Home > Uncategorized > Defunding the IRS is a bonanza for rich tax cheats – posted 1/15/2023

Defunding the IRS is a bonanza for rich tax cheats – posted 1/15/2023

One of the first acts of the new Congress was a House Republican effort to rescind Internal Revenue Service funding. Under President Biden’s Inflation Reduction Act, Democrats directed almost $80 billion to the IRS over ten years. The Congressional Budget Office estimated that this investment would net $200 billion additional revenue through the decade.

Republicans have demagogued the tax issue by making entirely false claims about the IRS funding. To quote House Speaker Kevin McCarthy: “Do you make $75,000 or less? Democrats’ new army of 87,000 IRS agents will be coming for you”. The message has been endlessly repeated by the FOX echo chamber.

All I can say is that as with so much in life, it depends what you look at. The charge that there will be 87,000 IRS agents running amok is entirely wrong. Over the last decade, the IRS lost 17,000 workers, The agency is desperately in need of IT technicians and improved technology. It also needs more taxpayer services support staff just to answer questions from the public as well as experienced auditors for corporate and high income tax evaders.

With the new funding, the great majority of IRS hires won’t be IRS agents. The unleashed 87,000 IRS agents scare is false framing. Former IRS Commissioner, Charles Rettig, a Trump appointee, has said that our country is losing a trillion dollars a year because the IRS has lacked needed resources. By far the most unpaid taxes are a result of tax evasion by the super-wealthy and large corporations.

Natasha Sarin of the Treasury Department, describing the new IRS funding, told Time Magazine:

“It is wholly inaccurate to describe any of these resources as being about increasing audit scrutiny of the middle class or small business.”

The image of an out-of-control federal agency menacing everyday Americans is another fake conspiracy theory that has long been peddled by the far right. The Republicans adopted it.

In truth, the IRS over the last decade has been reduced to a toothless tiger. Propublica has described a gutted IRS. Understaffed and working with outdated equipment, the IRS has not even gone after many wealthy tax cheaters who failed to file returns or who consciously or unintentionally misreport. The process of IRS weakening has been a death by thousand cuts rather than one dramatic layoff.

Particularly worrisome is the likely retirement of a significant percentage of experienced IRS workers in the next five years. Contrary to any image Republicans have tried to create is the reality of a demoralized and understaffed federal agency. The real danger we face is an epidemic of tax cheating and a further collapse in tax compliance that would result in tens of billions in lost government revenue.

Between 2010-2018, audits of corporations with assets over $20 billion fell from 98% to 49.3%. During the same period, audits of people with annual income over $10 million fell from 18.4% to 6.7%. The super wealthy have almost entirely escaped scrutiny.

Part of the problem has been an IRS focus on lower wage earners allegedly cheating on the Earned Income Tax Credit. The other part is the reality the IRS has lacked and still lacks the resources to handle sophisticated and complex returns of high wealth filers and businesses. The IRS may be simply outgunned by the most expensive lawyers and tax experts the rich can buy to shelter their income. That makes it easier to focus on poor earners where you can seemingly show success.

In 2019, not more than 500 of the 25,000 households reporting income over $10 million were audited. That is 2%. Talk about a scandal. As David Cay Johnston has written people can cheat like crazy with no fear of consequence. The IRS crazily spent far more money auditing the working poor than the super-rich.

The American judiciary has a soft spot for white collar crime. Tax cheating by the super-rich is almost a national pastime and tax fraud prosecutions are rare. Take the example of Donald Trump . As the New York Times reported, Trump paid $750 in federal income taxes in 2016 and 2017. He paid zero income taxes in 10 of the 15 years from 2000- 2015 as well as in 2020.

According to the U.S. Bureau on Labor Statistics, the average American household paid $9,302 in federal income tax in 2018, on an average earnings figure of $78,635.

Does anyone smell a rat? How is it possible that self-described billionaire Trump pays far less taxes than the average American household ? Even if entirely fabricated, Trump said he is worth $10 billion. He has intimated that the fact he pays so little in taxes makes him a smart guy but as a former president, he sets a horrible example. If he were a mafia boss living by an ethic of plausible deniability his behavior would be understandable but his example only encourages more people to cheat on their taxes.

David Cay Johnston says that the IRS rarely audits someone like Trump because the audit won’t raise revenue immediately and that looks bad on IRS performance reports. Johnston notes until 1924 all income tax returns were public. Whether or not that is a good idea now, just that fact highlights the current lack of transparency.

The new GOP effort to defund the IRS is about throwing a bone to their super-rich donor class. Professor Jennifer Mercieca says Republican messaging is meant to obscure their taxation objectives. Mercieca says:

“Since they can’t come out and say that they want low taxes for the wealthy and corporations – or, relatedly they don’t want to fund the IRS – they instead claim that average Americans’ rights are in danger.”

Although the system was supposed to tax the rich at a higher rate that is not the way it has worked out. The highest earners, on average, pay far lower tax rates than everyday earners. The tax system worsens the gross economic inequality that screws the working class. The Republican ploy to defund the IRS serves only their super-rich masters.

Categories: Uncategorized
  1. steveacherry
    January 15, 2023 at 3:19 pm

    Right on bro

    Sent from my iPhone

  2. jlewandohotmailcom
    January 16, 2023 at 12:38 am

    Once again, you’ve laid it all out. The political and vulture capitalist clans have combined to form a thriving white-collar criminal class. Now the inbreeding is producing Gaetz/Bobert/MTJ/Santos offspring. Whether they fall of their own corruption or bring down the Constitution is to be determine.

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