Brittany and Ronni talk about why the Internal Revenue Service started, how it has expanded, and what’s going on with the new Inflation Reduction Act.

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Here’s a transcript of our conversation:

Brittany: Hi, Ronni.

Ronni: Hey, Brittany.

Brittany: So, if you guys listen to our podcast, which you do, ’cause you’re listening now, you probably know how we feel about taxes and you may have even heard us say, taxation is theft from time to time. And we say that because taxation is theft and simple. It is when the government steals from us to fund whatever it is they’re trying to pay for. And spoiler alert, a lot of times actually I would argue to say most of the time the things they want to pay for are completely unnecessary or they’re programs that don’t work. I mean, I, could name numerous things. I’m trying to think of like a most recent thing. It would be a harder question to say, find something that worked, I guess, right?

Ronni: Maybe. Yeah.

Brittany: I guess there’s not many things. So, Ronni, I wanna ask you a question. If the government did not make you pay taxes, would you?

Ronni: No. Probably, no, I was trying to, in my head, think if there would be any reason why I would choose to, but no, nothing comes to mind.

Brittany: Yeah. And you know, it’s funny cause I’ve heard people talk about like what ideal taxation would be, and I’ve heard people say if I could choose what I paid taxes for, and that’s an interesting model. But I think you bring up a good point. It’s like, well, what would I choose to, it’s not like the post office is doing great things, you know, there’s not much that I would, but couldn’t I.

Ronni: But then couldn’t I just pay for those places, for example? I really like going to the library. My kids love the library, so we use it a lot. But couldn’t I then choose to just pay money for a membership for a Library?

Brittany: Exactly. Right. That would make it, and that would probably be a better library system. So, exactly. So, I think a lot of us feel the way you do, Ronni, I know I do that if I was not made to pay taxes, I would absolutely not pay taxes. You know, I wouldn’t be giving my money to spend money on wars I don’t wanna be in, or how much did we just give to Ukraine? It was, I know, I think it was in the billions, but you just think like, wait a second, what? you know, all this money. So, I would absolutely not pay the taxes if I didn’t have to. And this is why the government needed to create a way to make people pay these taxes. some might even say scaring them into paying these taxes. Because as we’ve talked about, before, you know, all taxation and even anything government does, it’s enforced by a point of a gun, as we say, right? Because they have to use force. They have to kind of scare you into doing it. And so that is how we got a wonderful organization called the Internal Revenue Service, which we call, or we talk about, call it the IRS. So, we will dive into this terrible agency today, arguably one of the worst. So, Ronni, I’m gonna ask you a question again. Do you know, here’s a little trivia for you. Do you know which president started the IRS?

Ronni: No. In fact, as you were just talking in my head, I was trying to think, I don’t even know when the IRS was started. Maybe gimme a year. Maybe that’ll,

Brittany:

That’ll give it away. That’ll be a dead giveaway.

Ronni: Oh, okay. then nevermind.

Brittany: Well, that’s good because you didn’t know. And that gives me more of a, that gives me a fun chance to answer. So, the IRS was born, I think it was actually called the Internal Revenue Bureau at the time, but it was started, it was born out of what was called the Revenue Act of 1862 under the Lincoln Administration. Oh, yeah. So let’s think about what was going on in 1862. We had the Civil War, right? So, there was a lot of things that needed to be paid for. And how does the government get its money? It doesn’t have any. So, it has to take it from us through taxation. So, this was originally supposed to be just a temporary measure. It was just gonna help pay for the war. And then when the war was over, we weren’t gonna have to use it anymore. But here’s a fun thing. What happens when we give governments just a little bit of emergency powers, as they call it, to pass measures? Well, we rarely get those powers back. I mean, remember it was two weeks to flatten the curve, Ronni, for a little bit.

Ronni: Gosh, there Oh my gosh. I look back on that time and it is crazy. I so wish we could go back in time and just tell our old selves, this is not really two weeks to flatten the curve. This is so much more.

Brittany: It’s gonna be about two and a half years to flatten that curve. Can you believe It’s been so long too? It’s just crazy. But so, we know what happens when we give, government’s emergency orders, you know, and before our listeners were born, we had the patriarch nine 11 stuff where it was like, all right, you have to give up your freedoms. And now we still have the TSA and we have all these places. So, the taxes and the Internal Revenue Service was no different. So as soon as it was put into place, even though it didn’t, it wasn’t as active as it was during the Civil War for a little bit. It was still very much there. So, it wasn’t until 1913 that the 16th Amendment, which is the income tax amendment was ratified, which was when the official, like income tax, became a thing. And so that was when they started hiring more people to be, I like to call it an army, which makes it sound a little scarier than it is, but you know what, it is kind of scary. So, we’re gonna call it. They needed an income tax army to collect all this money from us. So, Ronni, I want to, I wanna ask you a question again. You’ll notice I mentioned the year 1913. Yeah. Do you know what else came around this year that is related?

