Bill Knight: Rich tax dodgers cost us all

BILL KNIGHT

BILL KNIGHT

When politicians focus on crime, they usually mean crime in the streets, not crime in the suites.

There are no “pro-crime” lobbyists, so campaign rhetoric tries to instill fear, regardless of actual danger.

Candidates say they support “law and order.” But it’s really for some.

This isn’t just about how prominent or affluent Americans can escape consequences for ethical, even illegal actions, although that happens, nor about how some employers defy the law with few consequences if their victims are workers, although that occurs. A blatant example of laws not applying to some is how the country loses billions of dollars because of rich scofflaws.

Using tax laws creatively to minimize tax liability is one thing; cheating is different. Tax cheats could cost the United States $7 trillion in the next decade, according to Treasury Secretary Janet Yellen.

The 1% doesn’t report some 21% of their income taxes, a 2021 study by IRS and university experts found. About 36% of all unpaid federal taxes came from that 1%.

“Imagine what we could do for people with $7 trillion,” said Rep. Pramila Jayapal (D-Wash.). “That’s infrastructure, child care, paid leave, free college, climate action, and other investments in our communities.”

In recent months, House Republicans renewed their attacks from last year, when Congress passed the Inflation Reduction Act, which provides almost $80 billion over 10 years to restore some of the staff lost when the IRS budget was greatly reduced in the last

15 years — a work force downsized over time instead of a huge attention-getting layoff, resulting in too few people to do the work — to process routine returns or even to answer the phones or questions.

Former IRS Commissioner John Koskinen commented, “I don’t know any organization in my 20 years of experience in the private sector that has said, ‘I think I’ll take my revenue operation and starve it for funds.’ ”

Once falsely claiming the IRS will hire “87,000 new agents to weaponize the IRS against small business owners and middle America,” GOP lawmakers in debt-ceiling negotiations seek to cut that funding, following an earlier effort to rescind it, and even introducing a bill abolishing the IRS and replacing income tax with a national sales tax.

The National Bureau of Economic Research (NBER) study Tax Evasion at The Top of The Income Distribution: Theory and Evidence, said, “Our results highlight that there is substantial evasion at the top which requires administrative resources to detect and deter. Collecting all unpaid federal income tax from this group would increase federal revenues by about $175 billion annually.”

In some ways, it’s old news. Critics said the IRS targeted tax-exempt conservative groups, but independent probes found that progressive organizations also were audited. And “Abolish the IRS” was a slogan when U.S. Sen. Ted Cruz (R-Texas) ran for the GOP’s 2016 presidential nomination.

But now, because House Republicans want to keep cutting the IRS (while voicing concerns about deficits at least partly due to inadequate revenue!), it’s vital everyday Americans remain alert to mind-boggling mischief in the past and threats ahead.

In 2008 the IRS recognized hundreds of foreign companies operating in the United States weren’t paying their required U.S. taxes and started pursuing them. Then Congress’ budget cutting started contributing to loss of staff and resources. Ten years ago, $600 million was cut in one budget deal after previous years’ cuts, and months later, Congress slashed an additional $350 million from the agency. Investigations and audits of non-filers dropped dramatically, as did offshore accounts where people can hide income.

“Corporations and the wealthy are the biggest beneficiaries of the IRS’s decay [because] it takes specialized, well-trained personnel to audit a business or a billionaire or to unravel a tax scheme — and those employees are leaving in droves and taking their expertise with them,” reported ProPublica’s Pal Kiel and Jess Eisinger.

However, low-income taxpayers are still audited, especially recipients of the Earned Income Tax Credit (EITC), one of the nation’s biggest anti-poverty programs. EITC households are audited at a higher rate than expected — between 380,000 to 600,000 EITC audits yearly, reported ProPublica, which added that Republicans on Capitol Hill pressure the IRS to prioritize EITC homes for compliance.

“While the wealthy now have an open invitation to cheat, low-income taxpayers are receiving heightened scrutiny because they can be audited far more easily. All it takes is a letter instead of a team of investigators and lawyers,” said Sen. Ron Wyden (D-Ore.) from the Senate Finance Committee.

“We have two tax systems in this country,” he continued, “and nothing illustrates that better than the IRS ignoring wealthy tax cheats while penalizing low-income workers over small mistakes.”

Billionaires who can make hefty campaign contributions might whine to their Washington lap dogs about paying another $1 million in taxes, but that’s 1/1,000 of their worth — like a middle-class family making $100,000 complaining about an extra 100 bucks.

“We know our tax system is broken, and it’s long past time we start fixing it,” said Congressman Ro Khanna (D-Calif.). “The ultra-wealthy play by different rules than the rest of us.”

Law enforcement should ensure tax obligations are met fairly.



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