Possible increase in IRS enforcement budget has billionaires in a panic

There’s a lot in the Democrats’ Inflation Reduction Act for Republicans to hate, but the part that has the GOP and the billionaires it represents most up in arms is the massive increase in the IRS budget to go after rich tax cheats.

Notes the Wall Street Journal:

Treasury and IRS officials have said the new funds for enforcement won’t increase audit rates on filers making less than $400,000, and on Aug. 4 IRS Commissioner Chuck Rettig sent letters to Congress stating this. The bill omits an earlier proposal requiring banks to report account cash-flow information to the IRS.

Former IRS Commissioner Charles Rossotti, a technology specialist who has advised the Treasury Department and Congress on improving the tax system, endorses new IRS efforts aimed at higher earners. “Most underreporting is from upper-income people, because that’s where most of the income is,” he says.

These taxpayers are also more likely to have income from sources not automatically reported to the IRS. (There’s little cheating on income like salaries or pensions that is reported, according to the agency.) While the IRS is getting good at mining data to find missing income, it lacks the resources to make the best use of its skills.

The boost to enforcement dollars aims to stem a long decline in the IRS’s ability to check taxpayer compliance, especially by the highest earners. From 2010 through 2019, according to a study by the Government Accountability Office, the number of audits of taxpayers earning more than $500,000 dropped by three-quarters, from 53,000 to 14,000. Over this period, the number of key IRS enforcement personnel also dropped 40%, according to agency data.

Everyone from apologists like the Heritage Foundation and National Review, to noted economics expert U.S. Sens. Ted Cruz, are hitting the panic button.

Republicans and the right-wing media echo chamber have been incredibly successful over the last two decades in getting Congress to cut the IRS budget to the point that agency now tends to go after low-hanging fruit like poor people who claimed the Earned Income Tax Credit mistakenly or fraudulently.

It costs a lot more money to go after rich people’s tax dodges because those often require forensic audits.

Ramping up IRS enforcement around complex illegal tax schemes requires money that the Republicans have made sure the IRS hasn’t had in the past.

So, yeah, they’re all scared, no doubt because many of them have something to hide.

There is much to love about the Inflation Reduction Act, even though it does not go as far as I’d have hoped. But that is the nature of our national legislative law-making process. You get as much as you can now, and then go back later for another bite at the apple.

If the Act passes largely intact, all my hesitation about the Democrats for the 2024 election will have largely been erased. The IRS tax enforcement provisions will be a large part of that.

One of the big reasons inequality has been allowed to grow exponentially in this country is because you and I pay our fair share of taxes, and the rich often pay little to nothing.

You can read the rest of the WSJ column at this link.

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