|Government Gone Insane|
By Ashton Ellis
Thursday, August 09 2012
Imagine a government so capricious in administration that it would use the black market to estimate an heir’s estate taxes, prohibit a manufacturer from selling or destroying a product for the sake of global warming and penalize refineries for failing to use a type of biofuel that is not available.
Here are three true stories of a government gone insane.
IRS Estimates Estate Taxes Using Black Market
Sometime this month, attorneys for the heirs of a wealthy art dealer will face-off against tax lawyers from the Internal Revenue Service. At issue is whether the IRS was correct to value “Canyon,” a famous sculpture by Robert Rauschenberg, at $65 million. If correct, the estate taxes due from the heirs would be $29.2 million.
Already, the heirs have paid $471 million in estate taxes by selling $600 million of an art collection valued over $1 billion; an eye-popping reminder of how the estate tax virtually mandates heirs to sell the very property they receive just to keep the IRS happy.
Except in this case, the feds are even more greedy than usual. After being told that it would be illegal to sell “Canyon” because it includes a stuffed bald eagle, appraisers at Christie’s valued the piece at zero. When the heirs reported that decision to the IRS, the latter pounced.
Normally, when a dispute arises between the IRS and an heir, the agency relies on its Art Advisory Panel to come up with a valuation. But in this case at least two of the panel members defied common sense. One refused to consider the fact that selling “Canyon” would result in a felony and jail time, saying, “It’s a stunning work of art and we all just cringed at the idea of saying that this had zero value. It just didn’t make sense.” Another told the heirs’ attorney that even if it is illegal to sell “Canyon” on the open market, “there could be a market for the work, for example, a recluse billionaire in China might want to buy it and hide it.”
The IRS won’t comment on the idiocy of its experts’ reasoning, but it is adopting the panel’s $65 million appraisal for at least one undeniable reason – it allowed the agency to slap an additional $11.7 million fine for lying on top of the $29.2 million in estate taxes.
If successful, the IRS stands to reap a $40.9 million windfall on a piece of art its own expert agrees could only be sold on the black market to a reclusive Chinese billionaire. In the meantime, the heirs of an artistic masterwork are left to ponder the true meaning of the word priceless.
EPA Prohibits Manufacturer from Selling or Destroying the Only Over-the-Counter Asthma Inhaler While Granting Waivers to Pricier Rivals
When the Environmental Protection Agency implemented the Montreal Protocol, the makers of the only over-the-counter asthma inhaler were caught in a global warming-inspired vice grip. Because Amphastar’s popular Primatene Mist inhaler contains small amounts of chlorofluorocarbons (CFCs), a substance speculated to cause global warming, adoption of the Montreal Protocol meant that Amphastar was left holding roughly one million inhalers it could not legally sell, give away or destroy.
The problem is that EPA has granted waivers to companies that make more expensive, prescription-only asthma inhalers with CFCs, but not for Primatene Mist. When Amphastar asked EPA for guidance on what to do with all its stock of banned inhalers, the agency shrugged its shoulders.
With an August 2013 expiration date of the inhalers fast approaching, Amphastar has launched a public relations campaign and congressional lobbying effort to release its remaining stock back on the market. And to make it clear that the company’s aim is to respond to complaints from customers about the lack of over-the-counter inhalers, Amphastar is promising to donate all of the net profits from its inhaler sales to charity.
Still, the EPA isn’t budging.
As demonstrated by its waiver authority, EPA has the power to let Amphastar unload its inhaler inventory for the benefit of asthmatics and charitable organizations. That EPA refuses to grant Amphastar a waiver shows how short-sighted is the agency’s reasoning. Since the CFCs are already in the Primatene Mist inhalers, they will eventually leak into the atmosphere; either when an asthma sufferer uses the product or the substance is released through decomposition.
So far, it looks like EPA is making Amphastar a victim of the company’s own success. With waivers going to pricier rivals with less market share, EPA seems to be saying that it would be better to let a million inhalers go to waste – along with tens of millions of dollars in charitable donations – than to speed up the inevitable release of a substance that might cause a scintilla of harm to the ozone.
Talk about an inconvenient truth.
EPA Penalizes Refineries for Failing to Use Unavailable Fuel
What if a federal law required you to put cellulosic biofuel in your car, but none was available? It would be even worse if failure to comply meant steep fines, right? Welcome to the reality facing American refineries under the Energy Independence and Security Act of 2007.
Passed during the height of President George W. Bush’s alternative energy crusade, the Act mandates that oil companies mix 6.6 million gallons of cellulosic biofuel with gasoline and diesel in 2011, upping the requirement to 8.65 million gallons in 2012. But because the technology to mass produce cellulosic biofuel has not caught up to the law’s arbitrary timetable, refineries paid $6.8 million in fines in 2011. They expect to pay even more in 2012.
The purpose of the Energy Independence and Security Act was to wean the American fuel supply off foreign sources of oil by changing the content of that supply with cleaner inputs like recycled plants. But as with every other type of alternative fuel, cellulosic biofuel in quantities needed to meet the law is still just a dream, in large part because it is so difficult to mass produce.
The irony is that fracking techniques are unleashing huge amounts of domestic fossil fuels like natural gas, increasing the supply so rapidly that many companies are burning the excess because prices are at historic lows. A sensible Congress – or an entrepreneurial EPA Administrator – would see that natural gas meets the goals of the Energy Independence and Security Act because it is a domestic source of cleaner energy.
Changing the law to fit the facts would also have the benefit of not penalizing businesses for failing to comply with a mandate that is literally impossible to obey.
It is probably too much to expect government to be an expert in anything, but it is certainly the responsibility of those in authority to exercise common sense. In the three examples cited, our so-called civil servants are failing us woefully.
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