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The Internal Revenue Service (IRS) is facing a crisis, just not the one many pundits and most conservatives think.

To be sure, the Republican excavation project to unearth the smoking gun proving the agency targeted right-wing "social welfare organizations" over their non-profit status will continue. As Republican National Committee Chairman Reince Priebus described his party's lawsuit this week, "We're done playing footsie here with the IRS."

But the real scandal is that Republicans and their conservative amen corner have already done something much worse to the IRS. After their successful 1990's crusade to gut the Internal Revenue Service, the GOP is once again slashing its budget, demonizing its employees and even questioning the legitimacy of its mission. With its funding cut by Congress for four years in a row, the agency now has 10 percent fewer agents and officers than five years ago and fewer agents auditing returns than at any time since at least the 1980s. One result is that the "tax gap"—the difference between what the American people and U.S. businesses owe the federal government and what they actually pay—has mushroomed to an estimated $500 billion from $195 billion in 1998. To put that in context, that's more than the entire projected federal budget deficit for this year.

Before looking at the frightening numbers behind today's sad state of the IRS, it's important to recount the history of how the GOP became, as Jonathan Cohn aptly put it, the "pro-deficits, pro-tax evasion" party.

Continue reading about the GOP war on the IRS below.

For starters, the GOP's best and brightest have ridiculed the very notion that the richest Americans can even be asked to pay higher taxes. "It's really American to avoid paying taxes, legally," South Carolina Senator Lindsey Graham declared in defense of Mitt Romney in 2012, adding:

"It's a game we play. Every American tries to find the way to get the most deductions they can. I see nothing wrong with playing the game because we set it up to be a game."
A game, that is, that will be won by the well-to-do, since apparently they are the only ones financially qualified to play it. In rejecting a small increase in gilded class tax rates, President George W. Bush summed up the rules by explaining that "the really rich people figure out how to dodge taxes anyway." Supply-side snake oil salesman Arthur Laffer agreed:
"You really can't collect much money from upper-income people. They know how to get around taxes."
Their task is made even easier if the Republican Party convinces a wide swath of the American public that the Internal Revenue Service is, as Maine Governor Paul LePage claimed, "the new Gestapo" which is "headed in the direction of killing a lot of people." As it turns out, LePage was only regurgitating 20-year-old GOP talking points.

As David Cay Johnston explained in his 2003 classic Perfectly Legal, the GOP during the Clinton administration waged an all-out war on the IRS, turning the priorities for auditing Americans upside-down. Then as now, GOP spinmeister Frank Luntz framed the issue for his Republican allies: "Which would you prefer: having your wallet or purse stolen or being audited by the IRS?" As Senator William Roth's Finance Committee held hearings in 1997 and 1998, Mississippi's Trent Lott decried the IRS' "Gestapo-like tactics" while Alaska's Frank Murkowski protested, "You don't need to send in armed personnel in flak jackets." Former Senator Don Nickles of Oklahoma simply raged, "The IRS is out of control!" Congress went on to pass and Bill Clinton to sign the IRS Reform and Restructuring Act in 1998.

Even as then-IRS Director Charles Rossotti warned Congress about an epidemic of tax cheating, Senator Phil Gramm in May 1998 denounced the agency. Peddling myths of jack-booted IRS agents tormenting American taxpayers, Gramm called on Rossotti to fire his 50 worst employees. Gramm concluded:

I have no confidence in the Internal Revenue Service of this country. You do not have a good system. This agency has too much unchecked power.
As the New York Times recounted that spring, the plan to gut the IRS advocated by Phil Gramm and his allies was a popular political gambit, but almost certain to create incentives for tax evasion:
Mr. Gramm spoke at length of how he had ''no confidence'' in the I.R.S., remarks that were in sharp contrast to those of every other senator, who emphasized that the majority of I.R.S. workers were honest and most taxpayers law-abiding.

A variety of tax experts have said in recent weeks that attacks on the I.R.S., which polls show are a potent device to win votes and contributions for Republicans, give comfort to tax cheats and discourage honest taxpayers.

