Unless I'm misunderstanding the terminology, finding non-filers is a different task than auditing returns, right? You can't audit something that you don't have. So anybody who is skilled at scrutinizing a tax return for irregularities wouldn't be very useful at going out in the world and finding people who should owe taxes but don't file at all.
I'm way late to this party. My wife and I are way high on the income food chain, yet every penny we earn and every tax deduction we take except one are automatically reported to the IRS. The only deduction which isn't is our philanthropy, which approaches 15% of our gross income. Every year we are audited, evidently by computer, and some years we get a bigger refund, and some years we don't. No one has ever questioned our charitable deduction. Go figure.
I worked for a time in tax policy research after college, and the largest takeaways I have are, as this post states, that the IRS needs a full enforcement budget (one that will, at minimum, pay for itself) and that the tax code should be much simpler than it is. Unfortunately, Intuit and their ilk have gotten an incredible return on millions of lobbying dollars, preventing a true public free file/return-free filing option, and other various moneyed interests aggressively defend "their" tax breaks, leading to the current impossibility of achieving any simplification at all.
The lobbying efforts of these outfits also coincide with the long-term policy goals of many politicians on the right: namely, that anything that makes the public sector as inefficient and as unpleasant as possible is a desirable outcome on the merits, to the extent it reduces confidence in (and indeed increases antipathy toward) the public sector.
I'd suggest the last year provides a rather vivid display of the consequences of such a dynamic.
3.4 million jobs-worth of time are spent preparing taxes according to the link below, and compliance costs are estimated to be between $215B and $987B/year (2013 numbers). The high end of that estimate is almost what we spend on education. Spending more effort enforcing and complying with an ever-more complicated tax code is the very definition of a zero-sum game. A simpler tax code would provide less of a thicket for scofflaws to hide in, would be cheaper for the government to monitor, and would be cheaper for companies and individuals to comply with.
I think that something that’s missing from the TurboTax conversation is that all this (supposedly confidential) financial information gathering by Intuit seems to be a huge cybersecurity disaster waiting to happen. I don’t see why all this information, which is stored by the IRS anyway, should also be stored by someone else in the vast majority of cases. (Not that the IRS can never be hacked, but I trust the cyber capabilities of the federal government more than Intuit’s.)
The problem is we have a tax system that, at least in theory, needs to account for every transaction in a complex economy. A complex tax system is inevitably difficult to enforce, as well as inviting special interest political favoritism and assorted unintended consequences.
There is a better way.
The 19th century economist Henry George, in his book “Progress and Poverty” , proposed the Single Tax, also known as the Land Value Tax. Essentially, no income or sales tax, only a tax on the value of land (not a “property” tax; buildings would not be taxed, only the land they sit on).
Advantages?
- Simple to define and enforce. The tax would be “x” percent of assessed land value, no exceptions. You can try to hide income but you can’t hide land.
- Progressive and pro-growth. The wealthy own most of the high priced land and would pay most of the taxes, but the marginal tax on both income and consumption would be zero – a win-win for progressives and conservatives.
Henry George believed that the money you earn from your business, labor or profession belongs to you 100%, but the value of your land is due not so much to your own efforts but to the value of the surrounding community (“location, location, location”) and is therefore fair game to be taxed to support that community.
Could the Single Tax raise enough revenue? If my math is right, taxing all private land in the US at an average* of twelve cents a square foot would raise $7.3 trillion, which is equal to the combined budget of the federal government and all state and local governments. (* emphasize average: the Manhattan, NYC assessment would be a lot more; Manhattan, Kansas would be less)
Again the key point: You have the wealthy paying a large share of the tax burden (with no escape through a complex tax code) but structure the tax in a way that it does not punish work, savings and productive investment. Even though the rich guy is paying a lot of taxes, that "next dollar earned" is tax-free.
Like a lot of people I think a Henry George tax makes a lot of sense. That said, I'm extremely skeptical we'd be able to raise enough money to fund government (or keep inflation in check if you're an MMTer) via its sole use. A Henry George tax regime would massively disincentivize land ownership throughout the economy. That itself isn't a bad thing (indeed it's a good thing, from the perspective of reducing inequality!), but I believe the government would essentially be required to play a "land bank" role (a lot of land would revert to public ownership).
