At the New York Times, Peter Coy makes a convincing argument that the only way to address the deficit is to raise revenues, or in human terms, raise taxes. Of course, money already spent by the government has to be paid for, eventually, even if it was spent on things we would have preferred it not be spent on. Going forward, it would be nice to think that money will be better, more wisely, more effectively spent, but what are the chances of that happening? And so, future expenditures will have to be paid for as well. By taxes.
You don’t hear this from either Republicans or Democrats because calling for higher taxes is seen in Washington as politically fatal. As I said, it requires imagination. When you step back from the daily tit for tat, it’s hard to imagine any way to fix the nation’s finances in the long term that doesn’t involve more tax revenue. As Sherlock Holmes said, “When you have eliminated all which is impossible, then whatever remains, however improbable, must be the truth.”
And before anybody points fingers, the only person worse than Biden when it comes to growing the national debt is Trump, who knows a lot about debt. But there is, they (the ubiquitous but vague “they”) say, another answer. Collect taxes from the cheats who aren’t paying either at all or at least what they should.
But new data on tax avoidance by the ultrarich badly undermines GOP claims to being an anti-elite, pro-worker party. It shows that if Republicans get their way with regard to the IRS, a nontrivial number of very rich Americans would continue to underpay taxes they owe, effectively making out like bandits — some literally so.
Nearly 1,000 tax filers who earn more than $1 million per year have still not filed federal tax returns for at least one year from 2017 to 2020, according to IRS data provided to Senate Finance Committee Chairman Ron Wyden (D-Ore.).
What’s more, the 2,000 people who represent the highest-income non-filers in one or more of those years owe a total of more than $900 million in federal taxes, the data shows.
The point here is that by funding the IRS to hire an army of tax auditors, they can go after these 3,000 people whom Senator Wyden says are blowing raspberries at the IRS. Are 3,000 ultrarich taxpayers from whose pockets our deficit could be eliminated, or at least reduced, too burdensome for the IRS to address now? Would it really require $80 billion for more revenuers to come up with a jeopardy assessment and snag a big building here and there?
But according to Greg Sergant, it’s paying off.
Unfortunately for Republicans, enforcement funded by that law has paid off — bringing in more than $38 million from 175 rich tax delinquents, the IRS announced in July. And this month, the agency announced plans to use the funding for still more efforts targeting wealthy tax avoiders.
Was the IRS so strapped for cash, so lacking in enforcement agents, that they couldn’t go after 175 tax delinquents without an $80 billion infusion? Perhaps so. Perhaps everybody at the IRS was already too busy making sure all the computers that did the bulk of the auditing work of ordinary folks’ 1040s were plugged into the outlet.
But there’s another concern that arises from this zeal to find new revenues to pay off squandered tax dollars. The easy money comes not from the 175 or the 3,000, but the millions of regular folks who get W-2s and 1099s, so that their financial life is all digitized and a plugged-in computer can spit out any dime they failed to pay. After all, when the new regs require reporting of income of $600 or more, is that because somebody decided that they would snag those damn ultrarich trying to skirt payment on the $600 they made on eBay?
Telling the public that they’re raising taxes is politically fatal. Telling the public that they’re going after ultrarich tax cheats is groovy, even if it’s at $600 a pop. And this way, the government can spend promiscuously on every program to help people that makes your heart break no matter how much or little of the money actually finds its way to the downtrodden. After all, we’re not ultrarich, so it’s not like it’s our money. And screw them, anyway.
Does it really matter? The U.S.A. is bankrupt.
The obvious cure is to cut spending with brutality and pay off the debt. That will not happen. So it will be a painful death rather than a painful cure.
Scott, I think the numbers are complicated and those you cite are not the whole story. I’ve done a few minutes of googling, and that (unreliably, I’m sure) led me a few conclusions. First, we should be clear: it seems to be $80 billion total, over a 10 year period.
Second, the IRS has been seriously underfunded for a decade. That’s why you can’t get somebody to give you information over the phone. And apparently the number of investigating agents has gone down by close to 50 percent over those years, consistent with the decline in the overall employment numbers: “The long-term reduction in staffing and resources at the IRS took a hit at enforcement, where the agency has 2,600 agents who work directly on cases involving certain individuals, large corporations, and large partnerships….That compares with nearly 5,000 of these agents in 2010.”
