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A recent proposal from the Biden administration has called for the Internal Revenue Service to have more direct access to the bank accounts of Americans. Many of the leaders on both sides of the aisle in Washington have advocated for data privacy. Yet, this proposal has a hidden technological danger as it threatens the data privacy and protection of Americans’ bank accounts.

In the backlash against the proposal that certain American bank account information be reported directly to the IRS, much of the opposition to the proposal has centered around the danger of federal agents utilizing bank data to put Americans under financial surveillance. All of these concerns are well-grounded and legitimate. However, it is important to also consider that having sensitive bank account data centralized under one government agency carries an enormous cybersecurity risk.

Despite the claims that the proposed concept would help curb tax fraud, there has been no widely circulated data on how much it would cost the IRS to protect the data adequately. Worse yet, no analysis has been conducted on the enormous financial damage that taxpayers could face in the event of a catastrophic data breach.

The IRS has been a target of hackers for decades. However, a new influx of data in this level provides many more entry points and for hackers and a greater incentive for hacking operations to occur. There are multiple angles to consider this from.

Centralized bank account data would be a high-value target for hackers

In the first place, the IRS possessing a centralized repository of American bank account data would invite hackers' operations. Even though the proposal has not yet fully specified the exact type of bank account data that would be included, there would still be a danger. The advocates for this policy have insisted that the bank account data being gathered would be fairly limited. Yet, even the smallest amount of bank account information can be leveraged by hackers.

For instance, a hacker might get something as basic as a list of bank account numbers, the total amount of annual funds for each account, and the email addresses associated with the accounts. Then, the hacker could use this information to go after specific targets such as high-value bank account owners, retirees and elderly, and other particular victims with spear-phishing campaigns, spoofing, and additional attack methods.

These hackers could come from two primary sectors, foreign government-sponsored attacks, and criminal cybergangs. Although these entities utilize stolen data for different purposes, the danger is the same.

Government-sponsored attacks to get bank account information would carry several incentives for foreign governments. Foreign intelligence agencies can use hacking as a data harvesting method and then use that broad information to hone in on specific individuals. In the context of bank account data, simply having a confirmation of which business, political, and military leaders own specific bank accounts could serve as a precursor to initiate hacking operations against the bank itself in order to get more detailed information on specific individuals. In addition to intelligence, government-sponsored hackers could also potentially use this information in attempts to steal from the bank accounts themselves.

Non-government cybergangs would also have many uses for a centralized repository of IRS bank account data. While foreign government hackers often have a focus on gathering data for intelligence purposes, organized cybercrime primarily focuses on financial incentives. If they got access to this IRS bank account data, hackers could use this to single out potential victims with high-value accounts. Furthermore, by knowing where potential victims have bank accounts, hackers can use additional methods, such as installing fake banking apps made to look like the victim’s home bank.

Government agencies have a history of data breaches

Even if an organization has a perfect track record of cybersecurity with no major incidents, there is still always the possibility that a breach will occur. Yet, the federal government does not even remotely have such a track record. It is also notable that while different agencies have fared differently, the IRS has become especially notorious for a track of record filled with data breaches and compromises.

 According to a Government Accountability Office (GAO) report, in 2016 the IRS encountered $12.2 billion in attempted identity theft tax fraud and paid out at least 1.6 billion in fraudulent refunds. This is a 13 percent fail rate. The report also found that the IRS had not followed best practices for cybersecurity. If the IRS cannot even always determine that they are issuing a refund to the right person, there is little reason to think that bank account data would be protected from fraudsters.

Yet, it is also important to recognize that the IRS is not in a siloed cyber-ecosystem with data sharing that is exempt from the generalized attacks that have targeted multiple agencies across the federal government. Current federal law explicitly permits the IRS to share data with federal, state, and local agencies for a variety of purposes, and it has been doing so for years. In effect, this means that no matter how strict the IRS cybersecurity standards were, there would always be a possibility that another government agency could have a data breach, and jeopardize the shared IRS bank account data.