Which, of course, is exactly what happened. IRS staffing was slashed and audits of the wealthy dropped precipitously. As Johnston explained:
In 1999, for the first time, the poor were more likely than the rich to have their tax returns audited. The overall rate for people making less than $25,000 a year was 1.36%, compared with 1.15% of returns by those making $100,000 or more...Over the previous 11 years audit rates for the poor had increased by a third, while falling 90 percent for the top tier of Americans.

By 2006, as the New York Times reported, "Over the last five years, officials at both the I.R.S. and the Treasury have told Congress that cheating among the highest-income Americans is a major and growing problem." As former Reagan administration official Bruce Bartlett explained in 2012, "As the I.R.S. data show, noncompliance increased between 2001 and 2006, a period in which a substantial number of tax cuts were enacted." All told, according to the IRS estimates, the tax gap for 2006—that is, revenue lost to evasion, fraud and underreporting—reached $385 billion.  That's $95 billion more than in 2001 and almost double the $195 billion Rossotti warned Congress about in 1998.

By 2010, other projections put the tax gap as high as $500 billion a year, a sum equal to about 15 percent of the entire federal budget.

Nevertheless, the Republicans' anti-IRS drumbeat continued unabated. Even with 20,000 fewer total employees than in 1992, Bartlett lamented, "Republicans have been treating the IRS like a political punching bag for years, cutting its personnel and restricting its ability to do its job." Like a punching bag, even when IRS workers were killed for just doing their jobs.

Declaring, "Well Mr. Big Brother IRS Man, let's try something different, take my pound of flesh and sleep well," disgruntled taxpayer Joseph Stack in February 2010 flew a small airplane into the IRS office in Austin, Texas. His suicide attack killed IRS employee and Vietnam veteran Vernon Hunter. But instead of producing universal revulsion, some Republicans in Congress essentially blamed the victim. As Rep. Steve King (R-IA) put it:

It's sad the incident in Texas happened, but by the same token, it's an agency that is unnecessary and when the day comes when that is over and we abolish the IRS, it's going to be a happy day for America.
(Three years later, Texas GOP Senator Ted Cruz echoed that line, announcing, ""We ought to abolish the IRS and instead move to a simple flat tax, where the average American can fill out our taxes on a postcard.")

Newly elected Massachusetts Republican Senator Scott Brown similarly seemed to show King's sympathy for the devil:

I don't know if it's related, but I can just sense not only in my election, but since being here in Washington, people are frustrated. They want transparency, they want their elected officials to be accountable and open and talk about the things that are affecting their daily lives. So I'm not sure that there's a connection, I certainly hope not. But we need to do things better.
One person who had been doing things better was President Barack Obama. In his first two years in office, Obama's administration began to level the playing field for the IRS versus the tax cheats. The agency finally reversed its decade-long bias for the wealthy. The agency offered the carrot and stick of an amnesty program and prosecution for Americans hiding unreported offshore bank accounts. A new whistleblower program also began to pay dividends: in 2011, the IRS paid an accountant $4.5 million for tipping off the agency that his employer was cheating the American people out of $20 million owed in taxes. As the AP reported in December 2009, in its efforts to recover some of the nearly half-trillion dollars in revenue lost to cheating, the IRS was less likely to audit those earning below $200,000 a year:
IRS enforcement numbers, released Tuesday, show that returns under that amount have a 1 percent chance of getting audited.

Returns showing income of $200,000 and above have a nearly 3 percent audit chance. The percentage jumps to more than 6 percent for returns showing earnings of $1 million or more...

The number of audits jumped 11 percent from 2008 to 2009 for returns with earnings of $200,000 or more, but rose 30 percent for returns showing earnings of $1 million or more. For those under $200,000 the number of audits remained steady.

But just four short years later, the progress has started coming undone, thanks to a new wave of Republican attacks on the IRS budget. As the Washington Post reported last week, "As millions of Americans race to meet Tuesday's tax deadline, their chances of getting audited are lower than they have been in years." And as National Taxpayer Advocate Nina Olson and IRS Commissioner John Koskinen acknowledged with great regret, customer service has suffered greatly.

How bad have things gotten? Forty percent of calls to the IRS for help will go answered. The 60 percent they do get through have to wait 25 minutes on average, compared to just 10 minutes in 2010. In 2014, the agency provided in-person help to only 5.6 million people, compared to 6.5 million the year before. As Fierce Government explained in February, there is no secret as to why:

Fiscal 2014 IRS appropriations are $11.29 billion - almost a billion less than it was in 2010 and the fourth year in a row funding has declined, Koskinen told the House Appropriations Committee subcommittee on financial services and general government.

