In case you missed it, the Taxpayers Protection Alliance Foundation (TPAF) hosted a briefing on Competition and Security in the App Economy. TPAF’s very own Patrick Hedger moderated the panel and was joined by Shane Tews with the American Enterprise Institute, Jeffrey Wrestling with American Action Forum, and Michael Mandel with the Progressive Policy Institute. The full briefing can be found here ([link removed]) . Government regulation of app stores could be a disaster for consumers and national security. Be sure to follow TPAF’s work with App Security on twitter: @AppSecProject.


The IRS’ Racism Problem

I am obsessed with this issue. Congress wants to give the Internal Revenue Service (IRS) more power to audit as a way to pay for its trillions of dollars of social program proposals. Proponents say more money for the IRS will pay for itself by allowing the agency to go after millionaires and billionaires who are underpaying on their federal tax returns. However, if the IRS’s past track record is any indication, it will not be the rich and powerful that come under their microscope.

Before ProPublica resorted to publishing illegally leaked tax information on private citizens, they compiled troves of data on where the IRS conducts audits and which United States counties are targeted most frequently. This deep dive revealed that the most audited county in the United States is not one near financial meccas like New York, Los Angeles, or Chicago. No, rather, the most IRS audits per capita are directed at Humphreys County, Mississippi, a rural county near the delta, known for catfish farming. Humphreys is not some bastion of secret wealth hidden in the Deep South. According to the U.S. Census Bureau, well over one-third of Humphreys’ residents live below the poverty line. The average income of this humble county is roughly $18,000 per year. The economic issues in Humphreys County are fueling a dramatic decline in population over the last decade. There is hardly enough money to go around in counties like this, yet the IRS seems to believe there is too much and these poor
catfish farmers are secretly hoarding wealth. Also of note, more than 75 percent of Humphreys County residents are African-American. This makes Humphreys one of 151 counties in America where African-Americans, Hispanics, or Native Americans/Alaska Natives comprise the demographic majority. This is where the trends in the IRS data take an even darker turn. Of these 151 counties – spread out from Miami-Dade County in Florida to Nome Census Area in northwest Alaska – 144 of them are targeted for audits at rates well higher than the national average. This is not a coincidence.

The IRS is not even particularly shy about leaning into this trend. When questioned by lawmakers on Capitol Hill in late 2019, IRS Commissioner Charles Rettig described audits of poor Americans as “the most efficient use of available IRS examination resources.” Rettig’s justification for this answer is perhaps worse. Simply put, auditing poorer Americans from disadvantaged communities is easier. It requires less staff time because they don’t have the adequate resources to fight back. It’s easy to see how this cycle continues and will become worse over time if not addressed. The IRS targets those who are disadvantaged because they don’t have the will or the ability to fight back. This makes sure they’re not making any more money. These communities then remain economically disadvantaged because they have become outsized targets for the power of the federal government. They then remain targets because they are economically disadvantaged and can’t fight back when the time comes. On and on it
goes – and has gone. Sinisterly, the roots of this trend are seen dating all the way back to the slave trade era. For example, the counties in Alabama where there are majority Black populations, form a sort of stripe across the middle of the state. This is due to the fertile soil in these areas. That meant it was prime real estate for aggressive farming, spurred on by slave labor. This led to outsized slave populations, which leads to the prevalence of Black communities in these areas today. The IRS looks at the crippling effect slavery had on these communities and sees not injustice, but opportunities for cost-effective audits, ensuring these communities do not succeed economically beyond what the IRS believes is permissible.

Now, members of Congress and of the administration are calling for stepped up IRS enforcement to generate more revenue to fund projects included in the Build Back Better Act. They claim that this will enable the agency to go after wealthy Americans who are taking advantage of the tax code. We need only look at how the IRS has used the funding already at its disposal to see that this will not be the case. We need only take the head of that agency at face value when he says it is more efficient to go after poor Americans. Members of Congress like Reps. Alexandria Ocasio-Cortez (D-NY) and Ilhan Omar (D-MN) have touted the social justice benefits of the Build Back Better Act – likely with the best intentions. However, empowering the IRS to continue to hold down disadvantaged communities – and target them for harassment when they do attain success – will have the opposite of the intended effect. Striving for economic justice ought to begin with reining in the abuses of the IRS, not enabling it
any further.

Dangerous Drug Price Controls

It is no secret that the costs of prescription drugs are very high in the United States. With the costs of everything else beginning to rise due to the pandemic, inflation, and the global supply chain crisis, it is possible that more Americans will have to choose between treating their illnesses and affording basic necessities. This is unacceptable. Access to medicine and prescriptions is a problem that touches many families in the United States. Naturally, lawmakers are trying to ameliorate this problem through legislation. Unfortunately, the prevailing proposal on Capitol Hill is a set of command-and-control policies slipped into the “Build Back Better” reconciliation spending plan. The plan would implement restrictions and price controls on the market. This would actually harm the companies most likely to offer affordable solutions, generic and biosimilar drug manufacturers.