Put another way, the value of all private land in the United States is likely in the $20 trillion range. If you do the sums, you'll quickly realize that, even shorn of the burden of paying income, payroll and consumption taxes, the revenue required to fund the public sector (raised solely via a Henry George system) would represent an incredibly onerous, indeed ruinous burden to large sectors of the economy, and to most households.
PS -- Slow Boring's own Matt Yglesias (then with Slate) is my source for the land value figure. He estimated $14 trillion -- largely based on Fed data -- back in 2013. So I figure optimistically we're up to $20 trillion now. Matt's conclusion, I should mention -- is that a Henry George tax could largely work as the sole generator of tax revenue to fund the public sector. I conclude differently (although it could fund a good chunk).
Multiple comments in here expressing various forms of moral support for TurboTax and its ilk: "TurboTax really isn’t a bad product and is worth it to me" or "I greatly appreciate Turbotax and don't mind spending $39".
People, wake up!
A citizen can "appreciate TurboTax" only because tax-prep lobbyists have convinced Congress to hinder the IRS from making a better direct-efile system. The current IRS offering (free fillable forms) is just OK: better than paper, and it does most of the arithmetic. But further direct-efile improvements are mostly off the table, not for any good reason but simply because Congress has decided to create a market for something (tax prep) that the vast majority of citizens should not have to need. If Congress were to fund the IRS properly and remove the handcuffs, many improvements in the tax-paying experience are possible -- without changing the tax rules themselves (a separate and worthy topic) and even without going the full distance of having the government to just tell you the result (also worthy).
There are more options as well - IRS does the taxes but you can pay TurboTax to see if it can come up with better results. The IRS could potentially send TurboTax (or any other tax preparer, based on your request) the data.
For the vast majority of people the IRS could just do your taxes for you! That's what many countries do. The taxpayer just get a summary in the mail and if they missed something or your situation changes then you can file an updated return.
<i>Eight OECD countries, including Finland and Norway, fully prepare returns for the majority of its taxpayers.</i>
Rather than Veterans day we should celebrate Tax Collectors day. As far as I can tell, we've never won a war because we had a particularly good army. What we did have in WWI and WWII was an industrial base and taxes. We've been able to pull together chemical weapons (WWI) and tanks and submarines (WWII) in sufficient numbers to win. A large standing well equipped army and a defunded IRS (as conservatives seem to want) is the exact opposite of what we need in terms of defense.
Agree about the standing army. As far as I can tell, the United States would no worse off, and probably better, if we aspired to be more like Switzerland. We're not in any danger of being invaded, so devolve almost all the army and air force to State national guards. Keep the federal navy, missile defense and cybersecurity forces, but the rest seems to just encourage adventurism and waste, like pointless and insanely expensive wars in irrelevant places like Afghanistan.
American security depends on the balance of power in Europe and Asia. As Jefferson put it: the enduring interest of the United States lies in preventing the entire force of Europe from being wielded by a single hand. This is why it made sense for the US to fight in WWI and WWII, and to oppose Soviet expansion during the Cold War. https://russilwvong.com/blog/american-security-and-the-balance-of-power/
I've always prepared my own taxes and I agree the system is fairly straightforward for most filers who are not business proprietors. The IRS could prepare these returns if all they needed were W-2's and 1099's. For whatever reason, these simple returns are beyond the ability of more than half of filers for whatever reason and so they hire it done at significant cost. (Of course, some states like Minnesota where I live enact annoying provisions which don't conform to the federal practice and change from year to year).
I greatly appreciate Turbotax and don't mind spending $39 for the Deluxe Federal plus State version. I don't think it's a bad idea to organizationally separate tax prep software from the tax auditing authority. Would people trust the IRS to do their taxes fairly? There's a lot of ambiguity in reporting business income. The government could do a lot of good for itself by simplifying the system. And I totally agree that it needs to expand its capability to audit returns. A simpler system would also be easier to audit, but Congress can't help itself.
