Assuming the IRS is underfunded, saying they focus on low income people as a consequence, when it would be more lucrative to target high earners, makes no sense. The claims could all be true, but they don't appear to be connected.
Why would the total amount of funding force the IRS to spend less on individual cases? An alternative hypothesis might be that it actually is more cost effective to target people with less money, for instance, people paid mainly in cash tips, but I don't have any idea if that is plausible, I'm just saying the narrative doesn't make sense to me.
In general, targeting rich people seems obvious because rich people "have the money", but mathematically, it depends on how many there are when you multiply it out.
Anyway, I am very open to the idea that the IRS is being stupid and counterproductive, or politically avoiding prosecuting the rich, but I think it raises the question of "why" that is not answered by saying "underfunding". They still have funding to go after one or more high earners, right, so the total amount is irrelevant if it's taken as a given.
The IRS also sends the letters to people that they owe money. This year my accountant didn’t realize I was owed a credit. The IRS mailed me a check and a letter explaining why they adjusted my return and issued the credit.
It's hard to know where to draw the line but you could reasonably argue that chasing low income people for small amounts is net negative societal utility, even when you get them to pay up.
The thing that is often ignored, unknown, or forgotten, is that it doesn’t have to work this way. Some countries send you an end of year report on how much they collected from you and you can audit them as well. It’s less laborious than our system. I am blissfully unaware of the complications of such a system but I’d like to think that it works better. I’d like to think the people of the IRS would prefer that too.
They can't choose to spend more, knowing they will make it back.... they don't have the money to invest in going after rich tax payers. They can only spend the budget they are given, and that isn't enough to go after rich people, even if it would bring more money in.
I expected this was a big reason for the seemingly illogical behavior, but am curious how it shakes out. Where does money they recover go?
It would seem to make sense to seed a high income investigative unit, checked by the courts, and then allow them to retain a substantial portion of their recoveries to self-fund.
> It would seem to make sense to seed a high income investigative unit, checked by the courts, and then allow them to retain a substantial portion of their recoveries to self-fund.
For an example of how this could go horribly, horribly wrong, look at police use of civil forfeiture. https://www.nbcnews.com/think/opinion/police-abused-civil-fo...
If you limited their targets to high net worth individuals, I daresay they'd be able to afford a robust (and as fair as we can make it) defense.
Unlike the abuses in civil forfeiture, where the primary targets tend to be without legal recourse.
And a fast resolution doesn't seem required in this case. High net worth individuals don't seem like they'd be impacted by {potential tax bill and penalties} of their assets being frozen for multiple years while a case plays out. Relative to their total assets, any tax bill is going to be manageable.
The only problems actually preventing the IRS from conducting this enforcement are (1) political cover from direct Congressional interference & (2) lack of resources due to general defunding by Congress.
Given a choice between the dangers of establishing a self-funding high net worth tax prosecution arm and not prosecuting those individuals, I feel the greater risk to democracy is the later.
"Make your check or money order payable to “United States Treasury.” "
That's, you know, the federal government. Not the department called the IRS. The IRS gets a budgeted amount of funds.
I don’t understand how Republicans can argue cutting funding to the IRS will save the government’s spending. Instead their goal is to make the tax base richer by cutting taxes of the rich. Many of them are all about cutting taxes to the rich and corporations, doubling down on the trickle down. They even blocked payroll tax cuts to the lower and middle class:
http://www.washingtonpost.com/politics/house-republicans-def...
So yes, you're correct. Analyzing whether or not someone is eligible for EITC (those making less than ~$50,000) can be automated and if flagged, a letter sent telling them they aren't eligible or asking for more information.
[1]https://www.taxpolicycenter.org/briefing-book/how-do-irs-aud...
Seems like institutional failure if I have to vote for IRS expansion, the same people going after my tiny coffer, for the IRS to go after anyone else. That's a dumb conflict of forces.
That's deft political engineering. Congress is to blame. They tweak the budget to protect themselves and their true constituents (megadonors and lobbyists).
We're in a peculiar situation where democrats and republicans are both on the "right" in their fiscal policies. Any blush of "left" policy is shouted down by bipartisan echoes of McCarthyism. The politicians of both parties are, by and large, upper class, and they collectively pit the middle class against the lower class.
We don't need a new IRS, we need a new breed of politician. And enough funding for the IRS that it can audit those politicians and their donors fearlessly.
To sociologists, economists, and academia, those who rely on a salary or wage to live are considered working class compared to those who don't.
That's a perversion of the definition.
I don't think your handsome graphic there is offering much insight into the topic at hand. The richer someone is, the less likely they are to cheat on their taxes.
EITC not withstanding you need to have income to hide it.
According to Brookings, the bottom 50% pay 14% of the taxes but are responsible for only 12% of evasion.
The better distinction is the source of income. Farms, landlords and sole proprietorships are the leaders in misreporting income. W-2 salary reporters account for <1% of evasion. Between those two groups are misreported tips (typically lower end) and capital gains (typically higher end)
Both could survive on far less.
Hell no. If you're in the top 1% of income (~$400k per year) you are wealthy.
And yes, I believe that if you sell your labor for a living, whether it be for $400k at Apple or otherwise, you have more in common with someone making $24k bussing tables than you do with the person who owns property for a living.
If you're making $400k per year, how long before you start to accumulate substantial wealth? Pretty quickly I'd say. Sure it might not be millions, but if you sock away $200k at age 25 after 3 years, you have more wealth than 99% of people your age.
"Wealthy" is not limited to wealth alone. If you're making $2M a year and have no savings, you're still "wealthy".
And people with large amount of wealth (your definition) can still become destitute. There are plenty of examples.
That $400k post tax is mostly going into housing.
Some might say that with that luxury comes the responsibility to improve the situation.
The kinds of rich people being discussed in this thread are still a very small percentage of six-figure+ earners. I would venture to say (no pun intended) that most HN readers are not accredited investors.
So I continue to think that the six-figure norm people talk about is within a "reality distortion field".
Another thing, many countries expect rich people and rich companies to hire government-certified accountants to verify your fillings (known as a Statutory auditor https://en.wikipedia.org/wiki/Statutory_auditor ). This makes it harder for these companies to do stuff the non-audited guy can easily do.
Audit rates of people making $1m or more are down by 80% since 2011. Now "the top 1% of taxpayers by income were audited at a rate of 1.56%. EITC recipients, who typically have annual income under $20,000, were audited at 1.41%."
Source: https://www.propublica.org/article/irs-now-audits-poor-ameri...