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Economics Discuss A Gutted I.R.S. Makes the Rich Richer at the Political Forums; With enforcement enfeebled, as much as 20 percent of potential tax revenues go uncollected . Let’s take a moment to ...

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Old 12-27-2018, 06:14 AM
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Default A Gutted I.R.S. Makes the Rich Richer

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With enforcement enfeebled, as much as 20 percent of potential tax revenues go uncollected.

Let’s take a moment to pity the Internal Revenue Service. Yes, to many Americans, it’s a money-grabbing ogre siphoning hard-earned cash to the faceless federal bureaucracy.

But the nation’s tax collector today is an enfeebled enforcer. Its budget has been bled dry by a Republican Congress in service to wealthy donors and businesses aggressively pursuing tax avoidance, leaving uncollected 18 percent to 20 percent of potential tax revenues annually. That’s the conclusion in articles by the journalism site ProPublica, co-published by The Atlantic and The Times.

Loopholes are beyond the means of most Americans who earn salaries or are paid hourly wages, and are exploited by those who derive significant income from investments or business revenue. Although we’d all like to pay less, relative to most developed nations our tax burden is a pretty good deal.

It’s an even better deal for the richest Americans, who have benefited the most from President Trump’s tax cuts. The rich are different: They’re more likely to cheat, according to one study of I.R.S. data. And the I.R.S. has about as many auditors now as it did 60 years ago, when there were half as many Americans. The undermining of the I.R.S.’s enforcement capability coincides nicely with the Republican playbook: Enrich wealthy individuals and corporations with tax giveaways that balloon the deficit, justifying spending cuts for health care, education and infrastructure, then amplify the process by not holding high-end taxpayers accountable for the amounts they owe.

Dodging taxes is as old as taxes themselves. Just ask Mr. Trump, who has employed systematic dodging for decades, according to a Times investigation.

We got a good look at one of the bigger problems, the proclivity of the wealthy to hide cash from the I.R.S., in 2008, when the Justice Department was able to pierce the Swiss bank secrecy veil during an investigation of UBS. The department uncovered thousands of rich Americans who were hiding about $18 billion in offshore accounts arranged by that Swiss bank. Many were compelled to fess up and pay up. But eight years later, the Panama Papers, millions of files hacked from a Panamanian law firm that specialized in caching money for the rich and powerful, disclosed that there were still plenty of rich people willing to play hide-and-seek with the I.R.S.

The odds are in their favor, and growing. ProPublica reported that I.R.S. audits dropped 42 percent from 2010 to 2017, a period in which the I.R.S. budget was lopped by $2.5 billion, adjusted for inflation. New investigations of people who don’t file dropped to 362,000 last year, from 2.4 million in 2011. That costs the Treasury $3 billion annually in uncollected taxes. More than $8 billion in back taxes did not get collected in 2017 because the agency couldn’t get to them before the 10-year statute of limitations ran out, another worsening problem. Tax delinquents can simply wait the agency out. ProPublica estimated the total shortfall of uncollected funds since 2011 at $95 billion.

These uncollected billions could pay for any number of things: better care of wounded veterans, infrastructure improvements such as a desperately needed new tunnel between New York and New Jersey. You could even build an expensive wall.

One area where the I.R.S. still bares its teeth is in auditing people in the lowest tax bracket. If you are claiming the earned-income tax credit, which provides cash for people who typically earn less than $20,000 annually, you are as likely to be audited as someone earning between $500,000 and $1 million. ProPublica reported that 36 percent of all I.R.S. audits focused on this group. It may not be a crime to be poor in the G.O.P.’s America, but you can expect to be treated like a criminal for accepting the government’s cash to make ends meet. At best, that’s an inefficient use of I.R.S. agents: Compliance should apply to all, but the I.R.S. should do most of its fishing where the big fish are.

The Trump/G.O.P. tax policy is now operating at peak failure. The tax cuts have failed to increase gross domestic product beyond the “sugar high” stimulus they gave to an economy already heading toward record low unemployment. The economy seems to be slowing, making a mockery of the promise of strong growth that was used to peddle the tax cuts.

The stock market is shuddering at the idea of a slowdown, which corporations contributed to by using their tax windfall to buy back more than $1 trillion of their own stock. They have, to this point, immolated capital instead of using it for additional hiring, increased wages or further business investments.

