I quit journalism mid-aughts and, seeking a stable career, started a grad program in accounting. Hiring dried up due to the 2007 great recession, and I ended up taking a job as a state tax auditor.
It was easily the most interesting job I've ever had. Getting to see how businesses work and how many weird ways there are to make money was fascinating. Spend a week at an online store that sells survivalist supplies getting to see every cent in and out. The occupy the next few days with a tiny company that makes millions renting portable toilets to events.
The pay was terrible; benefits - pension, four-day work week - were amazing. It was also very hard. So much business falls into ambiguous grey areas of taxability. You could ask three different supervisors questions regarding whether a particular activity was taxable and might end up with four different, conflicting answers.
I left after a couple years for better pay. Was soon making 3x as much in a respected firm - that was only about 20% as hard as being a good state tax auditor.
I've been looking at the IRS job listings lately out of nostalgia. Pay is actually solid.
The Trump years revealed to me that something I had always downplayed was actually true -- that there is a vast, almost-invisible ocean of white-collar crime happening every day in this country and that the vast majority of those people will never face any consequences.
I'd be willing to bet that the sum total of all that criminal activity is a serious drag on the nation as a whole. No one act gums up the works, but a bunch of criminal shady activity from many powerful people sure adds a lot of friction to the machinery of American society.
In addition to increasing funding for personal tax audits, I would love to increased funding for small business audits. Most large businesses (S&P500 size) are, effectively, under continuous audit with an IRS team usually located onsite at the business HQ. Smaller businesses, though, can go years without ever having their taxes reviewed. Increase funding for small and medium business audits also!
Don't have much to say on this except to agree that, yes, it is a no-brainer and should be done.
More broadly, the tactic of fighting against laws you oppose on policy grounds by failing to enforce them is generally a dysfunctional tactic, that undermines rule of law in the long term. And ironically, by relieving some of the pressure to change bad laws it can actually result in those laws being left on the books longer than if they were strictly enforced.
These seem like such obviously good proposals, that are both objectively good and politically good. In addition, they are progressive. So why hasn't the Democratic Party embraced them more aggressively?
This connects to Matt's Make Blue States Great Again questions. AFAIK, zero states with income tax and a Democrat state legislature majority have tried pre-filling tax forms. I know that Intuit has lobbied various state Assemblymen and Senators against this. But is that really all it takes to talk Democrats out of what should be a solid Democratic win for good governance?
I wish there were a crystal clear, 10-point national Democratic Party platform that we could point to, with slam-dunk items like this. Then we could either pass them, or hammer Republicans with them when they vote against them.
"The Democrats said, let's make the IRS get off their butts and do your tax work for you, if you tell them to. [Fill in blank of local GOP congressman] and Mitch McConnell voted no."
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).
This complicated tax prep bothers me every year when I fire up TurboTax. Particularly when TurboTax they *constantly* try to upsell me on their Max product. That's when it really hits home that this company is just grabbing cash from people so they can enter some crap that the IRS already knows.
I have a couple quick thoughts. First, I think there ought to be a broader push to fund the financial police. The IRS, FinCEN, SEC, etc. I think the window of opportunity exists if you use the framing around combatting kleptocracy, which seems to have been effective at getting some surprising new bi-partisan policies passed recently. Have you seen anybody framing the IRS funding argument around combatting international actors using the US as a money laundering playground? Second, I think the question of investing in IT systems is interesting. Should more money go towards training and hiring auditors or building IT systems? I've read that Russia has a new, super effective (and slightly scary) tool for cutting down on VAT leakage.
I am glad you mention simplifying the tax code. I suspect based on anecdotal evidence that a big reason for opposition to the IRS is that a lot of people worry that they've entered something incorrectly on their tax forms and that a well-funded IRS will spend their time ruining people's lives over typos.
In order to justify a souped up IRS people need to assume that they will be going after intentional criminal activity - increasing the confidence ordinary people have that their tax return is not going to be reviewable would help achieve that outcome in my opinion.