Third, half the money will go to better computers, hiring many non-enforcement employees, better training for employees, and the like. And they’ll hire more lawyers!
Finally, the Congressional Research Service says that the $80 billion will lead to the recovery of an extra $180 billion over 10 years. (The IRS thinks it will be more). To me, that’s important not just for the amount, but to increase overall tax fairness. If this weren’t going to have a big impact, it wouldn’t scare the Republicans so much.
Of course the numbers are more complicated, even when the sell expenditures with simplistic one-liners. But none of this detracts from the point. If this is about going after billion dollar tax cheats, why require 1099-K at $600? Why weren’t current enforcement agents going after the ultrarich rather than the ultra-easy to nail without leaving their desk? Why was this so neglected a decade ago before he who can’t be named was elected?
And even if someone answers the phone at the IRS, their information/advice still won’t be binding.
The government will go after the low-hanging fruit to make up its deficit because they’re easy to find and easier to scare. They don’t fight back. And yet, they use these claims of going after the ultrarich as a palliative for promiscuous spending for what they claim to be good causes, regardless of how much or little of the funds actually find their way to the putative goal.
Neither Reps nor Dems have proven themselves capable stewards of the public fisc. Until they do, it’s all just a con.
Unless you believe that the government can be trusted to use our money wisely, the objective of collecting revenue is just enabling bad government going forward. They spend like drunken sailors and we pay for their party. Some of us would prefer to pay for our own party.
The $600 threshhold is the giveaway. They’re claiming to tax the rich, but they’re creating the trap for the poor and middleclass. They may nail some of the ultrarich, although there is no explanation as to why they haven’t focused existing on the big money (Willie Sutton, anyone?), but they will surely catch the easy ones first and more.
So totally off topic but,
Saw that NYC got hit pretty hard in the past couple of days. I know you aren’t in the city proper, but you all doing ok?
All’s well at Casa de SJ. Thanks for asking.
Apparently it doesn’t occur to Peter Coy that there is another way to address the deficit, and that is to cut government spending. 90% of the revenue that our government borrows, prints and steals is wasted, stolen, or paid to useless employees. If politicians cared about fixing the deficit, they would fire 90% of the federal workforce, and plug some of the larger holes where money leaks out. That would be counterproductive for them, because some of that stolen/wasted money makes its way back into their pockets. Decreasing the fraud, theft and waste would remove some delicious dishes from their smorgasbord of grift.
As a long time tax practitioner, I’d like to weigh in with a few considerations, the main one being the importance of IRS services to taxpayers and professional tax practitioners.
Improving taxpayer services is critical to increasing tax revenues, in my opinion. Over four decades, I’ve come to the belief that most taxpayers want to do the right thing, more or less. But the IRS has pushed too many dollars towards raiding restaurants for unpaid payroll taxes and such (remember the Congressional hearings from the Gingrich days). Instead, if IRS personnel would provide quick and reliable access to taxpayers and restore the support services they previously offered to licensed tax professionals, total tax revenues would climb.
Unfortunately, there is no glory for IRS personnel who provide excellent taxpayer services and few votes for a politician who campaigns on the promise to take what we have and make it work.
I know this is a boring idea but after 40 years as a tax practitioner I’m convinced genuinely good service will improve the whole federal tax system. Just imagine an IRS public relations campaign inviting taxpayers to “Have Tea with Me (after we answer your tax questions).” After a period of success, support will grow for chasing down the few bad guys who catch the headlines. Trust me on this.
p.s. If a $100 political contribution from SIMPLE JUSTICE appears in my mailbox, I will use it to open my first campaign and run for federal office on this very promise: “I Will Reduce US Debt by Making IRS Employees Return Your Calls.”
Wait by the mailbox. You never know.
Not Necessary at All. We can borrow forever!
The rich and ultra rich use the law to avoid taxes (“Buy, Borrow, Die”, Trusts, etc.). The IRS agents are for everyone else.
Nah- we’re all slowly moving to the Social Credit system where the Govt doesn’t tax, it just prints money and spends it. So long as the rate it spends matches the increase in size of the economy, there’s no inflation.
Yeah, no chance of that, but with inflation AND tax, we’re certainly no better off under this system. Didn’t they spend the billions on an Army’s worth of assault rifles and bullet-proof vests a few years back? They must know what $600 tax delinquents are like..