Enforcing The Rule Of Law

Americans spend a lot of time arguing about legislation. For that matter, this blog is predominantly focused on what we call “public policy,” which is essentially a term meaning “laws and regulations.” What tends to get much less attention is an equally important aspect of the rule of law: enforcement.

With the exception of policing–the enforcement of criminal laws–we tend to ignore the behaviors of those who have been authorized to enforce the laws once they’ve been passed. For one thing, it is much harder to ferret out the degree of enforcement. If Congress or a state legislature passes a measure, reporting that fact– or opining about its wisdom– is fairly simple. Figuring out whether the law is being fairly and evenly applied–or applied at all–requires considerably more effort.

Take tax law. Bills to raise or lower taxes receive widespread reporting and discussion. But enforcement–or the lack thereof–is equally important, and gets much less attention. When we are talking about taxes, however, there are two equally effective methods for reducing  tax liability for the mega-rich: lower rates, and inadequate investigation and application of those rates. When staff levels at the IRS are kept too low, when the agency lacks the ability to audit more than a handful of returns, the millionaires and billionaires can be confident that the odds favor the significant success of various tax avoidance ploys.

President Biden has moved to beef up IRS’ staffing, which has been decimated by the former guy’s administration, and six former IRS commissions have applauded that move in a column for The Washington Post.They provide the context.

As former IRS commissioners, we know the challenges of administering the tax system, which has grown in size and complexity, particularly in recent years.

Yet, during the past decade, budget cuts have substantially diminished the IRS workforce. In real terms, the IRS budget is smaller than it was in 2010, and it has 21,000 fewer employees. The IRS has fewer auditors today than at any time since World War II. Moreover, the agency has struggled to keep pace as complicated tax structures, such as partnerships and pass-throughs, have grown in popularity. Workforce attrition has been most pronounced among agents who examine these complicated tax filings: Thirty-five percent fewer revenue agents handle these returns today than a decade ago.

Their essay goes on to remind readers that, despite its reduced workforce, the IRS has seen its responsibilities increase. The agency administers significant provisions of the Affordable Care Act, and during the pandemic, it has been the IRS that has delivered three rounds of federal payments to hundreds of millions of taxpayers. Now, the agency is preparing to deliver periodic payments of the recently-enacted expanded child tax credit.

Thanks to its expanding authority and reduced staffing, the former commissioners report that

There has also been a substantial decline in enforcement scrutiny of high-earners and large corporations with complex returns: Audit rates for millionaires have fallen more than 70 percent since 2011; audits of large corporations decreased from essentially 100 percent a decade ago to less than 50 percent, according to the most recent IRS estimates.

This situation is no fault of the IRS or its committed workforce, who are dedicated to fair implementation of the tax code and the strongest possible support for taxpayers. Provided appropriate resources, the IRS can make good on its commitments.

The former Commissioners agree that the changes and additional resources that President Biden proposes would “produce a great deal of revenue by reducing the enormous gap between taxes legally owed and taxes actually paid — much of it through increased voluntary compliance.”

The Biden proposal includes provisions on third-party reporting, leveraging information from financial services providers to learn basic information about account inflows and outflows. This information could assist taxpayers in filing accurate returns and help the IRS better focus collection efforts. Research shows that when the IRS has access to third-party reporting, compliance rates top 95 percent. Without third-party information reporting, compliance rates are below 50 percent. Reliable information is critical to an effective and fair tax system.

The statistics cited in the essay demonstrate the importance of effective enforcement. It isn’t simply tax rates that favor the rich–lax enforcement costs an enormous amount that the rest of us must make up. Estimates are that uncollected taxes from those sources are equal to the total taxes paid by the lower 90 percent of individual taxpayers.

It is long past time to give the IRS the resources it needs to ensure that corporations and billionaires pay their taxes. If enforcement is fair across the board, the rest of us will feel a lot better about paying ours.

 

19 thoughts on “Enforcing The Rule Of Law

  1. In addition to having the wealthiest and corporations pay a fairer share of their taxes, I would like to hear about efforts to go after the money in off-shore accounts.

  2. Another thought on “Enforcing The Rule Of Law”; regarding the voter suppression laws being enacted in many states, do States Rights not end when they do not uphold the Constitution of the United States of America? These laws currently, like all considerations in this government are based on “Follow The Money”; never more so than since the Trump administration took control of tax laws and obviously the moral standards, or lack thereof, of the government and more than 70 MILLION Americans.

    Read your Constitutional Amendments IX Rights of people, X Powers of states and people, XV Black Suffrage and XIX Women’s Suffrage; the voter suppression laws being enacted do NOT mention race or gender specifically but those who are suppressed “happen” to be those races and gender. “Enforcing The Rule Of Law” regarding the voter rights of all Americans needs to be addressed before progress can be made into IRS laws regarding tax rates and collecting back taxes from millionaires and billionaires will be addressed by the full Congress at state and federal levels.

