Paul L. Caron
Dean


Tuesday, November 18, 2014

The IRS Scandal, Day 558

IRS Logo 2Town Hall, The IRS Hatchetmen:

[W]hen the Joint Committee on Taxation was started, it was a temporary committee and that was founded because the IRS (then called the BIR) was engaged in the same type of political bullying and illegality that conservatives have used against the Tea Party since 2010.

Senator James Couzens of Michigan, who helped found the JTC, was the Larry Ellison of his day. Like Ellison, who co-founded Oracle, Couzens made his money as the number two guy and management genius behind Henry Ford and Ford Motors. ... As a Republican from Michigan he was considered a progressive and opposed tax cuts, supported the graduated income tax and–like another rich guy, Warren Buffet—acted as the self appointed popular voice against rich corporations, railing against favorable tax treatment for companies.

At the time Secretary of the Treasury, Andrew Mellon, himself one of the richest men in America was advocating a scientific basis for taxation, “the use of economic theory to identify the tax rates that would maximize revenue yet burden productive capital as little as possible,” according to George K. Yin at the University of Virginia Law School. In short he was proposing an infant Laffer curve.

Mellon noted that tax policy was distorting the distribution of capital with companies less willing to pay dividends to shareholders because of the hostile tax treatment dividends received. He also noted that wealthy people were more inclined to invest in tax-free municipal securities because of the different tax treatment that cities and states had versus corporations.

As a progressive Republican Couzens argued against Mellon, using his own status as a rich man to make his point. His argument—in a preview of Warren Buffet’s own stupidity—was that tax treatment made little difference in what types of investments rich people made. ...

By inviting scrutiny of his tax situation, however, Couzen challenged Mellon publicly and also admitted that the tax treatment of investments changed his behavior. The result eventually was an examination in 1925 of Couzen’s tax liability for the sale of his Ford Motor stock in 1913, according to Yin, which was supposed to amount to 73 percent of the gains from the stock, a tax that Couzen said he supported.

The affair became unseemly with both sides using private tax records as weapons against the other. And when Couzens made the affair public in the Senate, the Senate was outraged that a sitting Senator would be subject to retaliation by an adinistration.

Thus was born the Joint Committee on Taxation whose expressed aim was to "investigate and report upon the operation, effects, and administration of the Federal system of income and other internal revenue taxes and upon any proposals or measures which in the judgment of the Commission may be employed to simplify or improve the operation or administration of such systems of taxes,” according to the JTC’s website.

In reality however it was there to stop internal revenue from being used as a political weapon.

https://taxprof.typepad.com/taxprof_blog/2014/11/the-irs-3.html

IRS News, IRS Scandal, Tax | Permalink

Comments

After reading this excerpt from Town Hall, I immediately went to the website of the Joint Committee to check the accuracy of the reporting. The history of the JCT relates a conflict between Secretary Mellon and Senator Couzens. The conflict had to do with valuation of oil properties, many of which were owned by Gulf Oil, of which Mellon then was the principal shareholder. Couzens publicly criticized the Treasury’s oil property valuation.procedures, which appeared to favor Gulf Oil. Couzens next received a $10 assessment. None of this is related in the Town Hall article. Conversely, none of the mishmash about Couzens’ or Mellon’s purported advocacy of tax policy appears in the JCT history. The latter account may or may not be true, but it isn’t on the JCT website.

Posted by: Publius Novus | Nov 18, 2014 1:22:08 PM

Should be "Couzens next received a $10 million assessment."

Posted by: Publius Novus | Nov 18, 2014 1:23:15 PM