US Taxpayers Research Articles

Building the Nation’s Cyber Security Workforce

This article presents a view of the necessary size and composition of the US national cyber security workforce, and considers some of the contributions that the government-designated Centers of Academic Excellence (CAE) might make to it. Over the last dozen years about 200 million taxpayer dollars have gone into funding many of these CAEs, with millions explicitly targeted to help them build capacity. The most visible intended output has been in the form of around 125 Scholarship for Service (SFS) students per year going mostly into the workforce of the federal government. Surely the output capacity of these 181 colleges and universities is greater than that, and should be helping to protect the rest of US citizens and taxpayers. We take a need-based look at what the nation’s workforce should look like, and then consider some possibilities of what the CAE schools could be doing to help to close the gaps between that perceived need and the supply and demand.

Offshore Accounts: FATCA Background, Developments, and Key Issues

FATCA was unilaterally enacted by the US in March 2010 to address tax evasion by US taxpayers using offshore accounts. Much has occurred during the ensuing 4 years as the world prepares for FATCA’s July 1, 2014 effective date.This slide deck titled, Offshore Accounts: FATCA Background, Developments, and Key Issues, was prepared for a March 24, 2014 speech sponsored by the University of Baltimore School of Law and the Maryland State Bar Association. Ultimately the key question is whether FATCA will be successful, and if so, how long will it take?

US voluntary disclosure and expatriation: trusts and escaping the US tax net

The Foreign Account Tax Compliance Act (or FATCA) has changed the face of global tax compliance. Arguably, the US government will not, on a prospective basis, need to issue requests for assistance to obtain information about its citizens’ financial foreign accounts. For the most part, FATCA mandates the disclosure of this information. As a result, many US taxpayers residing outside the United States face compliance issues, restrictions on investments, and a narrowing universe of banks and investment advisors that wish to deal with US clients. For some, the solution is to renounce their US citizenship. This article focuses on the issues that may be of interest to trustees and trust advisors in connection with the journey from voluntary compliance through expatriation.

The Road to FATCA in the European Union

The author discusses the EU response to the US Foreign Account Tax Compliance Act (FATCA), which allows the US Internal Revenue Service (IRS) to gather information concerning the accounts of US taxpayers in foreign banks. Banks and financial institutions worldwide are required to gather the information or a 30% tax on capital flows from the United States is imposed. The article looks at the due diligence burden resulting from FATCA, as well as legal concerns – notably data protection issues.

Penalties: The IRS Continues to Attack Unreported Foreign Bank Accounts by Criminally Indicting Three Swiss Bankers

United States citizens or residents with foreign accounts must be careful to properly report such accounts on tax returns and reports of foreign bank accounts. The government is continuing its attack on bank secrecy around the world and the latest development involves the indictment of three Swiss bankers for helping US taxpayer evade US tax.

Keeping the “Home” in Nursing Home

Keeping the “Home” in Nursing Home

E-Verify Can Stop Refund Fraud

Two issues in the current Washington debates need to be linked. E-Verify, the Internet-based database that allows employers to verify an employee’s work eligibility that is at the center of the immigration debate, is the ideal tool for stopping tax refund fraud. All that is needed is a digital signature of the E-Verify result, and the mandatory inscription of this signature on tax documents to make them self-authenticating. The central features of this proposal have been made before. The technology it requires is tried and proven. The processes and procedure it advocates are in place and effectively deployed in foreign jurisdictions, notably in VAT jurisdictions enforcing against VAT fraud. The heart of this linkage (the E-Verify/refund fraud linkage) is numerical. At least $5.2 billion in annual revenues are being lost through refund fraud – the cost for businesses to implement a fully mandated E-Verify system is $2.7 billion. If E-Verify solves refund fraud, there are funds available for a business credit with a considerable amount of money left over. The $5.2 billion figure comes from the Treasury Inspector General for Tax Administration (TIGTA) who found that in Processing Year 2011, identity theft cost the US taxpayer in excess of $5.2 billion in undetected fraudulent tax refunds, and estimated $21 billion in losses over five years. The $2.7 billion figure comes from a Bloomberg Report for the same time period indicating that a fully mandated E-Verify system for all employers would cost $2.7 billion (almost all of it in training expenses related to system implementation and worker appeals).

FATCA from the European Union perspective

The Foreign Account Tax Compliance Act requires foreign financial institutions to report to the US Internal Revenue Service the information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest. This aim of FATCA, which is to increase the ability of the American tax authorities to combat cross-border tax evasion by US persons, is reasonable. However, it imposes burdensome due-diligence, information reporting and withholding obligations on all foreign (non-US) financial institutions. It also raises legal concerns – notably data protection issues. The article analyses the main issues connected with FATCA, presents the pro and contra opinions, and looks at the reaction of EU Member States at the announcement of American provisions.

