Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at intelligent and rational individuals, whose comments are very welcome.

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"Observe that the 'haves' are those who have freedom, and that it is freedom that the 'have-nots' have not." Ayn Rand

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22 July 2015

All-Controlling Governments Are Identity Theft Accomplices

When governments take on the task of micromanaging our lives, they acquire massive records on the personal information of individuals and their interactions with others.  This information is needed to perform the micromanaging.  It is needed to exercise control of those ruled by the Ruling Class.  It is acquired with the force of law because the Ruling Class is curious.  It is acquired so the Ruling Class can construct still more arguments to control still more aspects of the lives of those ruled.  It is highly useful as a means of enrichment through investments and bribes using insider information for the Ruling Class as well.

Such Big Governments, having their hands in a mind-boggling number of affairs, are massively unfocused.  The People are necessarily uninformed and baffled voters.  The Ruling Class itself is poorly informed about most of the activities of the government and certainly is massively ignorant about the effects of governmental policy.  The All-Controlling Governments are characterized by mismanagement and a core incompetence.  Among the many consequences of this incompetence is the demonstrated inability of All-Controlling Governments to protect the massive information on the People from abusive uses and from identity thieves.  This inability to protect that information or to use it to persecute the opponents of All-Controlling Government is an under-appreciated argument against the Big Government model of rule.

Now that government can manipulate massive databases of private and personal information on individuals, the protection of this data from identity thieves, blackmailers, unethical commercial operations, and enemy governments is a critical responsibility of any government that claims, however falsely, that it has an interest in the welfare of the People.  The federal government has long known that its protections of such data are grossly inadequate.  It has done irresponsibly little to provide improved protections.  Indeed, with the recent creation of the ObamaCare health insurance exchanges it hugely increased the medical and financial data on Americans.  These ObamaCare exchanges are well-known to have an incredibly cavalier concern for data security.  The massive medical computer records required by ObamaCare are another private information leak.

Americans are forced to provide almost innumerable government agencies and operations with highly personal data about themselves.  Government agencies collect such data from employers, medical providers, financial institutions, other businesses, or by surveillance of our telephone and Internet exchanges with one another.  If one operates a business that does government contract work or serves as a sub-contractor to companies that are government contractors, still more data is collected on individuals.

Let us examine some of the evidence of irresponsibly inadequate protection of our personal data, as well as evidence that the government really does not care very much about protecting that data:

Between January 2003 and June 2006, 490 IRS laptops were stolen.  Many were stolen from the homes or vehicles of IRS employees, but 111 were stolen from IRS facilities.  The IRS has no idea what individual or company financial information or what social security numbers and birth dates were made available to criminals or enemy governments.  An inspection of a sample of as-yet not stolen IRS computers revealed that sensitive data was not encrypted as required and that the computers had copious data on taxpayers and IRS employees on them.  Many of the computers with unencrypted data had inadequate passwords or easy means to by-pass the password requirement.

In 2012, the Treasury inspector general for tax administration told a Senate panel that there were 1.8 million instances of tax returns filed with the IRS using stolen identities.  Investigators estimated that more than $5 billion in refund payments may have gone to identity thieves.  Another audit concluded that the IRS was detecting far fewer fraudulent returns than occurred.  The IRS did detect 940,000 fraudulent tax returns in 2011 for $6.5 billion in returns, but the audit suggested there were maybe another 1.5 million undetected fraudulent returns.  It is especially hard for the IRS to detect returns using the identity of dead people or children.  So, the dead file tax returns as well as cast votes!  The IRS delivered 2,137 tax refunds totaling  $3.3 million to one address in Lansing, Michigan.  Treasury investigators believed that nearly 24,000 fraudulent tax returns with Detroit addresses totaled $74 million.  More than 500 returns were filed from three Florida addresses for more than $3 million in refunds.  The IRS deposited 590 refunds totaling $900,000 into one bank account.  In 2013, it estimated that it paid out $5.8 billion in fraudulent refunds and credits.  Most of this, the IRS says is going to organized crime syndicates.

If you are a victim of one of the fraudulent tax returns, it is a nightmare to get things straightened out with the IRS.  A check-up on the theft reporting of 17 taxpayers was found to generate 58 separate case files because the taxpayer was shunted between so many IRS employees, each time having to prove his identity.  When a tax accountant's computer was stolen and she notified the IRS to be on the lookout for fraudulent returns on her clients, the IRS said each client would have to file a separate theft report.  When a client tried to do so, she was told she could not until she was a victim.  She later became a victim.