Price controls shift demand, drastically alter supply calculations, and obscure the true value of medications already available. Such proposals reflect a fundamental misunderstanding about the nature of prices. Prices are merely a signal of value from consumers and suppliers based on a host of factors. Price controls treat the symptoms of what’s wrong with the current system, but not the underlying cause. That would be like shutting off “low battery” notifications on your phone instead of plugging your phone into a charger. If generics and biosimilars can’t read the signals that prices send and the market behavior that follows, they will be at a severe disadvantage when it comes time to market their products. These price controls come in the form of government “negotiations” with drug manufacturers. First, a negotiation is hardly fair or based on actual value when one party is the government, which has a monopoly on force and threatens punitive action should talks fall through. Proponents
of the plan tout the fact that negotiation benchmarks will be tied to international market valuations. However, international markets are substantially different from the American one. In the U.S., patients have more access to newer medicines, which is partly responsible for higher prices. This negotiation further obfuscates value and will lead to decreasing availability and investment. Generics will bear this shift heavily.

Another price control in the package is an inflationary penalty. This penalty would implement a steep tax on drug manufacturers who raise the price of their drugs faster than the rate of inflation. First, this will incentivize drug makers to come to market at a higher list price to hedge their bets, in case a price hike might be needed in the future. That is because labor supply, manufacturing costs, and supply chain shortages – like those we’re seeing now – can increase costs faster than inflation. This would necessitate a change, but without the ability to make it, prices would have to start astronomically high to protect investment. Secondly, such a percentage-based benchmark would disproportionately impact generic drug makers, whose prices are already far lower. Because of the discrepancy, a minuscule price hike by a generic would trigger the penalty. This provision is not an incentive to lower prices; instead it’s an incentive for brands to start high and a punishment for the
manufacturers that are offering affordable medicines. Competition is the surest way to lower the price of any product on the market, and prescription drugs are no exception. Generic and biosimilar drug manufacturers have been helping offer far more affordable alternatives for years. While lawmakers in Washington think they are going after pharmaceutical companies charging the highest prices, the manufacturers of all life-saving medications will be impacted. The biggest price of all, however, will be paid by the patients and families that rely on them.





BLOGS:


** Monday: Added IRS Funding Spells Bad News for Minority Communities ([link removed])
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** Tuesday: Congress’ Christmas Rush Will be Costly to Taxpayers ([link removed])
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** Wednesday: Taxpayer Watchdog Pans New “Compromise” Tax and Spend Agenda ([link removed])
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** Thursday: TPA Sends Letter Urging Senators to Oppose Nomination of Gigi Sohn to serve as FCC Commissioner ([link removed])
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** Friday: The Dangers of Misinformation on Vaping ([link removed])
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MEDIA:

November 22, 2021 WBFF Fox45 (Baltimore, Md.) interviewed me about shot spotter

November 22, 2021 I appeared on 93.1 WACV (Montgomery, Ala.) to talk about the $1.7 trillion reconciliation bill and tobacco harm reduction.

November 22, 2021: I appeared on the Tim Jones Show on KWTO 93.3 FM (Springfield Mo.) to talk about $1.7 trillion reconciliation bill and tax increase

November 22, 2021: The Center Square ran TPA’s op-ed, “Energy tax credits a giveaway to special interests.”

November 23, 2021: I appeared on the Tim Jones Show on KWTO 93.3 FM (Springfield Mo.) to talk about $1.7 trillion reconciliation bill and tax increase

November 22, 2021: The Center Square ran TPA’s op-ed, “Proposed rail regulations would slow down Santa’s sleigh.”

November 23, 2021: The Denver Post (Denver, Col.) ran TPA’s op-ed, “Right public policies can ensure wildfires are not the new normal.”

November 27, 2021: Townhall.com ([link removed]) ran TPA’s op-ed, “The Dangers of Misinformation on Vaping.”

November 28, 2021: Townhall.com ([link removed]) ran TPA’s op-ed, “Added IRS Funding Spells Bad News for Minority Communities.”

November 29, 202: WBFF Fox45 (Baltimore, Md.) interviewed me about the Strategic Petroleum Reserve.

November 29, 2021: WBFF Fox45 (Baltimore, Md.) quoted TPA in their story “Baltimore County residents weigh in on how to spend $20 million in COVID rescue funds.”

November 30, 2021: Inside Sources quoted TPA in their story, “UK E-Cig Summit Highlights U.S. Failure Fighting Tobacco Use.”

December 1, 2021: I appeared on KRC 550 AM (Cincinnati, Ohio) to talk about the infrastructure bill and vaccine mandates.

December 2, 2021: WBFF Fox45 (Baltimore, Md.) interviewed me about the continuing resolution and debt ceiling.

December 2, 2021: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about the debt ceiling.

Have a great weekend!
Best,

David Williams
President
Taxpayers Protection Alliance
1101 14th Street, NW
Suite 1120
Washington, D.C. xxxxxx
www.protectingtaxpayers.org ([link removed])

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