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.)
Agree with all of this. It's probably my #2 issue behind healthcare. I'd only add the penalties for tax fraud should be higher. I feel like a lot of the tax-gap is simply people making a "business decision" (i.e., tax savings > % of audit * incremental penalties). If we tip the penalty scales - that should close the under-reporting gap without increasing the audit rate and associated IRS fixed costs.
More broadly and culturally and definitely ideally, I wish taxes would be viewed more as a civic responsibility and celebrated. I bias towards transparency so I'd also support tax data being public. Some of the hypocrisy I struggle the most with - even across friends - is this outward charity focus but I know which accountant their working with and his reputation for loophole exploitation.
General (enthusiastic) agreement but two points. 1) Is the IRS absolutely optimizing collections with the existing structures of auditing? 2) (Paradoxically) both times I have been audited the result has been that I had overpaid and the second time the auditor was super friendly. [I had the impression that my name could out of an algorithm, but that he "knew" I was not cheating and was rather embarrassed to have to be doing the audit.]
I think one thing this article didn't mention was how to tie this in to Matt's previous discussion of heavy sentencing in criminal law- specifically, how harsher punishments don't impact criminal conduct because what you really need is for communities to think that if they commit a crime they'll be caught. Greater enforcement of tax laws will obviously allow the IRS to capture those funds that they uncover during their investigations, but it will also send a signal to high earners that it will cost them more to engage in dicey tax avoidance than it would to simply pay up front, which may reduce the gap between what the IRS knows is owed every year and what actually comes in. I don't expect that number to be enormous or anything, but greater enforcement would almost certainly have SOME impact on other, non-audited individuals who will ensure they're compliance with tax laws in order to avoid being audited later and having to a) pay more in penalties than they would have paid if they'd complied in the first place, and/or b) go to jail.
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.
I quit journalism mid-aughts and, seeking a stable career, started a grad program in accounting. Hiring dried up due to the 2007 great recession, and I ended up taking a job as a state tax auditor.
It was easily the most interesting job I've ever had. Getting to see how businesses work and how many weird ways there are to make money was fascinating. Spend a week at an online store that sells survivalist supplies getting to see every cent in and out. The occupy the next few days with a tiny company that makes millions renting portable toilets to events.
The pay was terrible; benefits - pension, four-day work week - were amazing. It was also very hard. So much business falls into ambiguous grey areas of taxability. You could ask three different supervisors questions regarding whether a particular activity was taxable and might end up with four different, conflicting answers.
I left after a couple years for better pay. Was soon making 3x as much in a respected firm - that was only about 20% as hard as being a good state tax auditor.
I've been looking at the IRS job listings lately out of nostalgia. Pay is actually solid.
The Trump years revealed to me that something I had always downplayed was actually true -- that there is a vast, almost-invisible ocean of white-collar crime happening every day in this country and that the vast majority of those people will never face any consequences.
I'd be willing to bet that the sum total of all that criminal activity is a serious drag on the nation as a whole. No one act gums up the works, but a bunch of criminal shady activity from many powerful people sure adds a lot of friction to the machinery of American society.
In addition to increasing funding for personal tax audits, I would love to increased funding for small business audits. Most large businesses (S&P500 size) are, effectively, under continuous audit with an IRS team usually located onsite at the business HQ. Smaller businesses, though, can go years without ever having their taxes reviewed. Increase funding for small and medium business audits also!
Don't have much to say on this except to agree that, yes, it is a no-brainer and should be done.
More broadly, the tactic of fighting against laws you oppose on policy grounds by failing to enforce them is generally a dysfunctional tactic, that undermines rule of law in the long term. And ironically, by relieving some of the pressure to change bad laws it can actually result in those laws being left on the books longer than if they were strictly enforced.
These seem like such obviously good proposals, that are both objectively good and politically good. In addition, they are progressive. So why hasn't the Democratic Party embraced them more aggressively?