    “Americans spend a lot of time arguing about legislation.” The priority of the government argues more about legislation regarding money than about people’s rights and allowing the states to enact voter suppression laws will only continue to widen the economic levels of tax paying Americans who are losing civil and voting rights. The Republicans are still winning the tax war by sitting mute and idle in Congress as they concentrate on supporting the return of Donald Trump with McConnell, now the minority leader, still somehow in control and openly determined to stop any progress by the Biden administration.

    I read a news item that IRS has not sent out many refunds to tax payers because their printers are out of ink. Fact, Alternate Fact or Fiction? Or an excuse due to the lack of employees to carry out the responsibilities of the IRS?

  3. How about trying to attract the best and brightest to the IRS to do tax compliance instead of big accounting and big law hiring them to do tax avoidance? Maybe we can’t pay them the same salaries, but how about giving them “a piece of the action” via bonus percentages of what they recover?

    Of course, my idealistic self, would prefer to attract them via the idea of a career doing good public service…but in these days of ME, not WE…not likely.

  4. In effect, the tax collectors were declawed and destaffed. This was done intentionally by the oligarchs to prevent the collection of revenues and reduce accountability. It was done a long time ago. Like decades ago.

    The reasons are obvious to anyone who understands how this country functions.

    In 2010, we tried to get a nonprofit approved by the IRS, submitted in 2008. It was mandatory so we could collect payments from the City. We couldn’t even get a name of a person at the IRS. It was so bad, then-Senator Donnelly’s staff had to intervene. He explained the situation and apologized.

    Firing or eliminating the accountability function of the government has been the top priority for lawmakers over the past several decades. Meanwhile, the expansion of government has been applauded within the surveillance, military, and intelligence communities.

    I wonder why the oligarchy wants to surveil and contain the masses instead of being accountable to us? What are the bastards up to?

    By the way, have you noticed they morphed journalism with government sources into Espionage?

    Our free press is considered espionage. What does that tell you about the performances you see on the television or read in the newspapers? LOL

  5. As a former Executive Director of a 501c3, I’ve had lots of interactions with the IRS. One in particular goes into my “long tales of dealing with what seemed like idiocy,” folder, but I can’t say anything bad about the vast majority of the people I dealt with over the years.

    That being said, I have noticed that many times the IRS does what we all do. It goes after the low hanging fruit, making life miserable for a low paid worker with a complicated tax situation. If they go after the corporations, they know they are in for a long, drawn out, and possibly costly fight. They are loathe to take on those fights with a low level of expertise. The proposed hiring should help.

  6. Now that I own a rental property (an Airbnb), I have seen now easy it is for that case of toilet paper we bought at Sam’s Club to suddenly be a “business expense”, even when most of it ended up in the house. I can’t imagine how much fake money moves around when you are dealing with millions or even billions of dollars.

    Increasingly with short budgets, and short staffing, the IRS has avoided going after complicated high earner tax payers, because with limited resources, it is easier to catch the smaller less complicated cases. This is another case where most lower and middle class Republican’s are voting against their own best interests.

    Catching tax cheats levels the playing field for all of the people and business that are paying their fair of taxes and makes the entire economy more competitive. For the last few decades, Conservatives have argued that the IRS is politicized and the budget should not be increased because they target conservative groups more often than liberal groups. Studies have shown this is not true.

    Here is a post I made on Facebook on March 18th in response to the delayed tax filing dead line in 2021:
    ====================
    I had been reading about Trump’s push to cut staff at across the board for Federal Government agencies. It was part of his war on “The Deep State”. He instituted an almost across the board hiring freeze. He cut the budget of the GSA agency which is the HR department for the Federal Government. This has led to even critical positions across the board not being filled in almost all departments, including the IRS, plus normal attrition has deeply cut staff.
    On top of that Trump and Republicans cut the funding of the IRS some $20,000,000 last year. I have heard that for every $1 dollar spent on in the IRS they bring in $10 of revenue. It seems that if you want to save money the last budget you would cut would be the IRS.
    In addition, as the staffing levels at the IRS have fallen, the people that the IRS targets to get audited are often lower income taxpayers because incentives in the department reward employees for the number of audits completed. Auditing a high income, complicated, and professionally prepared returns takes a huge amount of time and effort and so staff go after the people that least afford to be audited. As narcissistic as Trump seems to be, there may have been an ulterior motive in cutting the IRS budget since Trump and many of his peers are in that high income, complicated, and professionally prepared tax return category.
    Today’s announcement that the IRS is pushing back the tax filing deadline has several reasons; The deadline was moved back last year and there are still unprocessed claims from last year, the last two COVID relief bills made lots of changes to the tax laws, computer systems still need to be upgraded but lack of funds has significantly slowed that down, AND LACK STAFF has slowed the processing of claims.
    If you want your tax refund in a timely manner, or you want to increase your chances of being audited, think twice before you attack “Deep State” because what you may actually be attacking are basic government services.
    =================

  7. Additionally, as a wage earner, receiving a W2s and 1099s, it is next to impossible to cheat on taxes. Through automated processes the IRS will send you a letter telling you you missed something.

