A panel of 36 distinguished public policy experts and scholars—ranging from Nobel laureate Milton Friedman to Eagle Forum President Phyllis Schlafly to former House Majority Leader Dick Armey—has selected the Internal Revenue Code as the No. 1 item on this year’s Human Events list of the Ten Most Harmful Government Programs.
The programs elected by our judges don’t just cost money, they also attack our values and corrode the spirit of liberty that makes America the greatest nation.
As in previous years, we initially asked our judges to nominate programs for the list. The judges were then sent ballots listing the nominated programs. They ranked their choices 1 through 10, with No. 1 being the program they believed to be “most harmful.” A program received 10 points for each No. 1 vote it received, 9 points for each No. 2 vote, and so on. The program with the highest aggregate score—the Internal Revenue Code—was named No. 1 on the list.
When the ballots were tallied, we phoned spokesmen for the federal agencies responsible for each program to see if they could point out the constitutional provision, if any, that authorized the program.
1. Internal Revenue Code
Started when: 1913
By whom: Republican President William Howard Taft proposed, and Congress approved, the 16th Amendment in 1909. It was ratified by the states in early 1913, just before Taft left office. Newly inaugurated Democratic President Woodrow Wilson promptly pushed through a progressive income tax. Under President Franklin Roosevelt in 1939, the income-tax laws were formally consolidated into the Internal Revenue Code.
Why: To give the federal government a means, over and above tariffs and excise taxes, for raising revenue.
What it does: Takes large sums of money from American workers, and uses the threat of targeted taxation to manipulate the behavior of citizens. Behavior that politicians disfavor is taxed heavily. Behavior they prefer is taxed less, not at all, or even granted tax credits. Daniel Mitchell of the Heritage Foundation reports that the current code requires 893 different forms. The Internal Revenue Service has determined it takes Americans a collective 6.6 billion hours each year to complete all the paperwork to comply with the code. As of 2003, the code and its accompanying regulations totaled 17,000 pages.
Cost: In fiscal 2004, the IRS employed 99,000 people and spent $10.2 billion enforcing the code. The Tax Foundation calculates that it cost Americans $194 billion to comply with the code in 2002, and predicts that compliance costs will rise to $244 billion by 2007.
Constitutional provision: The 16th Amendment says: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”
2. Social Security
Started when: 1935
By whom: President Franklin Roosevelt and a Democrat Congress.
Why: Roosevelt signed the Social Security Act, designed to replace the family with the federal government as the principal means of providing financially for seniors who lack the savings to sustain themselves.
What it does: The government imposes a 12.4% tax on the first $90,000 in income earned by every worker. Half this tax, 6.2%, is paid by the employee. The other 6.2% is legally paid by the employer (but, as conservative economists point out, in effect, also comes from the workers.) Self-employed workers pay both halves. The program has socialized the retirement of Americans, making most seniors dependent on the federal government for their livelihood: Two-thirds of beneficiaries now depend on Social Security for more than 50% of their income—a fact routinely exploited by demagogic Democratic politicians. Benefits for current retirees are paid out of taxes paid by those still working. When the system was founded, there were 42 working taxpayers for every beneficiary. Now, there are 3.3. In 2031, there will be 2.1.
Cost: Social Security took in $657.7 billion in taxes in 2004 and paid out $501.6 billion in benefits. Congress and the administration spent the $156.1 billion surplus on other things. The Government Accountability Office (GAO) says Social Security faces $3.7 trillion in unfunded liabilities over the next 75 years.
Constitutional provision: A Social Security spokeswoman pointed to the Social Security Handbook on the Social Security Administration website, and said, “It’s not going to relate to the Constitution, but it’s going to give you an overview of the history of the Social Security Act.”
Started When: 1965
By Whom: President Lyndon Johnson and a Democrat Congress.
Why: To provide federally funded health insurance to seniors.
