#140 The IRS Targets the Proletariat

the christian economist dave arnott

The IRS is getting 87,000 new agents.  It would take only 25,000 to audit every millionaire, and the bottom 57% pay no taxes.  They will target the middle class.


The terribly misnamed Inflation Reduction Act contained an $80 billion increase in the IRS budget.  

The IRS says they will hire 87,000 new agents with the money.  In defense of those hirings, they claim they will increase government revenue by $204 billion.  As I often say in the classroom, “on the other hand…” you could properly say they hope to remove $204 billion from the productive sector of the economy.  In economics we often use the phrase “opportunity cost.”  We want to know where that $204 billion would be if the IRS did not extract it from the productive part of society. 

The purpose of taxing is to maintain a civil society in a fallen world.  One of my fellow Christian economists, Art Lindsley says it this way, “The government should punish evil but not do good.  The church should do good, but not punish evil.”  If the $204 billion is being used to punish evil, Christians would be pleased about it.  But, it’s not.  Remember, it’s the government, not the “givernment.”  Their role is to govern.  But instead of governing, the money will be used to perform the federal government’s view of good.  For more on that, take a listen to podcast #69 titled, Who Cares?

So, if the church’s purpose is to “do good,” how does your church increase revenue?  When’s the last time your church hired more “fund-raisers?”  Uh-huh, just what I thought.  Your church operates by free-will giving, not by forcibly extracting revenue from its parishioners.  It seems like your church is raising money the right way, don’t you think?  Isn’t society better when we reduce the use of power?

In I Samuel 8, the Israelites asked Samuel to appoint a King.  Apparently, they wanted to be just like the other countries.  Samuel warned them that a King would take their sons and make them serve in the army.  He continued his warning in verse 16: “ Your male and female servants and the best of your cattle[c] and donkeys he will take for his own use. He will take a tenth of your flocks, and you yourselves will become his slaves. When that day comes, you will cry out for relief from the king you have chosen, but the Lord will not answer you in that day.”  Seems like that’s what’s happening, when the IRS takes 87,000 of the best workers out of the productive economy. 


Three Buckets

OK, let’s make this simple.  Money can go only three places: Saving, spending, or taxes.  We’ll include giving in the spending bucket for simplicity’s sake.  Saving is the best place for your money, because it lowers the interest rate and encourages the development of the economy.  It happens to be Biblical also.  Spending is the second-best place, because the money gets multiplied throughout the economy.  If you buy a new dress, the shop pays rent and labor and the supplier of the dress.  They, in turn, pay their rent, employees, etc, and the money gets multiplied.  Taxes is the worst bucket.  As mentioned earlier, it gets diverted from the other two buckets and put into the “protection” economy.  Here’s what I mean by that.  Police and accountants consume wealth, they don’t create it.  They consume value that is created by others.  We need police and accountants – and you can add IRS agents in that mix – because we live in a fallen world.  But the less we spend on them, the richer we all become.  Keeping money in the value creating system, and out of the value consuming system, is good for the economy.  So we need IRS agents, but we want as few as possible.  


Honor Those in Power

In our book Biblical Economic Policy, Sergiy Saydometov and I found ten Biblical Commandments of Economics.  Number ten is “Honor those in power.”  We should follow the law.  But if you’re looking for a law to break, cheating on your taxes is the best one, because it grows the economy.  When you’re honest and pay all the taxes you’re supposed to, you harm the economy.  OK, I’m the Christian Economist, so I live in two camps.  Christians seek input answers.  Economists almost always seek output answers.  You could call it means and ends if you want to.  As a Christian, we’re supposed to keep the law and pay our taxes.  An economist would encourage you to cheat on your taxes, because that keeps money out of the value reducing economy and keeps it in the value creating economy.  I’m not suggesting you break the law.  Sometimes, you don’t have a choice. 