Revenge of the Optimum Currency Area

Revenge of the Optimum Currency Area

And Yet it Moves: A Tax Paradigm for the 21st Century

A central premise of tax scholarship of the last thirty years has been the greater mobility of capital than labor. Recently, scholars such as Edward Kleinbard have recommended that the US adopt a variant of the 'dual income tax' model used by the Scandinavian countries, under which income from capital is subject to significantly lower rates than labor income because of its supposedly greater mobility. This article argues that the premise upon which this argument is built is mistaken, because for individual US taxpayers (as opposed to corporations), there are significant limitations on their ability to avoid tax by moving their capital overseas. Moreover, if we focus on those taxpayers that pay the bulk of the income tax (i.e., the upper middle class and the rich), the data suggest that their ability to legally avoid taxation by expatriation is not significantly lower than their ability to evade it by moving capital, and lower income taxpayers are able to avoid both the income tax and the payroll tax (as well as a VAT) by emigration. The article will then develop the policy implications, suggesting that income from labor and capital should be subject to similar rates, but that these rates should be congruent with the price the US population is willing to pay for public services.

Open letter to the associate director for DOE’s Office of Fusion Energy Sciences

We are early-career research scientists and professors, all under 40, who work in plasma and fusion science. We are concerned about the proposed fiscal year 2013 budget for the Office of Fusion Energy Sciences (OFES) in the Department of Energy’s Office of Science and about the future plasma and fusion science funding trajectory it represents.The current US administration has affirmed its “world-class commitment to science,” with the goal of attracting more US students to science and engineering now, and to ITER, the international tokamak fusion project, as it reaches full operating capacity 15 years from now. Those commitments should be applauded, and they should be acted on sensibly to maximize the return on investment for US taxpayers in today’s tough fiscal environment.With a price tag upwards of $20 billion, ITER is the cornerstone of the world’s fusion energy program. It represents a leap forward on the path to a viable fusion reactor. Yet ITER is more than an engineering project. It will have to create, confine, and control a self-sustained, burning plasma. The challenge of studying that plasma state is matched by the anticipation of what we will learn. We have theories of how a burning plasma will behave and how associated heat loads and energetic particles will impact the ITER wall materials. And there is one thing we know: ITER is discovery science, and a burning plasma will produce plenty of surprises once we get there. Some surprises may be advantageous, others will need to be mitigated.US plasma and fusion scientists must be in a position to understand and expand on those new physics insights. The vibrant domestic program must be maintained and nurtured, so that today’s graduate students and postdocs can become experienced scientists and leaders 15 years from now.Instead, the administration’s FY 2013 OFES budget redirects one-sixth of the FY 2012 domestic spending to the ITER project (see Physics Today, June 2012, page 25). If that trend continues, within the next two years hundreds of scientists and engineers at premier US institutions will be laid off. Over time, those layoffs will lead to the permanent loss of some of the brightest young minds from the US plasma and fusion program, and likely from the academic and research communities altogether.The fusion program has a public-image problem: It was supposed to deliver cheap and safe nuclear energy long before many of us young scientists entered the field. But the plasma and fusion program is much broader than energy research. It encompasses the study of supernovae explosions, solar coronal mass ejections, galaxy clusters, wakefield accelerators, the basic complexity of dynamical systems, and many other plasma phenomena.Plasma science, with its enormous breadth, draws on many funding agencies, but the 2007 National Research Council report Plasma Science: Advancing Knowledge in the National Interest has called on the DOE Office of Science to take the stewardship role in guiding the multifaceted and exciting research field forward. The Office of Science must act on this deed of trust and enable us to capitalize on the public curiosity and interest in the 99.9% of the visible universe we call a plasma.The US Congress has consistently said that ITER funding should not come from the domestic fusion program, which is already underfunded, yet the contributions to ITER are threatening to consume the entire domestic OFES-funded program. The proposed FY 2013 US contribution to ITER is $150 million and is scheduled to double or even triple in the next few years. That makes us deeply concerned for the ability of the Office of Science to allow and encourage domestic plasma and fusion research to survive and thrive.The under-40 crowd, those expected to lead our field in the ITER era, respectfully request that you not let the world-leading US plasma and fusion program weaken in comparison to our partners and competitors. Instead, let us capitalize on the taxpayers’ domestic R&D and ITER investments. Let us build a stronger and broader program to advance knowledge in basic plasma and fusion science and to prepare the scientific workforce of this country for the era of burning plasma.In addition to the two of us, 61 other early-career scientists from 27 organizations across the country have signed this letter. The original version, with all its signatories, is available at http://fire.pppl.gov/under_40_letter_2012.pdf.© 2012 American Institute of Physics.