What it does: The government imposes a 2.9% Medicare tax on all income earned by American workers. Half is paid directly by the worker; the other half is paid by the employer. Self-employed people pay the entire 2.9%. In return, the government provides seniors with hospital insurance, or Medicare Part A, which pays for hospital and hospice care. Also, for a modest premium, seniors receive supplementary medical insurance, or Medicare Part B, which pays physicians’ fees and outpatient care. President Bush’s Medicare prescription drug plan, or Medicare Part D, will begin next year (see Hall of Shame). These programs have socialized health care for seniors, making seniors dependent on the government not only for their income, but also for their medical coverage. Medicare now covers 41 million people.
Cost: Medicare spent $309 billion in 2004. Premiums cover only 25% of the cost of Medicare Part B. The other 75% is paid from general federal revenues. The GAO says Medicare faces $27.8 trillion in unfunded liabilities over the next 75 years.
Constitutional provision: Medicare spokesman Don McLeod said, “I don’t know that issue.”
4. Tax Withholding
Started when: 1935 and 1943
By whom: President Franklin Roosevelt and a Democrat Congress.
Why: After imposing a “Victory Tax” of 5% on all incomes over $624 in 1942, thus vastly expanding the number of Americans who owed income taxes, Roosevelt and Congress enacted the Current Tax Payment Act in 1943 because they feared that low- and middle-income workers might not pay the new tax unless it was withheld from their wages. The Social Security Act of 1935 had already provided for withholding of Social Security taxes, paving the way for withholding of income taxes.
What it does: Tax withholding compels employers to withhold income and payroll taxes from workers’ paychecks and pay the money directly to the federal government each quarter before tax returns are actually filed. It allows the government to extract far more revenue from workers than would be politically tenable if workers paid the tax directly. In a study for the Cato Institute, Charlotte Twight notes: “[W]ithholding is the paramount administrative mechanism enabling the federal government to collect, without significant protest, sufficient private resources to fund a vastly expanded welfare state.”
Cost: According to the Congressional Budget Office, Americans will pay $1.689 trillion in personal income and payroll taxes this year—much of it withheld from paychecks by employers.
Constitutional provision: 16th Amendment, by extension.
Started when: 1965
By whom: President Johnson and a Democrat Congress.
Why: To pay health-care expenses of poor people.
What it does: Medicaid is a joint federal-state program that pays for health care for poor people. The federal government mandates that states include certain categories of people in the program and provide certain services. The states are free to expand the categories of people and services subsidized. Forty-six million people are now on Medicaid. The massive number of Americans in the combined Medicare and Medicaid programs, and the massive amount of tax dollars spent on these programs, means that a large segment of the U.S. health-care industry is already socialized. This gives the federal government tremendous leverage over health care in general, affecting the choices and freedom of Americans in and out of the programs.
Cost: In fiscal 2006, Medicaid is expected to cost the federal government $193 billion and the states $145 billion. Costs are exploding. “Over the next 10 years,” HHS Secretary Mike Leavitt told the House Committee on Energy and Commerce, “American taxpayers will spend nearly $5 trillion dollars on Medicaid in combined state and federal spending.”
Constitutional provision: “Congress adopted a new title to the Social Security Act—Title XIX—and within that title created the Medicaid program,” Medicaid spokeswoman Mary Kahn said. “That’s its authority.”
6. Endangered Species Act
Started when: 1973
By whom: President Richard Nixon and a Democrat Congress.
Why: To protect and restore animal and plant species deemed “threatened or endangered.”
What it does: The ESA empowers the U.S. Fish and Wildlife Service and the National Marine Fisheries Service to determine that a species is threatened or endangered, to determine the “critical habitat” necessary for the survival of the species, and to make regulations to protect the species in that habitat, even if it is privately owned. It also allows individuals to sue the federal government to force it to take action to protect a species. The law has been used by environmentalists in their efforts to stop development and economically fruitful activity in vast stretches of the West.
Cost: In a 2003 report, the FWS estimated that it cost $610 million in federal and state expenditures in 2000 to enforce ESA. “The true costs are probably four times that—not in the millions, but in the billions,” reports the Property and Environmental Research Center (PERC).