For instance, in the recent and massive SolarWinds hack, the federal government saw data compromises across numerous agencies and departments. These entities included the Bureau of Labor Statistics, the Department of the Treasury, the National Finance Center, and several others. Thus, even though the IRS claims that it was not affected by the SolarWinds hack, this does not mean that taxpayer data in possession of these other agencies remained secure.

The potential for third-party backdoors

The GAO report also determined that one of the primary security flaws in the system was the policies of the IRS that permitted third-party software to submit and extract data with a lack of adequate cyber oversight. Specifically, the report found that much of the third-party tax preparation software had critical flaws that could lead to data compromises.

If the IRS required banks to report their account data, additional third-party software would likely be introduced into the IRS technology ecosystem in order to deal with the sheer volume of bank data. If the IRS had multiple third-party data reporters approved for integration with its system, each reporting software would stand as potential security fail point. 

The broader effects of this would be twofold. On the one hand, if the IRS was too lax in its security compliance requirements, there would be a higher likelihood of taxpayer bank account data breaches. On the other hand, if the IRS implements extremely stringent cybersecurity compliance mandates, there could be an increased cost to the banks themselves and the third-party data reporting software developers.

Government financial monitoring of citizens has principle issues and technical dangers

It goes against the most basic American principles of limited government and due process for the IRS to presumptively monitor the bank accounts of citizens. Given that the entire policy proposal is based upon a faulty foundation, it comes as little surprise that the proposal carries extreme technological and security risks as well. Americans should be able to have confidence that their private bank account information will not be centralized in the hands of a government agency with a history of leaking data.

When it is shown that a policy is good and effective, it is often necessary to branch out that policy to other areas that need it. For more than five years in Mississippi, the state has benefited from Educational Savings Accounts program. However, despite existing for so long and having shown to be beneficial, only a very small portion of students are eligible. Mississippi should revisit and expand this program.

An Education Savings Account assesses the funds that the state has already allocated to each student. Then, the fund allows that student’s parents to use those funds for sanctioned educational costs such as private school tuition, online learning programs, and private tutoring. Conventional education funding models apportion taxpayer dollars to the exclusive control of government education boards and bureaucrats. On the other hand, ESAs allow parents to choose the best way to use their child’s public education funds, if they decide to use it outside of public school administration.

However, across the United States, Educational Savings Accounts have been implemented differently, bringing various results. As it stands currently, there are eight states that have implemented Educational Savings Accounts into their educational systems: Arizona, Florida, Indiana, New Hampshire, North Carolina, Tennessee, West Virginia, and Mississippi. States such as Indiana have broadened the eligibility of their Educational Savings Accounts program to a need-based system for students. Other states like Mississippi have limited eligibility only to those students with special needs.

Mississippi has certainly taken the right steps in providing this opportunity for students with special needs. However, broadening the eligibility for Educational Savings Accounts would give more students these alternative education options. Despite Mississippi’s Educational Savings Accounts program existing for more than five years, it still only makes up for about 0.06 percent of the state’s K-12 revenue. Additionally, only 19 percent of Mississippi students are eligible for the program, and only 0.1 percent of students across the state actually use this educational choice program.

In Mississippi, the problem goes beyond merely increasing awareness. Instead, the Educational Savings Account program in Mississippi is limited to only a small group of students. Mississippi would do well to expand the program, as other states have done.

For instance, in addition to providing accounts to special needs students, Arizona has expanded its program eligibility. This expansion now applies to those who attended a “D” or “F” ranked school, have been adopted in the state’s foster care system, and those whose parents were killed in the line of duty. This has aided a little less than a quarter of Arizona students, and the program continues to grow.

In West Virginia, the state has expanded its ESA eligibility to 93 percent of its student population. This policy has given West Virginian students and parents the ability to determine where their allocated education funding will go instead of leaving those decisions exclusively in the power of education school boards and bureaucrats. Students can attend public schools if they opt to do so, but the funds follow the student if they decide to pursue other educational options.

Mississippi has taken good steps in providing school choice to its students, but the policy is too limited in scope to be more than five years old. Expanding Education Savings Account eligibility would give Mississippi parents the choice to decide where their student’s education funding should best be spent.

