Slothful IRS Reduces Consequences of Exceeding Debt Limit

Treasury Secretary Timothy Geithner has told us that the government has a few tricks it can use so that even though the government debt exceeds the debt limit, the government will not have to shut down until early August.  One major reason is not discussed.

The IRS is running late this year on refunding excess taxes paid.  Part of the reason for this is that Congress and Obama did not manage to work out an agreement and sign it into law to prevent a drastic raise in taxes until 17 December of 2010.  In addition to changes that affected future payroll withholdings, some changes required retroactive changes to 2010 tax forms, which delayed the start of filing for many people.  Among these,

• Taxpayers were allowed to continue choosing to either deduct state income taxes or the state sales tax.  This affected the 50 million filers who itemize deductions.
• A change was made in who was affected by the Alternative Minimum Tax or AMT, which also affected those who itemize deductions.
• Teachers who claim the $250 deduction for money spent on classroom supplies which had been scheduled to expire.
• Qualified college expenses could allow a deduction of up to $4,000 which had been scheduled to expire.

Consequently, the IRS was going to be jammed more than usual due to these late changes.  There is, however, another problem the IRS has on top of this one.

The first Democrat-controlled Congress of four years ago decided that the IRS should provide loans to first-time home buyers at no interest.  A million home buyers took advantage of this program, so that IRS computers are taking in monthly mortgage payments in addition to handling the usual business payroll tax deposits and trying to get the many refunds out to taxpayers.  The IRS is running seriously behind.  This is the normal problem of poor central planning that we have come to understand is central to big government.

But, government has also earned our cynicism.  Could it be that this is also a good excuse for getting refunds, which averaged $2,324 in 2007, back to taxpayers late?  During the period between now and August, the longer it takes for the IRS to refund excess tax payments, the easier it will be to avoid the consequences of having exceeded the debt limit.  The delays on many tax refunds are expected to be 4 months.  Four months from 18 April will be 18 August.  This is very convenient for our overspending government.  Is it possible the IRS and its tax-dodging leader, the Secretary of the Treasury Timothy Geithner, are taking advantage to the fullest of such excuses?  This would help to allow the administration to continue its free-spending ways unabated until August.

How Obama's Illinois Government Pays the Bills

According to the 4 June 2010 St. Louis Post-Dispatch, Illinois has a $13 billion over-spending problem.  This has created a terrible cash flow problem.  Actually, the state has had a severe cash flow problem for years.  How does it deal with this problem?  Well, logically, it should cut back its spending or it should raise taxes.  But, taxes are not popular just now and they chase people into the underground economy or away to other states with more reasonable taxes, so the government of Illinois has not raised taxes enough to deal with their shortfall.  What they do is pay their bills very late.  As of 2 June, the state comptroller's office admitted to being about $5 billion behind in paying its bills!

Independent pharmacies are still waiting for payments by the state on Medicaid  prescriptions that should have been made in January.  There are 240,000 late payments to vendors and schools and cities.  Some regular state vendors have not been paid since October.  The Illinois comptroller's spokesperson, Carol Knowles, says

Every day, all day, we hear from vendors who are requesting emergency payments to make their payrolls or to keep the lights on.

As a small business owner, I know how rotten it is to be faced with payroll and payroll taxes on work performed long ago for payments long overdue.  Not paying your bills in a timely way is an instance of fraud. Many states, especially Obama's Illinois, habitually resort to fraud.  This is how irresponsible overspending is sustained in Obama's home hood.  This is how Obama learned to govern as a state senator in the Illinois legislature.  Promise spending, engage vendors for their goods and services, and then say we will pay you when it suits our convenience.  Of course, the state absolutely requires its unpaid vendors to make on-time payments to the state of withholding taxes from the vendor's employee pay!  This makes state government fraud especially egregious.

It would appear the state of Illinois is counting on saving a lot of money by not paying many bills until many of their vendors have been driven into bankruptcy.  I suppose that bankrupt and unoperated companies are less likely to make those daily calls pleading for payments so they can keep their doors open.  What a neat way to overspend and never face the consequences.  There is a bit of a problem, however.  I would not do business in the future with such a customer.  Of course, elderly care operations may find it more difficult to do without state payments than a material analysis laboratory would, but soon many of them will be out of business and many elderly will not be cared for, including those not dependent upon state assistance.  The irresponsible state, claiming to be unable to reduce its spending out of concern for the poor, will soon have no way to claim it is helping the poor.  The means to deliver the services will have been killed.  It is the nature of the parasite to kill its host.