The IRS budget has been cut by 7 percent total over the last four years, he said, despite a 4 percent rise in total tax filings.

Cut, despite the testimony by Koskinen and Treasury Secretary Jacob Lew that for each additional dollar invested in the IRS, the agency will deliver $6 in new revenue. (Cut, too, despite the Republicans' endless repeated mantra that the United States is becoming like Greece, where tax noncompliance is essentially a national pastime.) As Koskinen summed up the impact of the cumulative effects of the House GOP's $600 million cut in 2011 and the 2013 budget sequester:
"If you gave us the $500 million of our sequester funds (slashed under automatic spending cuts) we would have given you back $2 to $3 billion more, and people shrug and move on," he said. The agency now employs 10,000 fewer people and receives $900 million less in federal funds than it did four years ago.
The last time the IRS analyzed the tax gap based in 2006 data, the agency concluded that the nation's 114 million households had to pay the equivalent of a "noncompliance surtax" of nearly $3,400 each. But with the taxpayer population now at 141.2 million, economist Benjamin Harris of the Brookings Institution estimated the total tax gap could range from $410 billion to $500 billion. "You could go a long way toward solving our budget mess by closing the tax gap," Harris said. "But the problem is, it's not easily closed."

Especially if, as Republicans demand, you don't even try.

As Bartlett notes, "Information reporting and withholding are the I.R.S.'s principal lines of defense against tax cheating," especially by small businesses, yet "previous efforts by Congress to do so have been met with huge political resistance." But those policy moves aren't as counterproductive as cutting the agency's ability to enforce the law at all. As Ezra Klein pointed out when House Republicans first slashed the IRS budget in 2011:

Converting dollar bills into $10 bills is an excellent way to pay off your credit card. Except, it seems, if you're a House Republican.
Especially if you're a House Republican trying to make hay over a supposed scandal involving the Internal Revenue Service's handling of 501c(4) political groups. As The Hill reported in July 10, 2013:
House Republicans are going on offense against the Internal Revenue Service with measures to slash the agency's spending and reform what they say has become a culture of abuse.

The House Appropriations Committee released a measure on Tuesday that would roll back the IRS budget by $3 billion -- a cut of roughly a quarter -- in direct response to the agency's targeting of tax-exempt groups.

Such a step, which even Charles Krauthammer called "silly and small," would make Uncle Sam's tax gap dramatically worse. But for today's GOP, that's no problem.  As IRS chief Koskinen recently warned Congress, "I have not figured out either philosophically or psychologically why nobody seems to care whether we collect the revenue or not."

And that's the real scandal.

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Comment Preferences

  •  The real problem... (3+ / 0-)
    Recommended by:
    cocinero, goodpractice, kaliope

    The U.S. government does not need tax revenues in order to spend. It is the currency issuer of the U.S. Dollar. Federal taxes do not "fund" U.S. government spending. It is an illusion do to flow-of-funds, so it appears that taxes fund govenrment spending. Think about it: if you had a 'printing press' for completely legal U.S. Dollars, would you need to earn an income (taxes) or borrow dollars in order to spend? Of course not!

    The sooner progressives figure this out, the sooner we can start effectively using the U.S. government to serve public purpose. Start here:

  •  Faux GOP Outrage (16+ / 0-)

    This is what motivated the Issa IRS hearings to begin with; get the IRS on the defensive, so that they won't aggressively investigate the fully political 501Cs. Just another step in allowing blatant right-wing abuse of the US tax code.

    "One of the more serious temptations which stifles boldness and zeal is a defeatism which turns us into querulous and disillusioned pessimists, sourpusses." ― Pope Francis

    by GoodGod on Sun Apr 20, 2014 at 03:18:36 PM PDT

    •  And they sent me a nasty note (0+ / 0-)

      asking where was the income from a single worker's comp check ending Dec 27 for which I received no 1099. It was an omission valued at $17.00 in taxes.