Due to a decreased demand in light of the Covid pandemic and stay-at-home orders, the price at the pump in 2020 was artificially low since fuel was in relatively low demand. Yet, as the economy moves forward, gas prices have skyrocketed to extremely high levels. Despite these factors, some federal and state leaders have advocated for an increase in the gas tax.

As the economy continues to move forward, the demand for fuel has gone up. According to the Energy Information Administration, the average gasoline cost per gallon in the Gulf Coast states has gone from $1.85 in October 2020, to $2.95 in October 2021. This reflects an increase of 59 percent in just 12 months. Fundamentally, the cost of gasoline directly influences economic activity, particularly on the level of consumer spending.

Despite the market forces that are already driving up the costs of gasoline, some have advocated for an increase in the state and federal gas tax on top of these high gasoline costs. The key argument made for such proposals is the claim that tax increases are needed to increase funding for roads and bridges. However, the quantifiable benefits of increasing funding by raising taxes are questionable when one considers the fact that large amounts of funding have been allocated and then mismanaged.   

While an increase on the gas tax might be easier to propose in the midst of low-cost fuel, the recent increases in fuel cost have demonstrated just how much of an impact permanent gas tax increases could have. An understanding of the effect of the gas tax on consumer spending provides some insight into this issue. Tax areas such as the corporate and personal income tax rates have a more general impact on economic growth and spending. On the other hand, the price of gasoline and its accompanying taxes directly correlate to consumer spending and economic activity.

A study conducted by JP Morgan and Chase compared consumer spending trends from periods with high fuel costs to periods with low fuel costs. This analysis determined that for every $1 saved at the gas pump, consumers saved 20 cents and spent the remaining 80 cents directly in the economy. In addition, the study found that approximately 18 percent of the increased consumer spending went to restaurants, 10 percent went to groceries, and the remaining spending was distributed across several other sectors.

All of these economic growth factors carry a strong argument against any increase in the gas tax. On the federal level, there have been proposals to raise the gas tax from 18 cents to 33 cents. On the state level, there have been proposals to raise the gas tax from 18 cents to 28 cents. This would equate to a 25-cent increase per gallon on just fuel taxes.

According to the Mississippi Department of Revenue, the state economy used approximately 4.3 billion gallons of gasoline in the 2020 fiscal year. 2.6 billion gallons were exempt from taxation, mostly due to a policy that government gasoline use is exempt from taxation. This left 1.6 billion gallons of gasoline to be taxed in the state. The gas tax proposals mentioned above would have both caused an approximate $400 million increase in the tax burden on Mississippians. Using the JP Morgan consumer spending metrics mentioned above, this tax-driven increase in gas prices could equate to $72 million in unrealized consumer spending at restaurants, $40 million for grocery stores, and $208 million in the remaining sectors.

Increasing taxes must always be compared against the economic impact of the tax increase. Rather than using gas tax increases to bring more funding to Mississippi’s roads, state leaders should encourage free-market economic growth by leaving more money in Mississippi pockets. As economic activity increases, the state’s citizens and government can go into a better economic position without increasing the tax burden.

The Chinese government recently clamped down on cryptocurrencies. Owning or brokering Bitcoin is now frowned upon, and mining digital money has been outlawed all together.

This isn’t the first time that China has acted to keep out digital innovation. For years, China has blocked her citizens from using many of the social media platforms and search engines – Facebook, Google, Twitter – that are ubiquitous elsewhere. 

The actions of the Chinese government might impact these digital innovations in the short terms. But in the longer term, the behavior of the Chinese government does more to hinder China.

Following the move against cryptocurrency, the price of Bitcoin plunged. But, as of writing this, Bitcoin has bounced back. China might have developed her own indigenous alternative to Google and Facebook. Like all state approved monopolies, China’s clunky social media giants might not find it as necessary to innovate.

China has a long history of keeping innovation out. Whatever effect this might have had on the outside world, it ensured China fell behind. I suspect we are seeing the start of something similar today.