The IRS does not just do a poor job of detecting fraudulent tax returns, it provides the criminals with the identity information they need to make convincing fraudulent returns.  In May 2015, the IRS announced that a Russian organized crime syndicate had stolen the prior tax returns of 104,000 taxpayers from the IRS website Get Transcript feature.  The information they obtained can be used to make fraudulent tax returns appear to be much more authentic than they would otherwise be.  The IRS claims that information has only been used to file 15,000 false returns so far for a total of about $50 million.  However, the information stolen can be used for false returns in future years and to take out all sorts of loans on individual American's credit.  Russian hackers have also taken information from the White House and State Department websites.  They also recently listened in on sanctions discussions between the US and a foreign government.

The IRS is being sued by a company in California which stores massive medical records under HIPAA protection because 15 IRS agents stole 60 million medical records on about 10 million individuals in March 2011.  The IRS agents were in the building under a warrant to search only for tax information relevant to a former employee of the company.  They were told the medical records had nothing to do with the warrant authorization and they insisted in taking the unrelated medical records anyway, even threatening to use force to take them.  Among the medical records were those for every judge and employee of the California court system, though most of the records were for people outside of California.  The records included psychological counseling, gynecological counseling, sex and drug treatments, and much more very personal information.  Given the IRS penchant for attacking Republicans and Tea Party persons, such a stolen trove of medical records could be used for very nefarious purposes, including blackmail.

The Office of Personnel Management (OPM) had 4.2 million personnel records of government employees stolen in one event this year.  Then soon after, we were told that hackers had acquired Social Security numbers for 21.5 million people primarily from people on whom background checks had been performed.  19.7 background investigation applications and 1.8 million non-applicants were involved.  In addition, 1.1 million fingerprints were taken.

Big Government, All-Controlling Government needs, wants, and acquires massive databases of personal data on the People.  But, it has little regard for the privacy of the People, little competence to protect that privacy, and it is all too often willing to abuse the People using that private information.  This is an important reason to oppose Big Government, however many other critical reasons there are for opposing it.


Merlin Jetton said...

I am astounded by the IRS's inability to cross-check and catch fraudulent tax returns. It receives W-2s, 1099s, and so forth from independent sources that give data regarding the person for whom a tax return is filed that can be compared to the data on the tax return. I can understand a fraudulant return supposedly filed on behalf of somebody who is self-employed, has no reportable investment income or retirement income, and pays no estimated taxes passing the cross-checks, but how few people fit that category?

Charles R. Anderson, Ph.D. said...

Hi Merlin. Thanks for your comment.

Part of the problem is that of being inundated with data. The federal government collects huge quantities of data with the conviction that they will provide control and enforcement capabilities. In theory they do. In practice, it is a tough job to assemble all of the data to be organized and searchable. Competence is required, but competence is in short supply in the government. There are competent people, but they are few compared to the magnitude of the task. Commonly, there are more interesting things for these few competent people to do as strategic actors than doing the due diligence required of a patient and dogged tax payment investigator. The competent are soon promoted to management, while the incompetent are left to do the routine tasks.

The FAA and ICE have tried over and over to come up with new computer systems and data management software to manage aircraft control and immigration issues, respectively. They have failed over and over in doing this.

Too much data can be confusing and can only make it harder to see the forest for all the individual trees. Sometimes the hardest problems to solve are those on which you have too much information. It is often useful to form an hypothesis from smaller quantities of information and then test that idea against further information. But with a huge sum of information it may be actually harder to come up with the core essential ideas that make sense of the huge database. One of the classic cases in which this is true is the huge database of climate and weather information which seems to contribute to the baffling response of those who believe in catastrophic man-made global warming and which acts to protect them from all attempts to show that their hypothesis has failed. No warming for 17 years --- well that must be because the heat is being absorbed by the oceans at great depth. Well no, but it is hard to cut to the essential and critical issues in very complex problems, despite the fact that properly viewed, critical solutions may actually be available which are rather simple. They just are not simple to get to.

Of course the IRS is distracted by implementing ObamaCare, by tying up attempts by the Tea Party or Limited Government groups to form non-profit organizations, by destroying e-mail records, by ignoring and defying federal court orders, and by fulfilling the desire of the Obama administration to issue as many tax credits as possible, and far more than are legal, to targeted groups the Democrats want to vote for them. The employees of the IRS are very, very busy people, albeit largely in doing mischief and dastardly deeds.

Merlin Jetton said...

Thanks for your reply. I can understand that the IRS makes poor use of the data they get. On the other hand, my personal experience tells me that the IRS makes *some* use of it. In 2003 I exercised employee stock options. My employer submitted a W-2 for it. The broker who handled it submitted a 1099 for it. I got a letter from the IRS suspecting unreported income. I had to write a letter explaining why my return was complete and correct. The same thing happened again for 2006. I exercised the same kind of options in 2004 and 2005, also double-source-reported, but no letter from the IRS!

Both times the letter came several weeks after my refund. So it seems a fraudulent filer can get a refund before the IRS cross-checks anything.