      If you teach your child only one thing, let it be kindness through example.

      by Nodin on Mon Apr 21, 2014 at 06:17:25 PM PDT

      [ Parent ]

  •  Aren't the Congress's salaries... (4+ / 0-)
    Recommended by:
    blueoregon, Eric Nelson, Amber6541, hbk

    paid for by our taxes that are collected by the IRS?

    "Growth for the sake of growth is the ideology of the cancer cell." ~ Edward Abbey

    by SaraBeth on Sun Apr 20, 2014 at 03:27:04 PM PDT

  •  people who oppose the rule of law are not (14+ / 0-)

    conservatives, but right wing zealots.

    Conservatism (n)
    (1) the inclination, especially in politics, to maintain the existing or traditional order.
    (2) a political philosophy or attitude emphsizing respect for traditional institutions, distrust of government activism, and opposition to sudden change in the established order.

    (4) caution or moderation, as in behavior or outlook.
     - American Heritage Dictionary
    We should call the hard right what they are, not what they pretend to be, especially considering the safety-first connotations of (4).

    There's no such thing as a free market!

    by Albanius on Sun Apr 20, 2014 at 03:38:35 PM PDT

  •  I'll bet the Pentagon would be in a bind (1+ / 0-)
    Recommended by:

    if everyone stopped paying taxes.  

    Poverty is the worst form of violence. - Mahatma Gandhi

    by blueoregon on Sun Apr 20, 2014 at 03:41:31 PM PDT

  •  as the queen of mean (7+ / 0-)

    said only the little people pay taxes.

  •  Cheating on taxes? Just a boondoggle for the (10+ / 0-)

    very rich.  As a law-abiding member of the one percent (NOT the one percent of the one percent) I'm more than happy to pay 40 percent of my gross income in federal, state, and local property tax.  Correspondingly rich folks in the EU pay far more.  And they have an infinitely better quality of life to show for it.
    Ashamed to be an American.
    Ashamed to be male.
    Ashamed to be human.

    Armed! I feel like a savage! Barbarella

    by richardvjohnson on Sun Apr 20, 2014 at 03:57:15 PM PDT

  •  It's another way to shrink govt by defunding it (7+ / 0-)

    nosotros no somos estúpidos

    by a2nite on Sun Apr 20, 2014 at 03:59:42 PM PDT

  •  I gotta (10+ / 0-)

    get back to work, so Mitt Romney can afford his tax free life!!!

    •  deh - the last return that Romney disclosed was (1+ / 0-)
      Recommended by:

      2011 and he paid $1.9 million in federal income tax. I don't know about you, but that was a lot more than I paid and hardly a "tax free life".

      "let's talk about that"

      by VClib on Sun Apr 20, 2014 at 06:51:21 PM PDT

      [ Parent ]

      •  Tell you what, VClib (7+ / 0-)

        Compare what Romney paid in total taxes of all kinds as a percent of his income with what the average worker pays in total taxes on the same basis. I'll even disregard FICA, but count tolls and other user fees. Hint: sales taxes, excise taxes and property taxes -- all regressive -- will eat you alive.

        Pointing to Romney's absolute income tax is a sleazy tactic that is well beneath a person of your intellect.

        Too soon old, too late smart (-7.25, -6.21)

        by Tim DeLaney on Sun Apr 20, 2014 at 07:21:47 PM PDT

        [ Parent ]

        •  Tim D - Romney's federal effective rate (1+ / 0-)
          Recommended by:

          was in the low teens and if you add state and all other taxes was likely in the mid-teens. I would not have commented except that deh referred to Romney's "tax free life". Given that Romney's total tax bill was more than $2 million what his effective rate was isn't relevant, he doesn't have a "tax free life". Mitt Romney pays more tax in one year that most of us pay in a lifetime, or even earn in a lifetime. That was my only point.

          "let's talk about that"

          by VClib on Sun Apr 20, 2014 at 09:17:38 PM PDT

          [ Parent ]

          •  Most of us here find Romney's effective rate (3+ / 0-)
            Recommended by:
            hbk, Ljanney, indedave

            highly relevant to this discussion. The comment by deh was obviously meant as hyperbole, not as a literal arithmetic truth.

            OTOH, your comment appears to defend the lopsided nature of our tax system on the grounds that his absolute tax bill is higher than that of the rest of us.