Funny to see that thus far all the comments are in favor of expanding the IRS's reach. What about fear of government overreach? Why does doing something that makes the government bigger a good thing? Why do want to give a non-elected massive agency MORE power to mess with people's personal lives, and their ability to make money? Something something "pursuit of happiness", which is often conflated with pursuit of MONEY.
This is I think an example of an idea that while it makes a ton of sense is hard to frame as popular to the majority of the public at large. Trump being able to manipulate the legal and tax system was seen by many as evidence of his ability to "play the game" and win. I wonder if anyone could share ways that this change could be seen as a popular one.
Personal PS: I agree with this idea five million percent, just being devil's advocate a bit and looking for the reasons it would be popular. I hated filing US taxes as an expat. What services am I paying for, the chance of a Saigon airlift?! The byzantine and confusing nature of filing US taxes paled in comparison to the ease of Hong Kong taxes which were a simple 8 page questionnaire.
I think, "People are cheating on their taxes at your expense and we need to stop them." would be and in fact is wildly popular. In fact I think you could rile up a fair but of rage if you just publicized how much unearned income and business income is privileged over W2 income.
I guess the counter to that would be how popular the various Wealth Tax proposals poll - which I find all unimplementable due to the mark-to-market complexity. To me this a form of a "wealth tax" but simply leveraging the existing requirements. I personally feel a program built on closing loopholes exploited by those pursuing edge-case interpretations only available to those with the resources to exploit them and then prosecuting those committing fraud is winning message.
It's not fraud though, to take a reasonable edge-case interpretation that benefits you and then lose. That's just how the law develops and is clarified, by people taking self-serving positions on genuinely unclear issues and then having a court say whether they are right or wrong. So it's not helpful to accuse people of fraud when that's all that's happening. That's not to say there isn't also plenty of real fraud where people (including perhaps our former president) take ridiculous positions that any reasonable person should know aren't supportable. The lawyers and accountants who bless and sign off on that kind of fraud should face malpractice consequences themselves.
BTW ... I probably do have a more expansive view of fraud than most. My example below (i.e., setting up an LLC and adding your children to your "payroll" to use their standard deduction to shelter up to $12k) seems widely practiced and maybe technically permissible IDK. But I'd call that fraud. The children aren't acting as employees and they knew that going into the setting up the tax-avoidance structure.
We're aligned. That was just some lazy run-on writing in my post. But yes, I think we should do both: (1) close the edge-case loopholes as they pop up (e.g., all my fake "independent contractor" friends with their kids on their "payrolls") and (2) in doing so - likely through increased audits of complex returns - prosecute the real fraud cases. Completely agree on consequences for anyone signing off on these fraud cases too. The entire tax-avoidance industry is a terrible waste of productive talent.
This falls in line with "raise taxes on the rich" being popular so long as the rich always being people who make 50% more than I do. Give the IRS more money so they can audit the rich...so long as the people getting audited are people who are not me.
I think most would rightly see increased IRS audits as not an expansion of government powers, but just an enforcement of the government powers already on the books. I suspect there’s mixed, but generally accepting public opinion on those taking advantage of the loopholes on the books (“gaming” the system), but very few are in favor of those outright cheating the system by not following the tax laws.
Interesting quote from the Kiel article linked to in the post:
" ]T]he IRS said, auditing poor taxpayers is a lot easier: The agency uses relatively low-level employees to audit returns for low-income taxpayers who claim the earned income tax credit. The audits — of which there were about 380,000 last year, accounting for 39% of the total the IRS conducted — are done by mail and don’t take too much staff time, either. They are 'the most efficient use of available IRS examination resources,' Rettig’s report says."
The "most efficient use of IRS examination resources"? What's missing here -- and what I'd like to know about -- is the Return on Investment. I'm sure that it takes many, many more hours to audit a very rich person's tax return, using more qualified IRS people, and they may win in the end, but there's a lot more money at stake than EITC audits, even with 380,000 of them. Personnel mix is obviously an issue, but I'm sure the IRS can change that mix. (I assume that many more-qualified people would happily sign up for, oh, a five year tour, if only so they could cash in afterwards by defending the rich people they'd previously audited).