A CNBC poll found that millionaires are still sanguine about the economy. They can well afford to be. If their stocks lose value, they can take a write-off. If stocks rise, their maximum long-term capital gains tax is only 20 percent. Most American households don’t own stocks — or no longer own them, having been forced to liquidate stock holdings in the Great Recession, which was precipitated by a collapse in the housing market. Thus the wealth gap grows, reaching levels not seen since the Roaring Twenties.

To pay for the millionaire tax cuts, sacrifices had to be made. So Congress limited deductions for state and local taxes to $10,000 annually. While that generally applies to well-to-do people who can itemize their tax returns, it was also a clear shot against blue states such as California and New York that have relatively high state and local taxes. But reducing these deductions, along with higher interest rates, punished the housing market, which is stagnant nationally and in a free fall in the Northeast.

Our ability to keep the $1 trillion deficit created by the Trump tax cuts from deepening depends in part on collecting taxes to which the government is legally entitled.

Think of it this way: To protect our nation, we have the most powerful army in the world. To protect our tax base, we have an army on the order of Liechtenstein’s.

The lack of deterrence will only encourage more cheating. The I.R.S. needs to be capable of doing the job for which it was created — from answering taxpayers’ questions to chasing down the richest cheats, even if they occupy the Oval Office.
Why don't they care? I guess cause so far none of this affects them.
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Old 12-27-2018, 07:42 AM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

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Why don't they care? I guess cause so far none of this affects them.
A half page of babble, not one backup linky. But:

Fact: Half the nation pays less than no taxes. The top 1% pays 40%. The top 10% pays 50%. A family of 4 typically must have an income of $60 K +/- before owing taxes. So who's getting the tax breaks?

Author confuses dodging, which is legal and legitimate, with cheating, which isn't. Nearly all the 1% get audited yearly, most of the rest of the audits accrue to the top 10%.

Most working Americans do own stocks. Most pensions are at least partially invested directly in the market. The vast majority of mutual funds own stocks.


At least, Salty, post the source of the rant. Difficult to assess the credibility of the source without knowing the source.

It's also illegal to post copyrighted material without attribution.

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Old 12-27-2018, 07:56 AM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

https://www.nytimes.com/2018/12/25/o...dits-rich.html

Even the authors aren't willing to put their names to this.

The original source apparently is Pro Publica. Not exactly an unbiased source.
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Old 12-27-2018, 09:14 AM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

Quote:
Originally Posted by jimbo View Post
A half page of babble, not one backup linky. But:

Fact: Half the nation pays less than no taxes. The top 1% pays 40%. The top 10% pays 50%. A family of 4 typically must have an income of $60 K +/- before owing taxes. So who's getting the tax breaks?

Author confuses dodging, which is legal and legitimate, with cheating, which isn't. Nearly all the 1% get audited yearly, most of the rest of the audits accrue to the top 10%.

Most working Americans do own stocks. Most pensions are at least partially invested directly in the market. The vast majority of mutual funds own stocks.


At least, Salty, post the source of the rant. Difficult to assess the credibility of the source without knowing the source.

It's also illegal to post copyrighted material without attribution.
When the average homeowner reduces their tax liability with home mortgage interest it's a deduction. When a wealthy person like Warren Buffett manipulates their income to produce the lion's share as lower taxed capital gains it's exploiting a loophole. The rich are evil tax cheats no matter what, evidence doesn't matter.

The wonderful non biased employees of the IRS are incapable of political bias, not of smidgeon of corruption, Obama said so. Oh wait. But we should reward the Lois Lerners for her political bias in conducting her job and Koskin for lying about server crashes.
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Old 12-27-2018, 09:36 AM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

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When the average homeowner reduces their tax liability with home mortgage interest it's a deduction. When a wealthy person like Warren Buffett manipulates their income to produce the lion's share as lower taxed capital gains it's exploiting a loophole. The rich are evil tax cheats no matter what, evidence doesn't matter.

The wonderful non biased employees of the IRS are incapable of political bias, not of smidgeon of corruption, Obama said so. Oh wait. But we should reward the Lois Lerners for her political bias in conducting her job and Koskin for lying about server crashes.
Based on the numbers, either dollars, or people, the two largest loopholes are being poor, and having kids. Nearly all potential taxpayers use those. Third is undoubtedly charitable donations, including churches. My guess is this is by far the most abused category.

