This Weekly Update has a theme, mission creep by government agencies. Mission creep is a growing problem and encompasses many agencies as bureaucrats attempt an end around of Congress by expanding their mission and power and inevitably asking for more taxpayer money. Even though this week we focus on the Internal Revenue Service (IRS) and Securities and Exchange Commission (SEC), there are many agencies creeping. In the coming weeks we will highlight other agencies like the Federal Trade Commission and the United States Postal Service.
Internal Revenue Service
The first agency that we examine is the IRS. From refund delays to weak privacy protocols, the IRS has failed the American taxpayer. Now, certain members of Congress want them to prepare taxes. The Inflation Reduction Act (IRA) charged the IRS to examine the feasibility of a federally administered, online tax-filing interface. The agency just published its report. It unsurprisingly concluded that “Direct File should be considered among future options.” All along, the books were cooked. The IRA instructed the IRS to recruit further analysis from an “independent third party.” The agency chose the left-leaning New America, a nonprofit whose staffers have previously advocated a direct filing system. Moreover, well before the report’s release, the agency began work on a direct-file pilot program to be tested in 2024, The Washington Post revealed in May. The IRS, as an institution, has not earned the public’s trust. If Congress wishes to ease the burden tax season imposes on Americans, it ought to simplify the tax code, rather than initiate an inevitably error-prone mitigation mechanism. Policymakers should eschew consolidating more power in the agency. They should further avoid discouraging citizens from engaging with private institutions — such as tax-preparation services – that mediate between the federal government and everyday citizens. The IRS too often rules as a petty tyrant within its realm of authority.
In 2021, Govini, a Virginia-based software firm, compared direct-filing proposals to Healthcare.gov — the latter born in 2010 of the Affordable Care Act. Through October 2021, Healthcare.gov had devoured $21.2 billion from taxpayers. Compared with Healthcare.gov, Govini found that direct filing would necessarily serve many more users, process more complex datasets, and require far broader commercial integration. Thus, the IRS would likely face higher costs and obstacles than the Department of Health and Human Services. Policymakers ought to review Washington’s past fiscal and technological debacles more thoroughly before rushing to create new ones.
Roughly 160.6 million people filed taxes in 2022. The provision of an e-filing service to even a fraction thereof would place considerable strain on the IRS’ historically abysmal customer service. In 2021, agency staff fielded just 11 percent of 282 million taxpayer calls. What’s more, Americans making less than $73,000 per year qualify to file for free with private tax services through the IRS’ “Free File” initiative. The IRS should rather perfect this program before inventing and injecting into the market a new, socialized filing option. Consulting the IRS on the feasibility and prudence of establishing an in-house direct-filing system resembles asking a toddler if he should be allowed to have more cake. Invariably, both will answer in the affirmative, despite the fact that it will not be in the best interests of their long-term health.
Securities and Exchange Commission
Not exactly the first entity one thinks of when it comes to mission creep, but it is happening. The Securities and Exchange Commission (SEC) was created in 1929 after the Wall Street Crash to protect investors and ensure fair securities markets. The SEC was never intended to act as a climate regulator. Last year, Biden signed his “Executive Order on Climate-Related Financial Risk,” an order that charged several federal agencies to assess climate risks as part of their future planning and policymaking, including the SEC. The idea was if financial institutions mandate more information related to climate be disclosed by companies, the investing public might change their behavior. And thus, the SEC’s “Enhancement and Standardization of Climate-Related Disclosures for Investors” rule was born. This new rule would require companies to provide detailed information on all things climate-related, in addition to what they already disclose as part of normal business operations. This will include greenhouse gas emissions, environmental risks, and what they are doing to combat climate change. The SEC has also tried to include Scope 3 emissions into the proposal. Unlike Scope 1 and Scope 2 emission reports, which are already required in disclosures, Scope 3 emissions are complex and likely of non-material value. Scope 3 emissions are a company’s indirect greenhouse gas (GHG) emissions produced by their activity. Indirect emissions are extremely difficult to measure, and may not directly correlate with the company’s actions resulting in inconsistent data. This data is difficult to track and to ultimately verify, as is it data outside a company’s control. In addition, it is possible for Scope 3 emissions to be double counted since third parties will have to be brought in to perform the tests. This is a perfect example of why these additional rules further complicate the process. Transparency on financial information is a good thing, but overreach and over complication is not part of the SEC’s original mission. The SEC needs to stay within their jurisdiction and leave climate regulation to those mandated to regulate it. All resources should be focused on investing in and growing America's domestic energy industry, while making responsible environmental decisions. Lawmakers, stakeholders and the courts should ensure the SEC does not overstep their authority by regulating companies and imposing massive new costs on business activity.