From the late 1970s until about 2015, China seemed to have escaped her authoritarian trap. Under Deng Xiaoping, Chinese rulers placed limits on their own authority. The politburo stopped trying to run everything, turning a blind eye when farmers gradually abandoned collectivized farming. China began to grow. 

For three fleeting decades, maritime provinces were given more autonomy and special economic zones allowed to decide their own rules. After 1997, with Hong Kong once again Chinese, there were even two distinctive legal systems. Chinese output soared. 

But under President Xi many of these reforms have been reversed. Hong Kong’s autonomy has been treated as an affront and eradicated. Deng’s term limits have been cast aside. Officials in Beijing have become increasingly interventionist and authoritarian.

This same mindset has now been applied to cryptocurrencies. Rather than let crypto develop, the Chinese state seems determined to nationalize the innovation, introducing a state digital ledger, and banning the non-state alternatives. 

In the manner of a Medieval monarch, China’s government is becoming increasingly hostile towards its own entrepreneurs, as Jack Ma and co have discovered. As often happens when you attack the wealth creators, you begin to get less wealth creation. 

For as long as anyone can remember, we have been told that China is the coming power. China would, it was often said, eclipse America and the West. I doubt it. 

China seems to me to be in a trap of her own making. Far from being the Chinese century, I suspect future historians writing about the early twenty first century will note how China under Xi cut herself off from outside innovation and fell behind.  

China might not be the rising power we once imagined. I am not sure that that makes her any less dangerous. Wannabe great powers that aren’t quite as powerful as they would like to be are often far more threatening to the international order than those that actually are.

On practically every level, America has been a shining display of freedom and prosperity. According to the vision of its Founders, the nation has shined as a beacon of hope to a world full of tyranny and hardship. Despite these successes, America’s legacy has been under attack over the last several years.

With a focus on the failures of an imperfect but inspiring history, revisionist historians have attempted to paint the nation as a society that was ultimately built on oppression and evil. Yet, such claims do not hold validity when you look at the track record of the country.

In 1630, the world was filled with empires and monarchs. In Europe, several wars overwhelmed a continent plagued by imperial rivalries. The Ottoman Empire stretched from Turkey to Sudan with the rule of an iron fist. Spain and Portugal imposed a reign of terror over Latin America. The nations existed for their rulers. Meanwhile, far from the centers of world activity, a few dozen settlers quietly sailed up the Charles River into Massachusetts, led by John Winthrop. With a vision for a righteous society of liberty and justice, Winthrop proclaimed his aim that the settlement they established be a “city on a hill” and that “the eyes of all people are upon us.”

That settlement would become the city of Boston. One hundred forty-five years later, the War for Independence would begin 10 miles away with “the shot heard around the world.” In the wake of American victory and the founding of the nation, 245 years of history have shown that America has indeed been a “city on a hill” placed prominently in the view of the whole world.

In January 1989, President Ronald Reagan spoke of America in his farewell address as a “city on a hill.” True to its legacy, America had recently stood up to the might of the Soviet Union and led the free world in the fight to preserve freedom from the tentacles of Communism. Less than a year after Reagan’s farewell address, the Berlin Wall came down in November 1989. By 1992, the Soviet Union itself had collapsed and America still stood as “the shining city.”

The year is now 2021 and most of the tyrannical regimes of the last 245 years have been resigned to the dust bin of history. Direct assaults on Winthrop and Reagan’s shining city have all proved to be futile. But the enemies of liberty have not yet given up.

Instead of trying again to attack the shining city directly, new ideologies have instead questioned whether the shining city ever existed in the first place. Defining America as a nation of racism, oppression, and subjugation, this revisionist history threatens the very foundation of America through philosophies such as Critical Race Theory. The opponents of liberty know that the only way the nation can ever lose its exceptional legacy is by the destruction of its history. This is why so many advocate for the deconstruction of history.

The fact that America has truly been “a city on a hill” stands firm. The success of the nation refutes any claims to the contrary. The nation that is called “the land of opportunity,” the nation that countless scores have built their lives in, the nation that has stood for freedom of religion and speech, this country’s historical legacy cannot be changed.

