August 21, 2011 - Phil Hodgen

What Hath God Wrought? (FBAR edition)

One of my correspondents emailed me with a link to the Expat Forum and the disturbing things that pop up there. My correspondent’s note with the link:

It is amazing how this whole FBAR and taxing situation affects people who have never ever lived or worked in America, and yet they are tangled in its maze, and psychologically impacted…. It is amazing that this poor woman has to even consider these options…

Congress passes ill-conceived laws. There is no question about that. The Treasury Department (of which the IRS is a piece) has the happy job of figuring out how to enforce the mess they are handed. (The fact that the Treasury Department is frequently the source of these ill-conceived ideas in the first place will be passed over without comment.) (Do you see what I did there?)

As I watch the parade of tax legislation (Congress) and enforcement (the Treasury Department, IRS, and Department of Justice) I am more and more convinced that the government actors in this game are oblivious to the concepts of externality (which I learned as an Economics major at Claremont McKenna College) and the law of unintended consequences.

Consider the photographer. Focusing on the foreground renders the background fuzzy and indistinct. So too is it here. By focusing on the immediate — “We have rules! The rules must be enforced!” — the government actors have lost the ability to see the big picture. This woman’s story is one of many of those details. Because her story is lost in the blur, the government officials can pretend it doesn’t exist.

Just like my correspondent, I am amazed that the ripple effects of the government’s war on Swiss banks can reach out this far and torment a regular, ordinary person who probably has never traveled to Switzerland in her life.

The people who work at the IRS are, well, people. On an individual level each would probably be horrified to see this woman’s plight and would want to help if they could. (I know this because one of the individuals at the government who was central to creating much of this avalanche of FBAR hell has been revealed to me to in fact not be a monster but someone who is indeed sympathetic to the plight of ordinary people caught in the IRS’s meat grinder).

Look. The police in my town all carry guns. But they don’t shoot out the tires of your car if your parking meter expires.

Hey IRS! Just because you have draconian penalties on the books doesn’t mean you have to use them. And you don’t have to wave the gun around menacingly and occasionally shoot a driver just to make sure that other people feed a quarter into the meter.

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