A businessman in Brazil once explained to me that he could choose to keep the law, or make a profit, but not both.  That’s because the Brazilian regulations were so extreme that they prevented profit.  A magazine called Global Payroll explains it this way, Brazil has one of the most complex payroll systems because of its constantly changing laws and the impact of labor unions with employment and compensation requirements. Brazil is known for high employee and employer taxes.”  That’s the nice way of saying it.  We’re not there yet, in the United States, but we’re getting closer.



Another opportunity cost consideration is the labor of the IRS agents.  If the IRS didn’t hire those 87,000 agents, they would be working in the private economy, growing the economy.  Instead, they are in the value-reducing part of the economy.  

You may not be aware that government employees can spend their time on the clock, working for union interests.  IRS and Treasury Department employees spent 353,820 hours engaged in union activism—their PAC gives every cent to Democrats—in 2019.  The new 87,000 agents will likely double those hours.  So, not only will we take those 87,000 workers out of the private labor pool, we put them in the cesspool, where they will draw government salaries, while working for their public-sector unions.  The architect of the Great Society himself, FDR, warned that public unions were a bad idea.  He said, “All government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service.”  But the folks who passed this bill are not listening to their great champion of state-ism.  They are surpassing even his goals.  I unpack the negative effect of labor unions in podcast #52 titled Unions Cause Dis-Union in the Union


The Leviathan Gets Larger

Here are just a few snippets of headlines today: “T-Mobile Lays off workersFord Confirms Lay-offsSnapchat cuts 20% of staff.”  We are accustomed to these headlines in the productive part of society.  Why don’t you ever read a headline stating, “IRS to lay off workers.  The Department of Justice slims down, or the Food and Drug Administration reduces its workforce.”  Because, they are not driven by the market.  They are driven by federal dictate.  My 20-year-old sophomores at Dallas Baptist University have lived through an amazing increase in information technology that has reduced the workforce in the productive economy.  Why doesn’t the government do this?

Planning to hire 87,000 new IRS agents has been determined to be the largest expansion of the police state in American history.  You thought they would be toting a pencil?  The IRS announcement states, “The IRS is looking for special agents who can carry a firearm and be willing to use deadly force, if necessary.”

The global payroll publication I mentioned earlier, stated that the Brazilians had high regulation.  What about the US?  The Tax Code is 6,871 pages, but when you include the tax regulations and official tax guidance from IRS, its about 75,000 pages.  Taxpayers seeking help from the Internal Revenue Service can expect to receive erroneous advice, more than 20 percent of the time.  That’s because the system is so complex.  

In his book, Three Felonies a Day, Harvey Silverglate explains that when the laws become so complex, power shifts from the individual to the government.  The subtitle of the book is “How the Feds Target the Innocent.”  We’ve all broken SOME law along the way, so the feds simply decide who to prosecute.    


The Proletariat Will Pay

The rich have a phalanx of lawyers to defend them against the new IRS agents.  Poor and middle-class taxpayers are more likely to do their own taxes, and thus, more likely to make the mistakes that the new army of IRS agents are looking for. 

In the bill that hired the 87,000 agents, Republicans tried to add an amendment that would have prevented new agents from auditing individuals and small businesses with less than $400,000 of taxable income.  It was refused by the Democrats.  Why?  Because, as a friend of mine says, “It don’t pencil out.”  They have to go after the middle class, because that’s where the money is. 

Auditing every single taxpayer with annual income over $1 million would require only 25,000 new IRS enforcement agents, but the funding calls for 87,000 new agents. What will all those extra agents do?

Like the students in my DBU class, who think Socialism is going to redistribute goods to them, the middle class is about to find out that the IRS agents are NOT going after the rich.  They are going after the middle class.  Do the math: The guys at the top can defend themselves. The bottom 57% pays no tax.  So the only way for the 87,000 new IRS agents to capture the $204 billion increase in revenue they are bragging about, is to go after the middle class.

They have asked for a king, and they’ve been granted one.  Let’s pray we don’t suffer the same fate that the Israelites did, because Samuel gave them Saul.




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