The SEC is also getting more involved with shareholder meetings. SEC regulations and guidance on shareholder proposals currently establish a relatively low bar for submission and inclusion of proposals into companies’ proxy statements. With this process predominantly governed by regulation and guidance, the SEC has wide latitude to raise or lower this bar unilaterally. Over the last few years, the number of proposals submitted to companies has risen significantly while the numbers excluded by the SEC and those ultimately passed by shareholders have fallen. This suggests that the SEC has recently lowered the bar for shareholder proposals, resulting in an increase in the quantity but decrease in the quality of shareholder submissions. Companies, in consultation with their shareholders, should be free to manage their businesses as they see fit. This includes efforts regarding various societal issues tangential to their core business. However, it has become clear that public policy, specifically SEC regulation, is playing a significant role in driving political and policy outcomes pertaining to publicly-traded corporations in an extra-legislative manner. In addition, this dynamic is costing companies millions of dollars in additional compliance costs that are ultimately passed on to consumers. In order to correct this problem, Congress must ensure that SEC regulations regarding shareholder proposals are tightened to prevent frivolous use of the process and that regulation of the shareholder proposal process is anchored to objective metrics, not subjective political or policy judgements. In short, an administration’s desired political outcomes pertaining to publicly-traded corporations can be advanced through SEC facilitation of activist shareholder pressure in a complete circumnavigation of Congress. Neither political party should ultimately have an interest in letting such weaponization of financial regulation continue. Taxpayers and consumers are increasingly bearing the brunt of the politicized shareholder process through higher prices and reduced investment returns in addition to the ills of general paralysis and politicization of major corporations.
BLOGS:
MEDIA:
July 1, 2023: The Tennessee Star (Nashville, Tenn.) ran TPA’s op-ed, “Tennessee’s Certificate of Need Laws Stifle Competition and Allow Harmful Healthcare Monopolies.”
July 6, 2023: TPA was mentioned in an article in The Washington Examiner (Washington, D.C.) titled, “FTC challenge to Microsoft acquisition effort of Activision Blizzard no sure thing.”
July 7, 2023: Spiked ran TPA’s op-ed, “The cruelty and snobbery of the nanny state.”
July 7, 2023: Inside Sources ran TPA’s op-ed, “NTIA Softens Stance on Fixed Wireless.”
July 8, 2023: The Santa Barbara News-Press (Santa Barbara, Calif.) ran TPA’s op-ed, “FDA bars life-saving chemo.”
July 10, 2023: The Des Moines Register (Des Moines, Iowa) ran TPA’s op-ed, “On broadband, Iowa practices responsible stewardship of taxpayer dollars.”
July 10, 2023: WBFF Fox45 (Baltimore, Md.) interviewed me about accountability issues after the mass shooting in Baltimore.
July 11, 2023: The New York Sun (New York, N.Y.) quoted TPA in their article, “Judge Strikes Another Blow Against Biden’s Activist FTC With Ruling in Microsoft-Activision Merger.”
July 12, 2023: Filter ran TPA’s op-ed, “Time Short to Stop the WHO’s Assault on Tobacco Harm Reduction.”
July 13, 2023: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about inflation and the latest jobs numbers..
July 13, 2023: WBFF Fox45 (Baltimore, Md.) interviewed me about taxpayer money spent on public safety in Baltimore, Md.
July 13, 2023: The Washington Examiner ran TPA’s op-ed, “Congress must rein in pharmacy benefit managers to lower healthcare costs.”
Have a great weekend!
Best,
