The IRS wants to tax your frequent flyer miles and hotel points

May 27, 2014

taxes IRS shakedown

It’s as if the agency was worried it wasn’t hated enough.

Writing at Reason, Ira Stoll reports that the Internal Revenue Service is looking at taxing rewards points offered by airlines and hotel chains:

Just in time for your summer vacation, the IRS is getting ready to toughen the tax treatment on frequent flyer miles and hotel loyalty reward programs.

The IRS announced in 2002 that it wouldn’t try to go after individuals for income taxes on frequent flyer miles or hotel loyalty points earned on company-paid business trips. Yet the temptation to wring some tax revenue out of the vast non-dollar economy of Starwood Preferred Guest Starpoints, Marriott Rewards points, American Airlines AAdvantage miles, Delta Skymiles, and so on is apparently so great that that the government just cannot resist.

Sure enough, the Tax Foundation, a research group that tracks tax issues, flags a recent post on the View From the Wing blog that runs under the provocative headline, “The IRS Looks To Be on the Verge of Imposing a Big Tax Burden on Loyalty Points.”

The IRS’s plans are vague, but they have airlines and hotel owners concerned enough about the issue that they reportedly sent a letter to Treasury Secretary Jacob Lew. “The IRS’ proposal to alter the tax treatment of loyalty programs will impose a significant new tax on existing and future loyalty points that travel customers enjoy and rely upon,” said the letter, according to a report in Politico. “Any change or clarification of loyalty program accounting should be made through the legislative process, not IRS promulgation.”

Frequent flyer mile fanatics got a wake-up call on the issue back in 2012 when Citibank sent IRS Forms 1099, documenting “miscellaneous income,” at a rate of 2.5 cents a mile, to customers who had signed up for an American Airlines-branded credit card and gotten 40,000 AAdvantage miles as a bonus. It was an unpleasant surprise to cardholders who thought they were getting a free trip, not an unwanted extra tax bill.

I’ll say. I rarely rack up enough points for a free flight or hotel night, but I know plenty of people who fly a lot and who rely on those points to help cover the occasional vacation. Suddenly taxing them not only diminishes their value as a customer-retention tool, but also burdens the consumer by imposing a monetary cost for a non-monetary reward. (Sure, the points have “value,” but it’s not like real income. Just try paying for a meal with airline points…)

Stoll covers several problems with this plan, but I’ll add one of my own: this is another example of the gradual bureaucratic usurpation of legislative power that’s grown to be such a problem since the Progressive Era. Congress writes laws that allow regulatory agencies to create rules for their implementation, but agencies, like bureaucracies everywhere, constantly push the bounds of that authority to accumulate ever-greater power to themselves, to the point whereat they’re no longer writing rules, but actually making law in place of the elected legislature. Which, for progressive ideology, is a feature, not a bug. (1)

Although, perhaps “usurpation” is too strong a word. After all, congresses dominated by both Democrats and Republicans have gone along with this, even if they didn’t agree with progressive ideology, passing vague legislation and letting agencies “fill in the blanks.” It’s a tempting bit of laziness: as Washington accumulated more power to itself, Congress had to deal with more and more, until it became expedient to let someone else deal with the details. And it gives them political cover: It wasn’t your congressman who decided to tax your airline miles, it was the IRS. Left unsaid is how generations of congressmen and senators have enabled this.

Of the many reforms our government needs, congress reclaiming its power to make laws and reining in the bureaucracy –especially the IRS!– is high on the list.

Footnote:
(1) The basic idea is that democratically-elected legislatures are too prone to public passions, too full of unqualified people, to be trusted with governance. Progressives prefer unelected, dispassionate boards of technocrats who would practice scientific management of public affairs. They may be right about the problems of legislatures, but I think the last century has shown their solution is even worse.

(Crossposted at Sister Toldjah)


Repeal the Gas Tax…and Get Rid of the Department of Transportation

May 9, 2014

Phineas Fahrquar:

It’s a good start. The way to end cronyist corruption in DC is to take the money away.

Originally posted on International Liberty:

More than three years ago, I wrote that the Department of Transportation should be dismantled for the simple reason that we’ll get better roads at lower cost with the federalist approach of returning responsibility to state and local governments.

I echoed those sentiments in this CNBC interview.

Since there’s only an opportunity to exchange soundbites in these interviews, let me elaborate on some of the reasons why transportation should be a state and local responsibility.

1. Washington involvement is a recipe for pork and corruption. Lawmakers in Congress – including Republicans – get on the Transportation Committees precisely because they can buy votes and raise campaign cash by diverting taxpayer money to friends and cronies.

mitchells-first-theorem-of-government2. Washington involvement in transportation is just the tip of the iceberg. As I said in the interview, the federal budget is mostly a scam where endless streams of money are shifted back and…

View original 283 more words


North Korea: the nightmare of living under a god

April 11, 2014

North Korea Yeonmi Park

There’s an interesting and frightening interview posted to Business Insider today with Yeonmi Park, a woman who escaped from North Korea with her family as a teenager, but needed years to get over the brainwashing she endured there. An indoctrination so intense, she believed the late Kim Jong Il could read her mind:

Yeonmi Park grew up in North Korea, under the watchful eye of then-leader Kim Jong-il.