    As a corporation, there is no third party checks and balances. I saw a proposal that would require reporting of in and out flows of bank accounts to the IRS for tax payers earring over $400,000 in income. This would be the equivalent of business W2/1099, or at least some third party verification data. This would only effect a small percentage of tax payers, and statistic show that just the fact that reporting happened cheating will go down.

    This verification effect was demonstrated when the SSN of dependents was required to be reported on forms, the next year the number of dependents claimed went down by several hundred thousand.

    Giving the IRS the funding and tools to their job is going to be good for everybody.

  8. Actually, we are looking at things in too narrow a window. It was Reagan who first decimated IRS staff in an attempt (successful) to shelter the rich. I don’t remember the details, but the late David Broder wrote about how tens of billions of dollars had (at that late 1980s date) just been lost to the IRS due to statute of limitations.

    Also, Peggy and Dan, there was a specific policy decision (I believe under Reagan, but it may have been under other Republican presidents – Bush, Clinton, Bush) to go after those no-good working class and middle class tax cheats and ignore the rich. When you have limited resources, you need criteria to direct your efforts. Remember the rich are chosen by god to be rich, so we shouldn’t mess with god’s plan — TFIC.

  9. And the IRS regulations that do exist and are enforced have been so contorted in favor of the very wealthy that they fail to represent equity or justice in extracting appropriate levels of tax payments from corporations and the top ten percent. The complaints concerning rich people not paying their fair share have little to do with law breaking and much to do with taking advantage of the laws the corporations and their lobbyists were able to extract from Congressmen who were indebted to them for large campaign contributions. Not coincidentally, one of the best paying career paths for new attorneys from great law schools is tax law. Adherence to the rule of law is no great virtue if that law has been twisted in your favor, possibly through your efforts.

  10. Back when it was revealed The Trumpet was paying minimal and no Federal Income Taxes, the Reactionary Right came to his defense. They presumed he was taking legally allowed deductions to reduce his taxes.

    When it was revealed that many of our largest corporations were paying no or very minimal Federal Income Taxes, these companies responded with – We are paying what we legally owe.

    If the IRS does receive more funding there must be a concurrent effort to close loopholes the 1% and big corporations use to avoid paying Federal Income Taxes.

  11. JoAnn,

    I hope you don’t mind, but, your comment was excellent! Really really excellent. And, I featured it on the Facebook page “My Perspective”

    Thank You😁

  12. The simplest way to describe the nature of our country is that the citizens have the responsibility to hire and fire those who create effective public policy so that we are free to live within bounds that restrict our trespass onto the rights of any others of us.

    That means we must collectively be able to reason out what means are required to insure that stays true no matter what else we change or simply does change in our one world.

    The question is, as we’ve made everything more complex, fragile, interconnected, impactful, and hard hitting, is that aspiration still in reach?

    If it’s not, what’s next?

  13. Pete – the problem is, without proper education in critical thinking (and in a culture of ME), common understanding of “effective public policy” likely cannot be achieved.

  14. Perhaps the lack of IRS resources and staff can explain why I have never received my 2nd stimulus check of $600 even though I put it on my tax return with H and R block early in March. They supposedly sent it Jan 6.

    I just started watching a movie on Netflix in which Meryl Streep’s character is victimized due to the creation of a false insurance business off shore. I have a suspicion that her very ordinary character is going to get justice for herself. I hope so.

    There just are too many tax loopholes for the wealthy especially with these off shore accounts. I think this is a symptom of addiction to money and power.

    Really, people, how much money do you need, how big house,car etc to be happy? If you ask me the one with the most stuff, dies miserably when he/she realizes it won’t go with them.

  15. Pete,

    Great question…who is the “self”? If it is those who fund “pols” we are already there.

  16. Let us not allow the Indiana Department of Revenue out of this conversation. Despite using H&R Block to do my taxes via the internet this year, by golly the DOR is disputing that I paid my property tax, that I am over the age of 65, and that H&R Block has the correct amount for my Marion County tax. The greedy bastards want another $45.00. How many other tax payers in this state have been nickeled and dimed this way? My guess is thousands.
    When you won’t raise taxes, and you won’t make the rich pay their fair share; the only ones left to squeeze are the poor and middle class.

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