Ronni: Well, I believe that rings a bell, especially, you know, for the Tuttle twins. And as I have learned, I believe there was something called, well, it was the Jekyll Island.

Brittany: Yes. The Reacher from Jekyll Island.

Ronni: The Federal Reserve, for some reason I was totally blanking. Yes.

Brittany: Yes. The Federal Reserve. So it’s kind of funny to think about this. So, 1913 is a really big year for what was gonna end up being, you know, the future of our economic system. You have two terrible things that were, you had the 16th Amendment, which forced everybody to give a portion of their income to the government. And then you had the Federal Reserve, which, so first they’re being stolen from. And then you have the Federal Reserve, which now has the power to print money, which is what we learned about in the Tuttle Twins book is also kind of a form of stealing. Cause if you remember, Grandma and Grandpa Tuttle, the money they save for retirement, remember it isn’t as much as when they started saving because the Federal Reserve keeps printing money and inflation. So, it’s kind of a double dose of stealing. So that’s not great.

Ronni: Do you think they knew back then, at that time, like many of the people that they understood what was happening, like what the changes were gonna to, to do?

Brittany: That’s a really good question. You know, I’d have to imagine that people weren’t happy about having to give money. I just think that’s kind of ingrained in us, you know? But I also wonder if news didn’t travel like it does today, you know? So, I couldn’t tweet, you know, oh, this is unfair, this is bad there. It didn’t exist. And so you kind of wonder, maybe it’s just because they didn’t know until it was too late and what were you gonna do? You know, you can’t really fight. But that’s a really good question. I hadn’t thought of it. I’m glad you asked that. Here’s another fun little fact. So, there were a handful of states that opposed the income tax, and one of them happened to be Utah, where I am from and where Ronni, Yeah. You currently live. So, I think that was really cool. And, this will be a homework assignment for listeners. Cause I’m not sure if I’m remembering this correctly, but this kind of answers your question, Ronni. I believe if I’m not mistaken, that like it took them a long time to get Utah and the other couple of states like answers back and they had already ratified it. But again, that might not be true. Somebody, fact-check me on that so that I’m not giving fake news out to people. So, all right, So, after the income tax was passed, the IRS had to double its staff to collect all the money that they were stealing. So, in the beginning, it took them two years to process one return. So, if you did your 20 or 1917 return and you filled out your paperwork, they weren’t giving it back to you or getting your return or whatever it was back to you until 1917. So, very inefficient. But, unfortunately, the government loved how much money they were able to get. And much of this money at the time was funding the First World War, but they liked it a little too much because then whenever they needed something else, what did they do? They just kept raising the tax rate a little bit. So, that was the main job of the IRS was to collect the amount of money, but they had other jobs too, which to me don’t make a whole lot of sense. And I’m gonna put you on the spot, Ronni. Can you give us like a three-sentence refresher? Cause we did a whole episode on this, Connor and I, on what prohibition was, doesn’t have to be long. Like three to four sentences

Ronni: Oh, prohibition. Do you mean when they stopped allowing the sale of alcohol?

Brittany: Yes. See you look at that. That was perfect.

Ronni: Well, I know because you know, if anyone ever watches movies or TV shows about like the gangsters in the 1920s Yes. And speakeasies. I mean, that’s what blew up that whole culture. I mean, so the whole flapper dresses was a very interesting, obviously you can tell I like history. It was a very interesting time. But it also led to, like the whole, like bootleggers and, there’s a lot of crime that rose because it didn’t necessarily stop alcohol from being sold. It just made it all underground. And, so like a whole, like a bunch of stuff started. Isn’t that how the mob started from?

Brittany: That’s how the mob got more power. So, they were around before more power, but yeah. But they were, yeah. That kind that made, underground crime. But yes, exactly. So, here’s a weird fact. This is how the IRS ties into this. Originally, the IRS was the part of the government that was responsible for enforcing prohibition laws. And that was because yes, they were trying to catch like businesses or something like sneaking it, you know, in there. So, they were like the ones enforcing it, which is very silly and very scary. But eventually, it went to the Department of Justice, and the IRS, you know, wasn’t doing that anymore. But they also didn’t have a good reputation then. And they certainly don’t have one now. So, there was a lot of like bribery from within the IRS, like they were taking bribes from people. There were also people within the IRS who were not paying their own taxes. So, that was in 1952. There was a lot of conflict there. And the IRS today is known for its incompetency, incompetency meaning like, its ability to just be so, well, I’m trying to think of another word from competency to try to break that word down. But just to fail miserably, they’re just not good at what they do. They’re not good at it. And in recent years, like they’ve had, ’cause you know, with your taxes, you have like your social security number, you have all this really private information and in recent years, either somebody hacked into their system and never told anybody what happened, or an employee leaked information on a bunch of individuals. So they can’t even keep our information private and secret and they have pretty much everything. I don’t know if anyone has ever had to call the IRS, probably not our listeners. I hope you never do. Cause it takes a very long time to get ahold of them. And when you do get ahold of them, they have very little guidance for you. And it’s funny, I’ve had really nice IRS people I’ve had to talk to on the phone during tax season. And then I’ve had people who so clearly hate their jobs that I almost like, it’s really hard to have sympathy. So, and then it also takes them a long time to process returns. And this is really funny to me because if you are a day late on your taxes, you get slapped with all these fees and these fines. But if the IRS is late doing, you know, processing, yeah, they’re fine.

