trump proposes 5% boost to the irs budget, reversing years of cutbacks and declines.
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by 卡塔尔世界杯常规比赛时间 research
after many years of increasing austerity—and some would say crippling austerity—the irs may have bottomed out. despite broad cuts proposed in the overall 2020 federal budget, president trump has included an additional $362 million—a five percent increase—for the agency that gathers the funds that keep the united states in business.
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if congress approves the budget as proposed (and that’s bound to be an exciting story), the irs can begin—just begin—to recover some of what has lost over the last decade or so.
those cuts have been draconian, leaving the irs with a demoralized skeleton crew working with antiquated information technology and a phone system designed to avoid human contact. the number of irs employees has dropped below 10,000, a level not seen since the early years of the eisenhower administration, when the economy was a seventh of its current size. since 2010, audits have fallen by 42 percent.
in other words, if there was ever a time to cheat on your taxes, it’s now.
investigations of nonfilers have dropped
quite a few americans have figured this out. a recent notorious case is that of michael avenatti, esq., who represented stormy daniels in her suits against president trump. somehow avenatti allegedly got away with not filing a tax return after 2010.
it should be no surprise that the irs failed to notice avenatti’s failure to file. investigations of nonfilers dropped from 2.4 million in 2011 to just 362,000 in 2017. that reduction alone is estimated to result in $3 billion in uncollected taxes each year. maybe if avenatti had kept a lower profile, the irs wouldn’t have noticed him.
collections from those who file but don’t pay have also plummeted. in 2010, $482 million in tax debts lapsed after a ten-year statutory limitation. by 2017, that figure rose to $8.3 billion, a 17-fold increase.
the emasculation of the irs may be impacting the lower and middle classes more than the wealthy and corporations. interactions between the irs and individuals with modest incomes tend to be automated. it isn’t hard for a computer—even the irs’s rickety old coal-fed, steam-powered clunkers—to link w-2s and individual workers. but assessing the convoluted tax shelters of billionaires requires specialized accountants and a lot of time. investigating corporate tax schemes can consume even more of the irs’s limited resources.
in 2017, 36 percent of audits were of people claiming earned income tax credits, typically people earning less than $20,000 per year.
in 2011, about eight percent of people making more than $500,000 were audited. by 2017, that percentage had dropped to 2.5 percent.
how many thousands or millions of taxpayers are taking advantage of the irs’s limited resources? and how many are, in all innocence, filing erroneous returns simply because they cannot get information from the irs?
nobody knows how many, but the irs has an estimate of how much, and it has a name for it: the “tax gap.”
the tax gap
the irs estimates that the tax gap—the difference between total taxes paid and total taxes that should have been paid—is a staggering $458 billion. that’s about half the annual federal deficit. it’s roughly equal to everything the administration has proposed cutting next year.
and that may be a conservative estimate. the last irs report on the tax gap was issued in 2016. it analyzed the period from 2008 to 2010, when taxpayers coughed up about 82 percent of what they owed. if that same percentage held true in 2017, the tax gap in that year was $667 billion—and that’s assuming no increase in cheating despite the drop in audits.
by no means, all of that nearly half a trillion dollars has been lost to fraud or outright failure to file. much of it results from taxpayers who become exasperated with the nearly impossible task of accurately calculating what they owe. nobody but robots answer the phone at the irs. it takes months to book an appointment at a tax assistance center. reading the 2,600 pages of the tax code and the thousands of pages of associated opinions and positions is beyond human capacity.
fraud and frustration aren’t the only culprits. nobody knows how much revenue is lost to the incompetence or malfeasance of unqualified tax preparers. when the government accountability office had undercover auditors pose as taxpayers at the offices of large tax prep chains, only two of the 19 selected preparers were able to calculate the correct payment.
more than half of the 80 million tax returns done by tax preparers were done by unenrolled preparers, that is, practitioners who are neither cpas nor enrolled agents or are otherwise not certified as meeting any level of competence or education standards whatsoever.
counterproductive cuts
in their relentless efforts to reduce the federal budget, republicans in congress have led the ten-year effort to gut the irs into a state of near impotence. ostensibly the reduced budget translates into a reduced burden on the taxpayer.
the cuts, however, have been counterproductive. the irs estimates that every additional $1 spent on irs activities yields $4 in additional revenue. if invested in enforcement activities, $1 yields $10. spending more on irs activities would result in lower taxes for everyone except those who wouldn’t otherwise pay their fair share.
one dollar yielding ten is a good investment. if the government was run like the business republicans have always advocated, the investment would be made.
but debate in congress can get a little twisted. reducing the irs’s power to collect taxes can get confused with actually reducing taxes. elected officials may not confuse the two, but some of their constituents do. and a lot of those constituents simply do not like the irs. they’re pleased to see its budget reduced.
underfunding the irs reduces taxes only for those unwilling to pay their fair share. honest taxpayers have to pay more to make up for the cheats. the lack of irs audits and assistance only worsens the gap between the two.
last year mr. trump asked congress to reduce the irs budget by two percent. this year, however, in a laudable reversal, he has stepped up to the plate and asked for an increase. it’s far too modest and long overdue, but it’s a step in the right direction.
the taxpayers advocacy service, a watchdog division within the irs, says “the irs is stretched to its breaking point.” the national taxpayer advocate’s annual report to congress has a lengthy list of problems for the irs to resolve. most of them could be solved with money.
that money, alas, must be appropriated by the same congress that shut down the irs (and the rest of the federal government) just as tax season was getting underway, throwing a monkey wrench into a machine that hadn’t been working very well, to begin with.
to quote the taxpayer advocate’s report, “it is irresponsible for an agency that touches all aspects of people’s lives to be underfunded, understaffed, and at the mercy of shutdowns.”
yes, indeed. the ball is in congress’s court, the ball in the proposed budget that could bring the irs back from its breaking point. for the good of a nation that needs the lifeblood of taxes, congress must appropriate the spending that allows the united states to continue as a going concern.