Yet, this legacy can only continue if America looks back to the foundations of former days. Americans must teach their history so that future generations can know the nation’s exceptional story. Efforts must be made to push back against the revisionism of those who assault the nation’s legacy as a city on a hill. The future of the nation depends on it.   

One only has to turn on the television to see that the federal government has, in effect, completely engulfed state and local government. When a problem arises, many individuals no longer consider how state government will remedy the situation

The burden of governance has shifted to the federal government in many aspects. Part of the reason for this is that the federal government has grown beyond comprehension in the last 150 years.

One area in which this is evident is the growth of spending between federal, state, and local governments. According to the Tax Policy Center, the amount of spending by the federal government has greatly surpassed any other category of spending. The report showed that federal receipts in 2018 totaled over $3.5 trillion, which greatly surpasses the states’ $1.8 trillion and local government’s $1.4 trillion. This is a huge transition from federal spending never rising above several billion dollars in the early 1900s.

Why does this occur? Part of the reason for this change between state and federal budgets is that the federal government wields monetary power that the state does not have. When the federal government sees a problem, it is not restricted by budgetary restrictions. All it needs to do is just print more money or borrow from some other entity. This was clearly done in the COVID-19 pandemic.

States do not have this luxury. Because the United States cannot have 50 different currencies, printing power is reserved for the federal government. This means that state budgets are limited to the amount they can obtain through revenue. This creates several effects. For one, because state budgets are limited in funding, more time and effort is made in debating where to appropriate funds. The second effect is that the amount that is appropriated is already minimal and thus will not have the same capacity to create long-lasting change.

It's no wonder the federal government has increased in size and overshadowed state action. Federal funding is virtually unlimited, and thus less time and effort is needed to pass the budget. In fact, detailed budgets are no longer necessary on a federal level due to the inception of bureaucracy and shifting the burden of responsibility on executive agencies. The federal government has, in essence, taken the role of state governments as they now dictate where the majority of government money, in general, will be spent and appropriated. This is a problem.

As difficult as it might be, decreasing reliance on federal action is incredibly important if state governments want to maintain their autonomy. A big part of that can be done by boosting the economy. If the economy grows and flourishes, more money can be gleaned through state revenue. This may provide an outlet for states to take hold of their own problems and diminish the federal government's role in their own affairs. Ironically, it is typically the states that struggle economically that rely more on federal aid. State solutions are always preferred. It would be best to find more solutions to get federal action out of state affairs and back into its own domain.

Many across the state have advocated for the expansion of Medicaid with assertions that the state will “come out better” with expansion than without it. Despite these assertations, it is important to remember that while the federal government provides a match to state funds, it is ultimately the state that foots the bill.

Medicaid is a joint state and federally funded program initially created to provide government health care for limited portion of the population. With the passage of the Affordable Care Act, better known as “ObamaCare” the states were given the option to further expand eligibility for their Medicaid programs and have that expansion “matched” by the federal government.

Mississippi has wisely opted not to expand Medicaid. The federal government matches Medicaid expansion, but it is ultimately the responsibility of the state to pay a portion of the costs of the program. Time and time again, Medicaid expansion is pitched as “free money” from the coffers of Washington, but this money is not free.  

In the midst of the debates surrounding matching rates, federal funding, and expansion enrollment projections, many often forget Medicaid expansion's influence on increasing private health insurance costs. This would only be heightened in the event of Medicaid expansion.

Since Medicaid reimbursement rates are often much lower than private-sector rates, many doctors then pass on the extra costs by charging even more for private sector insurance. These extra costs lead to higher premiums for private health insurance. In turn, more individuals leave private health insurance and go to “cheaper” government programs like Medicaid. This cycle repeats, and the more people that leave private health insurance, the more expensive it becomes as doctors try to recuperate costs through the private sector. This coincides with an analysis conducted by the Heritage Foundation on an Ohio Medicaid expansion proposal.

Many new Medicaid enrollees would also find that doctors are less likely to accept Medicaid than the private coverage the enrollee might have had. In a study done by the Medicaid and CHIP Payment and Access Commission (MACPAC), the data concluded that as little as 66 percent of doctors accepted Medicaid in many states.