Open Access Musings

Open Access Musings

Studying Complementary and Alternative Therapies

IN 1992, WITH AN INITIAL BUDGET OF $2 MILLION, Congress created the Office of Alternative Medicine (OAM). Based on legislation sponsored by Iowa politicians Tom Harkin and Berkeley Bedell, OAM’s mission was “to explore complementary and alternative healing practices in the context of rigorous science.” Senator Harkin reportedly believed that bee pollen had cured his hay fever, and Representative Bedell reportedly thought that cow colostrum had cured his Lyme disease. They hoped that OAM would prove that alternative therapies like theirs should be brought into the mainstream. Harkin and Bedell’s efforts reflected the popular culture; about 50% of US residents use some form of alternative medicine; 10% use it for their children. In 1999, OAM became the National Center for Complementary and Alternative Medicine (NCCAM), a center within the National Institutes of Health (NIH). Funding has steadily increased; by 2012, NCCAM’s annual budget had reached $130 million. Since their inception, OAM and NCCAM have spent $1.6 billion. US taxpayers have a right to ask whether money appropriated for NCCAM—like money appropriated for all centers within NIH—has been well spent. In support of NCCAM’s mission, proponents argue that one century’s folk medicine can be the next century’s mainstream medicine. For example, Hippocrates used leaves from the willow plant to treat headaches and muscle pains. By the early 1800s, scientists had isolated the active ingredient: aspirin. In the 1600s, a Spanish physician found that bark from the cinchona tree treated malaria. Later, cinchona bark was found to contain quinine, an antimalarial drug. In the late 1700s, William Withering used foxglove to treat heart failure. Later, foxglove was found to contain digitalis, a drug that increases heart contractility. More recently, Artemisia, an herb used by Chinese healers for more than a thousand years, was found to contain artemisinin, another antimalarial drug. Indeed, most drugs on today’s hospital formularies were originally derived from plants. However, unlike studies of drugs derived from plants, many studies funded by NCCAM lack a sound biological underpinning, which should be an important requirement for funding. For example, NCCAM officials have spent $374 000 to find that inhaling lemon and lavender scents does not promote wound healing; $750 000 to find that prayer does not cure AIDS or hasten recovery from breastreconstruction surgery; $390 000 to find that ancient Indian remedies do not control type 2 diabetes; $700 000 to find that magnets do not treat arthritis, carpal tunnel syndrome, or migraine headaches; and $406 000 to find that coffee enemas do not cure pancreatic cancer. Additionally, NCCAM has funded studies of acupuncture and therapeutic touch. Using rigorously controlled studies, none of these therapies have been shown to work better than placebo. Some complementary and alternative practitioners argue reasonably that although their therapies might not work better than placebos, placebos may still work for some conditions. Although studies funded by NCCAM have failed to prove that complementary or alternative therapies are anything more than placebos, some proponents— pointing to studies of vaccine safety—argue that negative studies of biologically implausible hypotheses are worthwhile. For example, in 1998, Wakefield proposed that the combination measles-mumps-rubella (MMR) vaccine resulted in autism in some children. One year later, several parent advocacy groups became concerned that thimerosal—an ethylmercury-containing preservative in vaccines—also caused autism. Although neither of these claims made biological sense, media coverage in the United Kingdom caused thousands of parents to refuse to allow their children to receive the MMR vaccine; as a consequence, hundreds of children were hospitalized and several died from measles. The public health and academic communities responded by performing epidemiological studies, none of which were funded by the NCCAM, that showed MMR and thimerosal did not cause autism. These studies and their negative results were valuable; now clinicians had the data to calm parents’ fears.

The exploitation of publicly funded technology

In this paper we focus on technology that resulted from R&D projects funded by US Small Business Innovation Research (SBIR) Phase II awards. We ask: Is there evidence that strategic commercial agreements allow foreign firms to exploit the technologies developed through the SBIR program and funded by US taxpayers? Based on descriptive information from Phase II SBIR-funded project data collected by the National Research Council within the National Academies, we conclude that SBIR funds for Phase II projects and the technologies associated with those projects are not, to a pronounced extent, benefitting foreign firms through agreements with SBIR firms or investors. In that sense, there is no evidence that the technologies developed with funds from US taxpayers are, to any significant extent, being exploited by foreign firms through commercial agreements with SBIR firms.