The next time some Republican says that the government should be run more like a business, I shall readily agree and point, as any good businessman would, to areas with the greatest ROI. You go, IRS!
It would be about a 2.5% increase in federal revenue per year, which isn't nothing. Another way to think about it is that it's $100 billion per year, there are around 100 million households in the US, and so it's $1,000 per year per household - not nothing.
To the extent that this loose change is mostly stolen by the affluent, the situation nonetheless increases economic inequality, by effectively shifting the tax burden downwards.
Right now its not shifting a burden, its simply increasing the amount of debt issued. To my knowledge, there is no real intention by either party to pay down this debt. The best plan/hope offered right now is for GDP to grow so that it is smaller % overall.
^^^Right now its not shifting a burden, its simply increasing the amount of debt issued.
That debt has to be serviced at least partly with tax revenue. Again, to the extent tax evasion benefits the wealthy (vastly) more than the non-wealthy, this evasion favors the former. And that means the latter consume a smaller share of output (and suffer a reduction in the standard of living) than would otherwise be the case.
Unless I'm misunderstanding the terminology, finding non-filers is a different task than auditing returns, right? You can't audit something that you don't have. So anybody who is skilled at scrutinizing a tax return for irregularities wouldn't be very useful at going out in the world and finding people who should owe taxes but don't file at all.
I'm way late to this party. My wife and I are way high on the income food chain, yet every penny we earn and every tax deduction we take except one are automatically reported to the IRS. The only deduction which isn't is our philanthropy, which approaches 15% of our gross income. Every year we are audited, evidently by computer, and some years we get a bigger refund, and some years we don't. No one has ever questioned our charitable deduction. Go figure.
I worked for a time in tax policy research after college, and the largest takeaways I have are, as this post states, that the IRS needs a full enforcement budget (one that will, at minimum, pay for itself) and that the tax code should be much simpler than it is. Unfortunately, Intuit and their ilk have gotten an incredible return on millions of lobbying dollars, preventing a true public free file/return-free filing option, and other various moneyed interests aggressively defend "their" tax breaks, leading to the current impossibility of achieving any simplification at all.
The lobbying efforts of these outfits also coincide with the long-term policy goals of many politicians on the right: namely, that anything that makes the public sector as inefficient and as unpleasant as possible is a desirable outcome on the merits, to the extent it reduces confidence in (and indeed increases antipathy toward) the public sector.
I'd suggest the last year provides a rather vivid display of the consequences of such a dynamic.
3.4 million jobs-worth of time are spent preparing taxes according to the link below, and compliance costs are estimated to be between $215B and $987B/year (2013 numbers). The high end of that estimate is almost what we spend on education. Spending more effort enforcing and complying with an ever-more complicated tax code is the very definition of a zero-sum game. A simpler tax code would provide less of a thicket for scofflaws to hide in, would be cheaper for the government to monitor, and would be cheaper for companies and individuals to comply with.
https://www.mercatus.org/publications/government-spending/hidden-costs-tax-compliance
I think that something that’s missing from the TurboTax conversation is that all this (supposedly confidential) financial information gathering by Intuit seems to be a huge cybersecurity disaster waiting to happen. I don’t see why all this information, which is stored by the IRS anyway, should also be stored by someone else in the vast majority of cases. (Not that the IRS can never be hacked, but I trust the cyber capabilities of the federal government more than Intuit’s.)
still waiting on that response to Brian Riedl's concern about the debt and what happens if interest rates creep up.
IRS stuff is obvious....but needs to be said cause it's overlooked. Finally, a spending plan that pays for itself.
The problem is we have a tax system that, at least in theory, needs to account for every transaction in a complex economy. A complex tax system is inevitably difficult to enforce, as well as inviting special interest political favoritism and assorted unintended consequences.
There is a better way.