Thus, rather than expanding healthcare access, Medicaid expansion could actually cut down healthcare access as more and more individuals are forced to move to coverage that is not as widely accepted as private insurance. Despite this lower-quality health insurance, many individuals would have little choice in their leaving private health insurance due to the inflated premiums that would be influenced by Medicaid expansion in the first place.

When considering the question of Medicaid expansion, state leaders should take more into account than just the raw numbers that determine how much “free money” would come to Mississippi through Medicaid. Even if the Mississippi government “came out better” on a short-term basis, the long-term effects of government expansion ultimately interfere with the private sector and increase the cost of health insurance.

Critical race theory is a deeply divisive ideology that threatens to tear America apart. It demands that we stop seeing fellow Americans as individuals, and instead regard them in terms of racial identity. It is a rejection of the principle that all of us are created equally.

While lots has been said about critical race theory in more progressive parts of America, it is often assumed that in supposedly conservative states like Mississippi, this extremist agenda does not exist.

Unfortunately, this is not the case. This Marxist-like ideology is being taught in Mississippi’s educational system.

According to our report, Combating Critical Race Theory in Mississippi, the Mississippi Department of Education suggests teachers make use of professional development programs provided by organizations such as the Zinn Education Project and Facing Ourselves & History. Both these organizations promote radical ideas associated with Critical Race Theory. The Zinn Project even advocates for the abolition of Columbus Day and for the payment of reparations for African Americans.

Critical race theory is even more explicitly promoted at college level. Universities in our state are not only administered in accordance with critical race theory, but it also impacts what students are taught. 

Mississippi State’s English Department website refers to “systemic racism” perpetuating “white supremacy” in America. It demands “structural change” to achieve “racial justice.”[1] The department goes on to explain how it has “begun re-envisioning our curriculum to address its emphasis on white authors and literary traditions” and how it is responding to the fact that the “demographics and dynamics” of the department are those of a “Predominantly White Institution (PWI).”

The University of Mississippi’s Department of Writing and Rhetoric teaches courses that explore “how whiteness is constructed.” There, students analyze “whiteness as it has evolved over time” and consider the relationship between white identity and “white nationalism, white supremacy, white privilege and whiteness.”

One of the reasons why many Mississippians are unaware of the extent to which critical race theory is being taught is the fact that those who promote this agenda seldom characterize what they are teaching as being "critical race theory." Often, they will reject the term entirely.

This means that we need to look beyond the label and better understand what it is that educators are actually teaching.

In our report, we identify some of the underlying ideas behind this ideology. 

We then go on to recommend a series of practical steps that can be taken to tackle critical race theory. 

You can read our full study and recommendations to Mississippi leaders HERE.

[1] https://www.english.msstate.edu/news/mississippi-state-department-english-statement-protest-against-racism-and-police-violence/

FOR IMMEDIATE RELEASE

(Jackson, MS): Critical race theory is being taught and promoted in Mississippi, according to a new report out today from the Mississippi Center for Public Policy.

The report defines critical race theory as an ideology that maintains the United States is founded on racial supremacy and oppression. 

The report shows that critical race theory is a Marxist-like belief system. While conventional Marxists divide society between the oppressors and the oppressed, critical race theorists have replaced the class categories of bourgeoisie and proletariat with the identity categories of white and black. 

“This makes critical race theory a deeply divisive ideology, as well as an extremist one,” explains Douglas Carswell, President & CEO of the Mississippi Center for Public Policy. “Critical race theory ultimately seeks to overthrow the existing economic and political order and fundamentally change America.”

Today’s report reveals that:

“For all the assurances that critical race theory is not being taught in Mississippi, when you look at the evidence, it clearly is” added Carswell. “Mississippians need to know that a deeply dangerous and divisive ideology is being advanced through our public education institutions. Mississippi leaders need to take action to combat this.”

Today’s report sets out a six point plan to combat critical race theory. Included in the report’s recommendations are:

Read the full report HERE.


For more information or to request an interview with Mississippi Center For Public Policy President Douglas Carswell, please reach out to Stone Clanton, clanton@mspolicy.

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