Congressional Oversight of the 'Marketplace of Ideas': Defectors as Sources of War Rhetoric

Many scholars have recently complained about congressional oversight of the Executive. This paper provides a context-specific example and flags three controversial issues — government funding of private publicity organizations; the distinction between government-financed messages that flow to foreign or domestic audiences; and the use of privately-constituted data in making foreign policy decisions. First, following the 1991 Gulf War, President Bush Sr. issued a covert order that led the CIA to create and ally with the Iraqi National Congress (“INC”), an interest group, and the Rendon Group, a “perception management” PR firm. Government officials allocated over $100 million of US taxpayer resources to “create the conditions for removal of Saddam Hussein from power.” For the first several years, operations recognized fifty-year-old rules (e.g. the Smith-Mundt Act of 1946, Congressional appropriations bills, and in the endeavors of the U.S. Information Agency and the Voice of America) that condoned disseminating U.S. government-funded messages to global audiences, but restricted the information from reaching Americans. Preceding the invasion of Iraq in 2003, defectors, frequently sponsored by the INC, made numerous allegations of Iraqi WMDs and ties to terrorism to three recipients — the media, the American Intelligence Community (“IC”), and government agencies. The first communication requires the media to decide whether to publish the source’s account directly for Americans. The second dissemination is vetted by IC analysts, who may deliver the classified information to top government officials, and top officials decide to publicly disseminate. The third communication is a direct disclosure to government agencies. The CIA oversaw the INC as it disseminated data to the IC and the media; the U.S. State Department contracted with the INC to directly publicize reports in the media to foreign audiences; and the Defense Intelligence Agency imposed contractual restrictions to classify the data and prevent direct publication in the media.

Do Physicians Need a “Shopping Cart” for Health Care Services?

ELECTRONIC MEDICAL RECORDS ARE BEING IMPLEmented throughout the US health care system. Incentives for implementation are being partially paid for by the US taxpayer. To receive implementation incentives, clinicians must demonstrate meaningful use—that is, the electronic medical record must be used to improve quality and must satisfy certain indicators. What is missing from the definition of meaningful use is any direct measure of either value or cost. It is likely that introducing electronic medical records will improve quality on such dimensions as whether a vaccine is administered, measurement of blood pressure is taken, diabetes is better controlled, and admissions for poorly controlled diabetes are reduced. However, in most systems there are no measures built into electronic medical records to help physicians control cost or even to know the cost of the care that they are providing. Other organizations use computers to improve the purchasing experience, cost, and value of consumer products. Anyone who has shopped online has been presented with multiple ways to judge the quality of the product being purchased. There are ways to compare a given product with other similar products along specific dimensions, and to see what individuals who purchased the product thought about it. The assumption is that this information can help a consumer decide whether the product is worth the cost. However, the consumer’s experience does not end with the description of the product’s quality or efforts to encourage purchase of a better-quality product. Invariably the site has an electronic “shopping cart” that not only lists all the products that the consumer has put in the cart but also shows the cost of each one, as well as the total cost of everything in the shopping cart. The cart’s total automatically updates whenever the cart’s content is changed. In essence, on Internet sites, meaningful use means giving information to the consumer about the quality and the cost of a product in real time. In the United States, the primary purchaser of medical care is the individual clinician, whether that is a physician or a nurse practitioner. Practitioners can access many sources to determine the quality of a test or procedure, but real-time cost data are not available anywhere. In this context, cost means what a typical patient who is insured by a typical company or by the government would be expected to pay for a given service. Cost includes both what the company or government paid and what the patient paid out of pocket. For example, if the insurance company paid the pharmacy $80 and the patient paid $8, the cost of this service is $88. What if every time a practitioner used an electronic medical record system to order a procedure or test for a patient, an electronic shopping cart appeared, indicating how much that “purchase” would cost? What if at the end of the day the practitioner received a statement indicating precisely how much money he or she had ordered to be spent on behalf of patients? What would happen? Would anybody care? Some evidence suggests that providing this type of information to physicians may be helpful. For instance, in a study at one hospital, following the initiation of a weekly announcement informing the surgical house staff and attending physicians of the actual dollar amount charged to non– intensive care patients for laboratory services (ie, daily phlebotomy) ordered during the previous week, there were reductions in daily per-patient charges for laboratory services, with estimated cost savings of more than $50 000 over the course of the 11-week intervention. Perhaps the designers of computerized medical record systems should be advised that the records will be considered incomplete unless they contain information about the cost of the procedures, tests, or services that physicians are purchasing using the systems. How rapidly could the systems currently in use be modified to include such information? Perhaps it is time to begin making physicians and patients aware of what is being spent on a real-time basis, in a form with which they are comfortable. Retail clinics, which provide care for a limited number of acute and preventive conditions, post prices for their services. Patients can see what it will cost them to get a flu vaccination or to be evaluated for a urinary tract infection. But clinicians must do better than retail clinics, or at least as well. It should be possible to keep a running total of the costs for everything that a physician orders. For instance, every time a physician admits a patient to the hospital and orders the nurses to obtain vital signs every hour, or to collect intake