Constitutional provision: Article 1, Section 8, Clause 3, which gives Congress the power “[t]o regulate Commerce … among the several States,” has been used in federal court to justify ESA—even when the species in question lives in only one state.
7. Bilingual Education Grants
Started when: 1968
By whom: President Johnson and a Democrat Congress approved the Bilingual Education Act, which was updated by President Bush and a Republican Congress in 2001, becoming the Office of English Language Acquisition under the No Child Left Behind Act.
Why: To teach non-English speakers in their non-English language, while trying to teach them English.
What it does: Provides grants by formula to states for teaching “limited English proficient” (LEP) students. A March 16, 2005, Department of Education press release noted: “Title III [of the No Child Left Behind Act] does not endorse or promote any specific type of language education program for LEP students, and states have the choice to use ESL [English as a second language] or bilingual programs.” The release reported that 40 states receiving grants under the program use “some type of bilingual program in addition to their English as a second language programs.” Bilingual education works against the American “melting pot.” In 1998, before California voters approved Prop. 227, which bans bilingual education in public schools unless parents request a waver to enroll their children in bilingual classes, Alan Ebenstein, a member of the Santa Barbara Board of Education, reported in the Los Angeles Times: “This school year, 8.5% of Latino kindergarteners in Santa Barbara schools were not born in the United States, yet approximately 85% of Latino kindergarteners are receiving most of their instruction in Spanish.”
Cost: In fiscal 2005, Congress appropriated $681 million for the English Language Acquisition program.
Constitutional provision: Ethan Allen, executive officer in the Office of English Language Acquisition, said he did not know.
8. Title X Family Planning Funding
Started when: 1970
By whom: President Nixon signed a law co-sponsored by then-Rep. George H.W. Bush that had passed a Democrat Congress.
Why: To fund clinics to distribute and promote contraceptives and, as Planned Parenthood puts it, “reproductive health care services.”
What it does: “In 2001,” says Planned Parenthood, “approximately 4,400 clinics, located in nearly three-quarters (73%) of all counties, provided family planning services funded by Title X. Of the 4.7 million women served by these clinics, 43% received care at health departments, 33% received care at Planned Parenthood health centers, 13% received care at other independent community-based clinics, 7% received care at hospitals, and 4% received care at community or migrant health centers.” Thanks to the Supreme Court’s 1977 decision in Carey v. Population Services International, these clinics can give contraceptives to children under 16. “As a result of this court decision,” says Planned Parenthood, “clinics supported by Title X funds have traditionally served adolescents on a confidential basis.” The law says Title X funding cannot be used for abortion. However, Planned Parenthood, a major recipient of Title X funding, is also a major abortion provider.
Cost: Title X funding grew from $6 million in fiscal 1971 to $288 million in fiscal 2005.
Constitutional provision: “[I]t is a judicial issue, which is not addressed by the Office of Population Affairs,” said spokeswoman Jeannine Nielson.
9. Corporation for Public Broadcasting
Started when: 1967
By whom: President Johnson and a Democrat Congress.
Why: The Public Broadcasting Act of 1967 was designed to subsidize the growth of “noncommercial educational radio and television broadcasting” by creating the independent, non-profit, but federally funded Corporation for Public Broadcasting.
What it does: The CPB funds public TV and radio programs and public TV and radio stations. In 1969, CPB created the Public Broadcasting Service (PBS) to distribute CPB-produced TV shows. In 1970, it created National Public Radio (NPR) to distribute CPB-produced radio shows. CPB’s mission statement says it “has a particular responsibility to encourage the development of programming that involves creative risks and that addresses the needs of unserved and underserved audiences, particularly children and minorities.” Translation: It funds programming with a liberal bias. Meanwhile, for-profit cable and satellite TV services now routinely offer their customers a choice of more than 100 free-market TV channels.
Cost: In fiscal 2005, Congress appropriated $390 million for CPB.
Constitutional provision: CPB spokesman Eben Peck said: “That’s a bigger question than I’m able to answer. You could probably ask the same question about any department or agency in the federal government.”