Though she escaped with her family when she was 15, it took her years to get over the intense brainwashing she experienced. In a recent interview with Australian public broadcasting channel SBS, Park went into unbelievable detail about growing up in the totalitarian state.

Growing up in North Korea, according to Park, was like “living in hell.” She describes constant power outages, no transportation, and watching classmates and friends disappear without a trace. While that may be unsurprising, the most interesting part of Park’s experience is her admission that she believed Kim Jong-il to be “a god” who could literally read her mind.

“I had to be careful of my thoughts because I believed Kim Jong-il could read my mind. Every couple of days someone would disappear,” Park said.

Ms. Park’s story is part of a larger program on mind-control shown by SBS, the Australian public broadcaster.  The whole show is worth watching.

In an article at SBS, she tells more of her own story:

I lived in North Korea for the first 15 years of my life, believing Kim Jong-il was a God. I never doubted it because I didn’t know anything else. I could not even imagine life outside of the regime.

It was like living in hell. There were constant power outages, so everything was dark. There was no transportation – everyone had to walk everywhere. It was very dirty and no one could eat anything.

It was not the right conditions for human life, but you couldn’t think about it, let alone complain about it. Even though you were suffering, you had to worship the regime every day.

I had to be careful of my thoughts because I believed Kim Jong-il could read my mind. Every couple of days someone would disappear. A classmate’s mother was punished in a public execution that I was made to attend. I had no choice – there were spies in the neighbourhood.

George Orwell’s 1984 depicts the UK after an atomic war and a Socialist revolution. Big Brother is a de facto god to the people: his every word the undeniable truth, no matter how it contradicted what he might have said just the day before. Your innermost thoughts known to him, and he held the power to make you willing to accept your own death and the deaths of those close to you as just. His Animal Farm is a parable of a just revolution hijacked by an anti-democratic cadre, who maintain power by turning the other animals against each other and all into slaves. Both are taught as works of fiction, but Yeonmi Park’s story reminds us that they were more like docu-dramas and that the story hasn’t come to an end.

It reminds me of a saying of John Adams:

“It is weakness rather than wickedness which renders men unfit to be trusted with unlimited power”

Our second president was right, but left something out: it’s not just that Mankind is too morally weak for any one person to hold absolute power, but there is also the weakness that makes us willing to surrender our responsibilities as citizens and entrust a small group of people or a single person with unlimited power. It is dangerous because, eventually and inevitably, that power will fall into the hands of evil men.

And then what is to stop them from proclaiming themselves gods?

(Crossposted at Sister Toldjah)


North Korea: all men must now wear Kim Jong Un’s hairstyle?

March 26, 2014
x

Bah! You call that a “haircut?”

When you’re the boy god-king of the world’s largest prison camp masquerading as a nation, you can get away with weird, petty stuff like this:

If you are a man in North Korea, we sincerely hope you have a round face. It’s the shape that will work with your new haircut.

That new haircut is reportedly called the “Dear Leader Kim Jong Un,” modeled after—you guessed it—North Korean leader Kim Jong-un’s impenetrable block of black hair atop his chubby cheeks. The style reportedly became a state-mandated guideline about two weeks ago, though experts familiar with the country have said there’s no evidence a new hairstyle rule has gone into effect.

According to the article, this isn’t something new for North Korea: Kim’s father, the late, demented Kim Jong Il, launched a state campaign against long hair on the grounds that it sucked the nutrients from one’s brain.

Really.

Anyway, a TV campaign was launched and “journalists” would go to people’s homes to confront them about their overly lengthy locks. This being North Korea, I suppose they were lucky not to be shot or fed to the dogs.

Back to Kim III, and regardless of whether this is true, it’s another illustration of why limited, constitutional government is best; when there are no limits to the powers of the rulers, there are also no limits to what they will do the the ruled. North Korea is just the extreme example that clarifies the point.

(Crossposted at Sister Toldjah)


Time for a Free-Market Postal System

March 25, 2014

Phineas Fahrquar:

Revisiting one of my pet peeves: privatizing our hugely inefficient and money-losing postal service. In this case, Mitchell presents Britain’s success at doing just that.

Originally posted on International Liberty:

It’s not often that I agree with the Washington Post, but a government-run monopoly is not the best way to get mail delivered.

Moreover, it’s not often that I agree with the timid (and sometimes reprehensible) Tory-led government in the United Kingdom, but they just put the Royal Mail into the private sector. And that’s something deserving of loud applause.

Here’s a slice of the big news from the Financial Times.

The goal of privatising Royal Mail had defeated governments for 40 years. …Even prime minister Margaret Thatcher balked at the political risk of selling off a public service that carried the Queen’s head on its stamps. This time, the legislation went through parliament.

My Cato colleague, Chris Edwards, is suitably impressed.

Here’s some of what he wrote for Cato-at-Liberty.