The Impact of the US Foreign Account Tax Compliance Act (FATCA) on European Entities

This note addresses the potential impact of the US Foreign Account Tax Compliance Act on investment vehicles and multinationals situated in Europe, which contains provisions designed to prevent improper tax avoidance by US taxpayers that maintain accounts with non-US financial intermediaries or that make investments through non-US investment vehicles.

Profiting from destruction: The Iraq reconstruction, auditing and the management of fraud

Abstract While several US corporations have benefited tremendously from the Iraq reconstruction, the Iraqis and US taxpayers have not done as well. This paper argues that the Bush Administration's neoliberal agenda in Iraq created a corrupt, lawless environment in which corporations could reap huge profits through what would normally be called malfeasance. It further demonstrates how the audit reports produced by the Office of the Special Inspector General for Iraq Reconstruction helped to manage the impact of this massive fraud by giving the perception that the laissez-faire policies of the Bush administration were innocent mistakes, making the failures appear to be independent of one another, reconstructing corporate malfeasance as waste while criminalizing low level employees, and blaming the government agencies, the war and the Iraqis for the fraud.

Technology adoption under US biofuel policies: do producers, consumers or taxpayers benefit?

The beneficiaries of technology adoption in agriculture and biofuel markets in the United States are heavily influenced by biofuel policies and market context. Biofuel mandates, one of the key pillars of domestic biofuel policies, may significantly alter the elasticity of demand for biofuels as well as the derived demand for maize used to produce a significant share of ethanol in the United States. Using a stochastic agriculture and biofuel model, it is determined that market context relative to biofuel policy is critically important in understanding the winners and losers from technology adoption. The results for both feedstock and biofuel producers as well as the US tax payers are used to discuss implications for the analysis of EU biofuel policies. , Oxford University Press.

The role of security and trust in the adoption of online tax filing

PurposeThe purpose of this paper is to investigate the influence of six determinants on taxpayers' intention to adopt e‐file systems. The proposed model integrates technology adoption factors from the unified theory of acceptance and use of technology (UTAUT) model with personal perceptions on trust, efficacy, and security into one parsimonious yet explanatory model of e‐file adoption.Design/methodology/approachA survey was administered to 304 US taxpayers to capture their perceptions of e‐filing. The survey was developed using existing scales in the literature. Responses were measured on a seven‐point Likert scale, ranging from 1 (strongly disagree) to 7 (strongly agree). The results were tested using multiple linear regression analysis.FindingsThe findings of this research show that theoretical constructs from the UTAUT model are well suited in explaining intentions to use multiple e‐government services. Specifically, the results indicate that three factors from the UTAUT model (performance expectancy, effort expectancy, and social influence) play a significant role in predicting taxpayers' e‐filing intentions. More importantly, the research findings indicate that personal factors (web‐specific self‐efficacy (WSSE) and perceived security control), along with UTAUT factors, have a significant impact on taxpayers' e‐file intentions. The proposed model explains 63.5 percent of the variance in taxpayers' e‐file intentions.Research limitations/implicationsThis study contributes to the literature by integrating determinants from the UTAUT model with personal perception factors to explain e‐file adoption. This merging of UTAUT with theories, such as social cognition, that emphasize human perception, is the direction that must be taken by researchers in an effort to understand taxpayers' intentions to adopt e‐file systems. While the proposed model explained 63.5 percent of the variation in e‐file use intention, there are limitations to this research. The participants in this research are not sufficiently diverse in culture, socio‐economic level, etc. and 89 percent of the research participants are Caucasian. In addition, the participants were recruited from limited geographical locations. The strength of the model should be validated using more diverse research participants that will increase the variation in the data collected.Originality/valueThe paper presents a parsimonious, yet integrated, model of e‐file diffusion. The integration of adoption factors with personal perceptions of trust, efficacy, and security represents a significant step forward in explaining e‐file adoption.