10. Sugar Import Quotas and Subsidies
Started when: 2002
By whom: Since 1789, there have been many federal laws and trade agreements governing the protection of the sugar industry. The most recent are the Uruguay Round of the General Agreement on Tariffs and Trade, the North American Free Trade Agreement and the Farm Act of 2002.
Why: To increase the price of domestic sugar.
What it does: The federal sugar program has two prongs: Tariff-rate quotas impose a high tariff on sugar imported into the country over set quotas, and a federal loan program props up the price of domestically grown sugar.
Cost: According to GAO, Americans pay $1.9 billion annually in higher costs for sugar and products containing sugar because of the federal programs. “The only protection provided by the sugar program has been to a handful of wealthy sugar barons,” reports Citizens Against Government Waste. “Less than 1% (17 cane sugar growers) of the nation’s sugar growers gobble up 58% of the program benefits. In fact, one grower alone received $65 million. Contrary to popular rhetoric, these are not small family farmers. Rather, they are wealthy members of the sugar cartel, which pumps millions of dollars into congressional campaigns to protect their precious subsidy.”
Constitutional provision: Article 1, Section 8, Clause 3 gives Congress power: “To regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes.”
Hall of Shame
This is the third annual Human Events report on the Ten Most Harmful Government Programs. The program elected No. 1 by our judges each year is enrolled the following year in our government-program Hall of Shame. Programs enshrined in the Hall of Shame are no longer eligible for election to the Top 10 list.
2004—Medicare Prescription Drug Plan
The Medicare prescription drug plan, or Medicare Part D, was enacted by a Republican Congress at the request of Republican President George W. Bush in 2003. It goes into effect next year and will cover most of the cost of drugs for seniors on Medicare. Medicare’s trustees have determined the cost of this program to be $8.1 trillion over the next 75 years.
2003—Legal Services Corporation
The LSC was enacted by a Democrat Congress in 1974 and signed into law by Republican President Richard Nixon. It hands out grants to leftist lawyers to fund ideological lawsuits. Grantees have sued to keep criminals from being evicted from public housing, to help illegal immigrants get government benefits and to throw out ballots of military personnel. President Bush is requesting a budget of $363,809,000 for LSC for fiscal 2006, an increase of $33 million over this year.
These programs were nominated by at least one judge and received votes from at least two.
Title IX (banning discrimination by sex in education programs, including athletics)
Agency for International Development (foreign aid)
Equal Employment Opportunity Commission
NIH funding of human embryonic stem cell research
National Endowment for the Arts
Commodity Credit Corporation (agricultural export subsidies)
Federal hate crimes law
Federal privileges for Fannie Mae and Freddie Mac
Violence Against Women Act
U.S. Postal Service
Food and Drug Administration
World Bank participation
No Child Left Behind Act
Bureau of Indian Affairs
Corporate Average Fuel Economy Standards (CAFE)
Ethanol subsidies and mandates
“Comprehensive sex ed” funding, promoting contraception
Bureau of Alcohol, Tobacco and Firearms
Diversity Visa Program
Americans with Disabilities Act
Fourth preference category for family-based immigration (allowing siblings of adult citizens to immigrate)
Health Insurance Tax Exclusion
Affordable Housing Program
Section 8 housing vouchers
Superfund (of the Environment Protection Agency)
National Endowment for Democracy
Federal gas tax
BAM! Body and Mind (CDC website for 9-13 year olds)
Civil Service Retirement System
Small Business Administration
Advanced Technology Program (Department of Commerce)
Drug Enforcement Administration
Child support requirements for non-welfare families
Community Development Block Grants
International Monetary Fund participation
Recommended “routine and comprehensive” mental health screening of children
Economic Development Administration
Federal Trade Commission
National Endowment for the Humanities
Corporation for National & Community Service (AmeriCorps and Senior Corps)
NIH funding of sex studies
Transportation Security Administration
Supplementary Security Income
Overseas Private Investment Corporation