Overstating your charitable donations is illegal.
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Old 12-27-2018, 11:26 AM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

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Based on the numbers, either dollars, or people, the two largest loopholes are being poor, and having kids. Nearly all potential taxpayers use those. Third is undoubtedly charitable donations, including churches. My guess is this is by far the most abused category.

Overstating your charitable donations is illegal.
At what point does the tax deduction for people having kids end? A little biased for those of us who didn't have any.

I think the cap on local RE taxes was excellent.... because someone chooses to live in a high tax area, they get a larger deduction? I don't hear them say a word about 'using' that deduction, since it benefits them.

Many charitable groups don't give receipts anymore, including Goodwill... they let you write up a list for the donations you dropped in back, and they sign a receipt saying they received X of bags of items. Not to hard to cheat on that.

I haven't had enough to itemize deductions in a good decade. I figure the few times I may have come close, it wasn't worth the fight to keep receipts and documentations, so I take the standard deduction.
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Old 12-27-2018, 12:17 PM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

This line actually made me crack up...

Quote:
Tax delinquents can simply wait the agency out. ProPublica estimated the total shortfall of uncollected funds since 2011 at $95 billion.
Really?...

Because here's an May, 2016 report...

IRS Loses $400 Billion Per Year in Unpaid Taxes

Quote:
The Internal Revenue Service (IRS) recently released new estimates of the “tax gap” – the amount of taxes owed that go uncollected. They reveal that only 84 percent of the money owed in taxes is collected each year, which resulted in a "net tax gap" of $406 billion per year on average between 2008 and 2010. That amount is a combined $458 billion not voluntarily paid and another $52 billion collected after the IRS contacted those who were delinquent. The net tax gap of $406 billion is about 2.8 percent of Gross Domestic Product (GDP), which would be equivalent to $6.5 trillion over the next decade.

Most of the tax gap – $387 billion, or 84 percent of the gross amount – comes from taxpayers underreporting income. Approximately half of the net tax gap ($203 billion) comes from underreported pass-through business income, small corporation income, and the self-employment payroll tax.
So ProPublica say we haven't collected $95 billion since 2011, but the actual IRS says we were losing $400 billion PER YEAR a few years ago...Who to believe?...
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Old 12-27-2018, 12:57 PM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

I'd like to see the IRS and the income tax go the way of the dodo. Both are terrible and make possible the unjust transfer of wealth from people who have earned it to people who don't.
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Old 12-28-2018, 10:14 AM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

From the OP

Quote:
ProPublica reported that I.R.S. audits dropped 42 percent from 2010 to 2017, a period in which the I.R.S. budget was lopped by $2.5 billion, adjusted for inflation. New investigations of people who don’t file dropped to 362,000 last year, from 2.4 million in 2011. That costs the Treasury $3 billion annually in uncollected taxes. More than $8 billion in back taxes did not get collected in 2017 because the agency couldn’t get to them before the 10-year statute of limitations ran out, another worsening problem. Tax delinquents can simply wait the agency out. ProPublica estimated the total shortfall of uncollected funds since 2011 at $95 billion.
Hmm... according to the OP the IRS budget was reduced by $2.4 billion 2010 - 2017, a period which includes 6 years of the Obama administration. Apparently the Obama administration didn't think the reduction was a problem.

Those of us with experience in private industry are accustomed to doing more with less as a fact of life, not so with the IRS bureaucracy. Of course if the IRS had busied itself with audits instead of acting as a political weapon of the Obama administration's campaign of political sabotage tax revenues might have been boosted.
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Old 12-28-2018, 07:59 PM
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Default Re: A Gutted I.R.S. Makes the Rich Richer

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I'd like to see the IRS and the income tax go the way of the dodo. Both are terrible and make possible the unjust transfer of wealth from people who have earned it to people who don't.
Every great civilization in the history of the world had two things. Taxes and a census.
Some think we should start from scratch. I maintain we'll be scratchin' our butts while hangin' out in trees if we start over.
These people try to get others to follow their stupid theories about society.
It's easy sometimes cause who doesn't hate taxes right?
They are necessary.
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