The 19th century economist Henry George, in his book “Progress and Poverty” , proposed the Single Tax, also known as the Land Value Tax. Essentially, no income or sales tax, only a tax on the value of land (not a “property” tax; buildings would not be taxed, only the land they sit on).
Advantages?
- Simple to define and enforce. The tax would be “x” percent of assessed land value, no exceptions. You can try to hide income but you can’t hide land.
- Progressive and pro-growth. The wealthy own most of the high priced land and would pay most of the taxes, but the marginal tax on both income and consumption would be zero – a win-win for progressives and conservatives.
Henry George believed that the money you earn from your business, labor or profession belongs to you 100%, but the value of your land is due not so much to your own efforts but to the value of the surrounding community (“location, location, location”) and is therefore fair game to be taxed to support that community.
Could the Single Tax raise enough revenue? If my math is right, taxing all private land in the US at an average* of twelve cents a square foot would raise $7.3 trillion, which is equal to the combined budget of the federal government and all state and local governments. (* emphasize average: the Manhattan, NYC assessment would be a lot more; Manhattan, Kansas would be less)
Again the key point: You have the wealthy paying a large share of the tax burden (with no escape through a complex tax code) but structure the tax in a way that it does not punish work, savings and productive investment. Even though the rich guy is paying a lot of taxes, that "next dollar earned" is tax-free.
Like a lot of people I think a Henry George tax makes a lot of sense. That said, I'm extremely skeptical we'd be able to raise enough money to fund government (or keep inflation in check if you're an MMTer) via its sole use. A Henry George tax regime would massively disincentivize land ownership throughout the economy. That itself isn't a bad thing (indeed it's a good thing, from the perspective of reducing inequality!), but I believe the government would essentially be required to play a "land bank" role (a lot of land would revert to public ownership).
Put another way, the value of all private land in the United States is likely in the $20 trillion range. If you do the sums, you'll quickly realize that, even shorn of the burden of paying income, payroll and consumption taxes, the revenue required to fund the public sector (raised solely via a Henry George system) would represent an incredibly onerous, indeed ruinous burden to large sectors of the economy, and to most households.
PS -- Slow Boring's own Matt Yglesias (then with Slate) is my source for the land value figure. He estimated $14 trillion -- largely based on Fed data -- back in 2013. So I figure optimistically we're up to $20 trillion now. Matt's conclusion, I should mention -- is that a Henry George tax could largely work as the sole generator of tax revenue to fund the public sector. I conclude differently (although it could fund a good chunk).
https://slate.com/business/2013/12/value-of-all-land-in-the-united-states.html#:~:text=The%20short%20answer%20is%20that,trillion%E2%80%94which%20is%20a%20lot.
Multiple comments in here expressing various forms of moral support for TurboTax and its ilk: "TurboTax really isn’t a bad product and is worth it to me" or "I greatly appreciate Turbotax and don't mind spending $39".
People, wake up!
A citizen can "appreciate TurboTax" only because tax-prep lobbyists have convinced Congress to hinder the IRS from making a better direct-efile system. The current IRS offering (free fillable forms) is just OK: better than paper, and it does most of the arithmetic. But further direct-efile improvements are mostly off the table, not for any good reason but simply because Congress has decided to create a market for something (tax prep) that the vast majority of citizens should not have to need. If Congress were to fund the IRS properly and remove the handcuffs, many improvements in the tax-paying experience are possible -- without changing the tax rules themselves (a separate and worthy topic) and even without going the full distance of having the government to just tell you the result (also worthy).
A true expert on the rules limiting IRS innovation could probably qualify some of my comments and complicate the picture (which has changed in some ways recently), but here's one link for the curious: https://www.vox.com/2019/4/9/18301943/last-minute-tax-preparation-h-r-block-turbotax
There are more options as well - IRS does the taxes but you can pay TurboTax to see if it can come up with better results. The IRS could potentially send TurboTax (or any other tax preparer, based on your request) the data.
For the vast majority of people the IRS could just do your taxes for you! That's what many countries do. The taxpayer just get a summary in the mail and if they missed something or your situation changes then you can file an updated return.
