including access to reasonably priced energy. It will be up to U.S. policymakers to avoid reversing the progress.