Britain privatized its Royal Mail in 2013, proceeding with an initial public offering of shares that raised about…

View original 463 more words


On birthday parties, income inequality, and big government

January 20, 2014
"By invitation, only."

“By invitation, only.”

So, in all the excitement of the NFL’s “championship weekend” the featured the 49ers thrilling come-from-ahead loss in Seattle (1), I forgot it was Michelle Obama’s 50th birthday. You can bet she didn’t forget, though, enjoying a lavish party attended by 500 celebrities and political stars. An intimate soirée, in other words.

Like Byron York, I’ve no need to know the details, assuming the party was paid for with private money, but the intense secrecy surrounding it is intriguing:

It’s not easy to enforce discipline on successful, wealthy, and famous people used to having their own way. But the White House apparently did not want to see photos of the first lady’s glittery gala circulating around the Internet. So it imposed a strict rule: No cellphones. “Guests were told not to bring cellphones with them, and there was a cellphone check-in area for those who did,” reported the Chicago Tribune. “Signs at the party told guests: No cellphones, no social media.” People magazine added: “Guests had been greeted by a ‘cell phone check’ table where they deposited their camera phones on arrival and it was understood that this was not an occasion for Tweeting party photos or Facebooking details.” The publications cited sources who insisted on anonymity for fear of White House reprisal.

“So great was the secrecy surrounding the party,” the Tribune reported, “that guests were handed an invitation — on their way out, the sources said.”

Kind of amusing for the Most Transparent Administration in History, no?

York speculates on the reasons for the secrecy, including the aforementioned privacy. But, he also touches on another, one that I think is at least equally valid – political messaging:

Or maybe, since the president has announced he is devoting the rest of his time in office to an “inequality agenda,” the White House felt photos of a champagne-soaked, star-studded party would be somewhat off-message.

I’m willing to bet this is it. The Left is singing like a chorus about income inequality and the widening gap, hoping to distract us all from the rolling disaster of Obamacare, and Michelle’s big blow-out would sound a loud discordant note, if it had gotten out on the Internet.

The truth the Ancien Régime misses while enjoying their luxurious parties at Versailles-on-the-Potomac, however, is that their parties are not the problem. No one really cares whether Michelle invites five, fifty, or five-thousand guests. No one cares (other than as an object of mockery) how many snobby dinner parties Anna Wintour throws for her glitterati friends.

The real problem, according to David Malpass in the Wall St. Journal, is that the Left’s preferred big-government, class warfare policies make the dread inequality worse more often than not:

Big government expansions in recent years have harmed individuals with modest incomes while exempting or benefiting people with higher incomes. These include the federal takeover of the mortgage industry, and the Federal Reserve’s decisions to keep interest rates near zero and buy some $3 trillion in bonds. Both of these expansions channel credit to the government and the well-connected at the expense of savers and new businesses.

Middle-income earners used to be the primary beneficiary of the rise in the value of their houses. Housing gains now lift Washington, allowing the government to pay itself huge “dividends” from Fannie Mae, Freddie Mac and the Federal Reserve, which owns nearly $1.5 trillion in the government’s housing-related bonds. The government promptly spends the windfalls, fueling a further accumulation of wealth and income for those with Washington access.

The financial industry is making billions in profits fueled by the government’s provision of zero-rate loans for those with connections and collateral. Wall Street’s upper crust is the epicenter for financing the contractors, lobbyists and lawyers that help the government spend money. Meanwhile, government grabs a huge share of the profits generated by small businesses. It piles on opaque regulations, complex tax rules and countless independent agencies, producing a system that works against small businesses and the middle class. The Affordable Care Act takes pains to exempt Congress, government, corporations and unions, but leaves the rest severely exposed, adding to inequality.

This week’s congressional budget deal saw a narrow group of Washington’s elite legislators and lobbyists working over the weekend to divvy up nearly $1.1 trillion in discretionary spending for 2014. Much of the spending and all of the lobbying and debt underwriting costs will benefit those with high incomes while the extra debt falls heavily on the middle class.

Thus while Our Betters in D.C. and Manhattan and Hollywood graciously deign to run our lives for us (when they’re not attending a fancy-dress ball or jetting off to another exclusive resort), the burdens they impose on our lives really just enrich their friends at our expense and leave us holding the bag.

There’s a genuine opening or moment for a populist revolt coming. Not the Left-wing, class warfare kind the progressives like to sucker us with (and for which far too many fall), but a Jacksonian, democratizing electoral uprising against governing elites represented largely, but not exclusively, by today’s Democratic Party. A rising that would restore opportunity for us all, not trap us like Europe in social democratic amber.

We saw the first wave of this with the Tea Party rising of 2010, and Obamacare creates the conditions for another. The question is, will the Republican Party have the sense and the skill to take advantage of it?

We’ll see.

Footnote:
(1) Okay, I’m done pouting. Really. Just wait’ll next year…

(Crossposted at Sister Toldjah)


Introducing the 2013 Federal Register: Last year’s 80,000 pages worth of **job-creating rules & regs

January 12, 2014

Only 80,000 pages. The government must be slacking…


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