<i>Eight OECD countries, including Finland and Norway, fully prepare returns for the majority of its taxpayers.</i>
https://www.theatlantic.com/business/archive/2016/03/the-10-second-tax-return/475899/
"Broken windows for rich people" should be its own movement (a sub-Substack?). Good marketing of an important idea that goes beyond tax policy.
Rather than Veterans day we should celebrate Tax Collectors day. As far as I can tell, we've never won a war because we had a particularly good army. What we did have in WWI and WWII was an industrial base and taxes. We've been able to pull together chemical weapons (WWI) and tanks and submarines (WWII) in sufficient numbers to win. A large standing well equipped army and a defunded IRS (as conservatives seem to want) is the exact opposite of what we need in terms of defense.
Agree about the standing army. As far as I can tell, the United States would no worse off, and probably better, if we aspired to be more like Switzerland. We're not in any danger of being invaded, so devolve almost all the army and air force to State national guards. Keep the federal navy, missile defense and cybersecurity forces, but the rest seems to just encourage adventurism and waste, like pointless and insanely expensive wars in irrelevant places like Afghanistan.
American security depends on the balance of power in Europe and Asia. As Jefferson put it: the enduring interest of the United States lies in preventing the entire force of Europe from being wielded by a single hand. This is why it made sense for the US to fight in WWI and WWII, and to oppose Soviet expansion during the Cold War. https://russilwvong.com/blog/american-security-and-the-balance-of-power/
I've always prepared my own taxes and I agree the system is fairly straightforward for most filers who are not business proprietors. The IRS could prepare these returns if all they needed were W-2's and 1099's. For whatever reason, these simple returns are beyond the ability of more than half of filers for whatever reason and so they hire it done at significant cost. (Of course, some states like Minnesota where I live enact annoying provisions which don't conform to the federal practice and change from year to year).
I greatly appreciate Turbotax and don't mind spending $39 for the Deluxe Federal plus State version. I don't think it's a bad idea to organizationally separate tax prep software from the tax auditing authority. Would people trust the IRS to do their taxes fairly? There's a lot of ambiguity in reporting business income. The government could do a lot of good for itself by simplifying the system. And I totally agree that it needs to expand its capability to audit returns. A simpler system would also be easier to audit, but Congress can't help itself.
Funny to see that thus far all the comments are in favor of expanding the IRS's reach. What about fear of government overreach? Why does doing something that makes the government bigger a good thing? Why do want to give a non-elected massive agency MORE power to mess with people's personal lives, and their ability to make money? Something something "pursuit of happiness", which is often conflated with pursuit of MONEY.
This is I think an example of an idea that while it makes a ton of sense is hard to frame as popular to the majority of the public at large. Trump being able to manipulate the legal and tax system was seen by many as evidence of his ability to "play the game" and win. I wonder if anyone could share ways that this change could be seen as a popular one.
Personal PS: I agree with this idea five million percent, just being devil's advocate a bit and looking for the reasons it would be popular. I hated filing US taxes as an expat. What services am I paying for, the chance of a Saigon airlift?! The byzantine and confusing nature of filing US taxes paled in comparison to the ease of Hong Kong taxes which were a simple 8 page questionnaire.
I think, "People are cheating on their taxes at your expense and we need to stop them." would be and in fact is wildly popular. In fact I think you could rile up a fair but of rage if you just publicized how much unearned income and business income is privileged over W2 income.
I guess the counter to that would be how popular the various Wealth Tax proposals poll - which I find all unimplementable due to the mark-to-market complexity. To me this a form of a "wealth tax" but simply leveraging the existing requirements. I personally feel a program built on closing loopholes exploited by those pursuing edge-case interpretations only available to those with the resources to exploit them and then prosecuting those committing fraud is winning message.
https://www.reuters.com/article/us-usa-election-inequality-poll/majority-of-americans-favor-wealth-tax-on-very-rich-reuters-ipsos-poll-idUSKBN1Z9141
It's not fraud though, to take a reasonable edge-case interpretation that benefits you and then lose. That's just how the law develops and is clarified, by people taking self-serving positions on genuinely unclear issues and then having a court say whether they are right or wrong. So it's not helpful to accuse people of fraud when that's all that's happening. That's not to say there isn't also plenty of real fraud where people (including perhaps our former president) take ridiculous positions that any reasonable person should know aren't supportable. The lawyers and accountants who bless and sign off on that kind of fraud should face malpractice consequences themselves.