This connects to Matt's Make Blue States Great Again questions. AFAIK, zero states with income tax and a Democrat state legislature majority have tried pre-filling tax forms. I know that Intuit has lobbied various state Assemblymen and Senators against this. But is that really all it takes to talk Democrats out of what should be a solid Democratic win for good governance?
I wish there were a crystal clear, 10-point national Democratic Party platform that we could point to, with slam-dunk items like this. Then we could either pass them, or hammer Republicans with them when they vote against them.
"The Democrats said, let's make the IRS get off their butts and do your tax work for you, if you tell them to. [Fill in blank of local GOP congressman] and Mitch McConnell voted no."
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
This complicated tax prep bothers me every year when I fire up TurboTax. Particularly when TurboTax they *constantly* try to upsell me on their Max product. That's when it really hits home that this company is just grabbing cash from people so they can enter some crap that the IRS already knows.
I have a couple quick thoughts. First, I think there ought to be a broader push to fund the financial police. The IRS, FinCEN, SEC, etc. I think the window of opportunity exists if you use the framing around combatting kleptocracy, which seems to have been effective at getting some surprising new bi-partisan policies passed recently. Have you seen anybody framing the IRS funding argument around combatting international actors using the US as a money laundering playground? Second, I think the question of investing in IT systems is interesting. Should more money go towards training and hiring auditors or building IT systems? I've read that Russia has a new, super effective (and slightly scary) tool for cutting down on VAT leakage.
I am glad you mention simplifying the tax code. I suspect based on anecdotal evidence that a big reason for opposition to the IRS is that a lot of people worry that they've entered something incorrectly on their tax forms and that a well-funded IRS will spend their time ruining people's lives over typos.
In order to justify a souped up IRS people need to assume that they will be going after intentional criminal activity - increasing the confidence ordinary people have that their tax return is not going to be reviewable would help achieve that outcome in my opinion.
Happy 420. 6.9420% Federal tax on weed.
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.)
Agree with all of this. It's probably my #2 issue behind healthcare. I'd only add the penalties for tax fraud should be higher. I feel like a lot of the tax-gap is simply people making a "business decision" (i.e., tax savings > % of audit * incremental penalties). If we tip the penalty scales - that should close the under-reporting gap without increasing the audit rate and associated IRS fixed costs.
More broadly and culturally and definitely ideally, I wish taxes would be viewed more as a civic responsibility and celebrated. I bias towards transparency so I'd also support tax data being public. Some of the hypocrisy I struggle the most with - even across friends - is this outward charity focus but I know which accountant their working with and his reputation for loophole exploitation.
General (enthusiastic) agreement but two points. 1) Is the IRS absolutely optimizing collections with the existing structures of auditing? 2) (Paradoxically) both times I have been audited the result has been that I had overpaid and the second time the auditor was super friendly. [I had the impression that my name could out of an algorithm, but that he "knew" I was not cheating and was rather embarrassed to have to be doing the audit.]
I think one thing this article didn't mention was how to tie this in to Matt's previous discussion of heavy sentencing in criminal law- specifically, how harsher punishments don't impact criminal conduct because what you really need is for communities to think that if they commit a crime they'll be caught. Greater enforcement of tax laws will obviously allow the IRS to capture those funds that they uncover during their investigations, but it will also send a signal to high earners that it will cost them more to engage in dicey tax avoidance than it would to simply pay up front, which may reduce the gap between what the IRS knows is owed every year and what actually comes in. I don't expect that number to be enormous or anything, but greater enforcement would almost certainly have SOME impact on other, non-audited individuals who will ensure they're compliance with tax laws in order to avoid being audited later and having to a) pay more in penalties than they would have paid if they'd complied in the first place, and/or b) go to jail.
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.
"Broken windows for rich people" should be its own movement (a sub-Substack?). Good marketing of an important idea that goes beyond tax policy.