Ronni: They take as much time as they want.

Brittany: Probably get more money from the government for doing it. So, in the 1990s this article came out and it talked about how the IRS was barging into homes of people who were late on their taxes, but they were barging into ’em with like guns loaded. Like it was.

Ronni: Really? Yeah. I didn’t know that that was like a typical thing that IRS agents did is that they themselves actually went into homes, especially with guns. So, I’m glad you, brought that up. ’cause I had no idea.

Brittany: And scary, I think very scary. And these were people, these weren’t gangsters, right? These weren’t mobsters. These were just people who Yes, they relied on their taxes. They didn’t pay their taxes, but they were nonviolent. They weren’t doing anything that warranted that. So, then during the Obama presidency, and you probably remember this, the IRS was targeting groups, and people who had conservative beliefs and started going after them. Cause the thing is, yes, if the government takes a, like, look at anybody’s taxes, they could find something wrong. It doesn’t like, and I’m not saying that means people are dishonest. I’m just saying like the government, if they wanna find something, they will. And so, they’re, well.

Ronni: When you’re dealing with all the details of these little numbers and that means that’s what all the tax returns are, then Yeah, of course you’re gonna, there’s, I mean, I assume right? That’s just built into the system so they can always find something wrong with everyone.

Brittany: But because there’s so many rules, you honestly don’t know. You don’t even know all of them. It’s ridiculous. Honestly, kids, that’s the worst part of growing up. Is having to pay your taxes.

Ronni: It’s taxing.

Brittany: It’s the worst. So now it’s getting even worse. And Ronni, I’m gonna throw it back to you a little again to have you tell us a little bit of what’s happening with the IRS today, because lately in the last month or so, which I guess this episode will come out a little bit later, but recently, a couple of months ago, we’ve had something new, the IRS is expanding a little bit. Can you talk a teeny bit about that?

Ronni: Sure. Well, I think first off, what’s interesting is that it’s all tied into an act called the Inflation Reduction Act. Which you would think has to do with inflation. But actually, once you start reading it, you realize it has to do with, the ways in which they are hoping to, reduce inflation. And one of those ways is by hiring a ton more IRS agents to try to find as much money as they can from individuals. And now they say, oh, we hired all of them so that we can try to get more money from the rich people because the rich people don’t pay the taxes right. But, I saw somewhere, and I can’t remember the numbers off of my head, but you know, how many people are in the top 1% as they say, or, you know, the top percentage that they’re actually concerned about need better scrutiny of their taxes. There are not very many. And those people could easily be covered by far, far, far fewer agents than the number that they hired. They hired, or at least they were looking to hire, what, 87,000 I think is.

Brittany: 80,000?

Ronni: Extra IRS agents. So, what’s gonna happen is that they’re gonna be spending all their time Sure. A little bit of extra time on the rich, but most of it’s just gonna be on average regular people, trying to get every last cent they can out of for taxes. And, yeah, it’s a little scary. Especially, I didn’t know this before, but when you mentioned about in the nineties that they were going into houses with guns, there was, I don’t know if you saw this, but there was, the ad for the hiring of the 87,000 new IRS agents, the job posting had was circulating online. And one of the things, and the job posting was saying, oh, and you know, it was either they were looking for people with experience with guns or they were gonna teach you to have how to carry a gun.

Brittany: Or like, you had to be comfortable carrying a gun. Yeah. It was something creepy. Yeah.

Ronni: But it was very weird that it was in the posting because I didn’t know that was typically what IRS agents do. Usually, you think they’re just sitting, you know, they’re a little bit nerdy and sitting behind the computer and just crunching numbers all day, so.

Brittany: Nope. They’re very scary as it turns out. So, I think we’re almost at a time. So, I hope that gives you a little bit of some clarity on what the IRS is basically. It is one of the worst government departments ever, and in order for taxation to be theft, somebody has to be there to do the stealing. And that is where the IRS comes in. So we’ll leave it there today. Thank you so much for listening. Please like and subscribe and tell your friends about the podcast. And Ronni, we will talk to you later.

Ronni: All right. Bye.