BTW ... I probably do have a more expansive view of fraud than most. My example below (i.e., setting up an LLC and adding your children to your "payroll" to use their standard deduction to shelter up to $12k) seems widely practiced and maybe technically permissible IDK. But I'd call that fraud. The children aren't acting as employees and they knew that going into the setting up the tax-avoidance structure.
We're aligned. That was just some lazy run-on writing in my post. But yes, I think we should do both: (1) close the edge-case loopholes as they pop up (e.g., all my fake "independent contractor" friends with their kids on their "payrolls") and (2) in doing so - likely through increased audits of complex returns - prosecute the real fraud cases. Completely agree on consequences for anyone signing off on these fraud cases too. The entire tax-avoidance industry is a terrible waste of productive talent.
This falls in line with "raise taxes on the rich" being popular so long as the rich always being people who make 50% more than I do. Give the IRS more money so they can audit the rich...so long as the people getting audited are people who are not me.
I think most would rightly see increased IRS audits as not an expansion of government powers, but just an enforcement of the government powers already on the books. I suspect there’s mixed, but generally accepting public opinion on those taking advantage of the loopholes on the books (“gaming” the system), but very few are in favor of those outright cheating the system by not following the tax laws.
It doesn't seem like going after rich no-filers would be that hard. Anyone know why the IRS isn't picking that low hanging fruit right now?
If I go use my CPA license to be a tax investigator do I have to put up that Punisher/Blue Line mashup sticker on my VW?
Interesting quote from the Kiel article linked to in the post:
" ]T]he IRS said, auditing poor taxpayers is a lot easier: The agency uses relatively low-level employees to audit returns for low-income taxpayers who claim the earned income tax credit. The audits — of which there were about 380,000 last year, accounting for 39% of the total the IRS conducted — are done by mail and don’t take too much staff time, either. They are 'the most efficient use of available IRS examination resources,' Rettig’s report says."
The "most efficient use of IRS examination resources"? What's missing here -- and what I'd like to know about -- is the Return on Investment. I'm sure that it takes many, many more hours to audit a very rich person's tax return, using more qualified IRS people, and they may win in the end, but there's a lot more money at stake than EITC audits, even with 380,000 of them. Personnel mix is obviously an issue, but I'm sure the IRS can change that mix. (I assume that many more-qualified people would happily sign up for, oh, a five year tour, if only so they could cash in afterwards by defending the rich people they'd previously audited).
The next time some Republican says that the government should be run more like a business, I shall readily agree and point, as any good businessman would, to areas with the greatest ROI. You go, IRS!
Unfortunately, on the ever expanding scale of federal spending, $1 trillion over ten years is loose change between the couch cushions.
It would be about a 2.5% increase in federal revenue per year, which isn't nothing. Another way to think about it is that it's $100 billion per year, there are around 100 million households in the US, and so it's $1,000 per year per household - not nothing.
To the extent that this loose change is mostly stolen by the affluent, the situation nonetheless increases economic inequality, by effectively shifting the tax burden downwards.
Right now its not shifting a burden, its simply increasing the amount of debt issued. To my knowledge, there is no real intention by either party to pay down this debt. The best plan/hope offered right now is for GDP to grow so that it is smaller % overall.
^^^Right now its not shifting a burden, its simply increasing the amount of debt issued.
That debt has to be serviced at least partly with tax revenue. Again, to the extent tax evasion benefits the wealthy (vastly) more than the non-wealthy, this evasion favors the former. And that means the latter consume a smaller share of output (and suffer a reduction in the standard of living) than would otherwise be the case.