            Too soon old, too late smart (-7.25, -6.21)

            by Tim DeLaney on Sun Apr 20, 2014 at 10:12:31 PM PDT

            [ Parent ]

            •  Tim - every country in the G20 taxes long term (0+ / 0-)

              capital gains at a lower rate than earned income. I think that taxing long term capital gains at a rate equal to, or higher than, earned income would result in capital flight and lower long term economic growth in the US. The US has always taxed long term capital gains at a lower rate (historically half) than the earned income rate except for the three years after the Tax Reform Act of 1986 when both rates were capped at 28%.

              "let's talk about that"

              by VClib on Sun Apr 20, 2014 at 11:16:34 PM PDT

              [ Parent ]

              •  This is just "trickle down" theory (6+ / 0-)

                thinly disguised. if the events of the 21st century have taught us anything, it's that great wealth in the hands of a few lead to hard times for the middle class, both economically and politically.

                Low tax rates on capital gains actually discourage real capital investment. Why should Mitt Romney or S. Robson Walton take the risks of entrepreneurship when tax law strongly favors accumulating property and financial assets?

                To put it another way, what has either of the above done with their money that we can cheer about? Wouldn't we be better off if we taxed all their income at ordinary income rates and used the proceeds to invest in infrastructure and education?

                Too soon old, too late smart (-7.25, -6.21)

                by Tim DeLaney on Mon Apr 21, 2014 at 05:45:19 AM PDT

                [ Parent ]

                •  From my personal experience lower capital gains (0+ / 0-)

                  tax rates are an important part of the attraction of investing in startups. A few years ago there was a program where investment in a qualified startup, held for five years, was free of all tax, including ALTMIN. It created a real spike in the investment in startups in Silicon Valley, where I am located and very active in the angel investment community.

                  To answer your question I strongly believe that to be competitive in the worldwide competition for capital investment the US needs to continue its historic practice of taxing long term capital gains at a lower rate than earned income.  

                  "let's talk about that"

                  by VClib on Mon Apr 21, 2014 at 07:54:02 AM PDT

                  [ Parent ]

                  •  Well then, why hasn't our tax policy delivered (5+ / 0-)
                    Recommended by:
                    rose528, hbk, Ljanney, UFO Sherlock, indedave

                    the prosperity that its proponents promised us?

                    The wealth gap and the income gap are both widening. The 99% have barely advanced at all during this century, while the 1% have reaped virtually all the rewards. This is an undeniable statistical fact, that many pundits here on Daily Kos have so frequently written about. Empirical evidence is not on your side.

                    You have an opinion, and you have anecdotes. However, the numbers clearly show that it is primarily the wealthy that benefit from our current tax policy. Am I being cynical to conclude that this is what you favor? Just when, in your scheme of things, will the vast majority of Americans see even a tiny portion of the prosperity that the 1% enjoy?

                    Maybe you haven't noticed, but the economy is struggling. Are there any changes that you advocate? Or is everything just fine?

                    Too soon old, too late smart (-7.25, -6.21)

                    by Tim DeLaney on Mon Apr 21, 2014 at 08:44:50 AM PDT

                    [ Parent ]

                    •  Tim, what we don't know is what impact it would (0+ / 0-)

                      have on the economy if we changed the historical treatment of long term capital gains. Every country in the G20 has a lower long term capital gains tax than the rate at which they tax earned income. Developing countries have even lower capital gains tax rates, some as low as zero. We are stuck in a cycle of anemic economic growth. Would higher capital gains tax rates lower that growth rate even more? The other issue is that capital gains taxes are only paid when appreciated capital assets are sold. Historically when capital gains tax rates are increased the rich have just kept their appreciated capital assets and borrowed against them if they needed cash. If the assets are never sold there is a step-up upon death and no capital gains tax is paid (there is an estate tax payment however).

                      In the 50s & 60s the capital gains tax was one half the top effective rate for each taxpayer and we didn't have the income inequality we have today. The key is raising the top marginal rates on high incomes. Only the very wealthy have primarily investment income. Corporate executives, lawyers, physicians, athletes, entertainers and other high income earners receive W2 or 1099 income, all of which is taxed at the top marginal rate. I think that's the place to start raising taxes because increases there don't have a negative impact on GDP.

                      "let's talk about that"

                      by VClib on Mon Apr 21, 2014 at 09:24:41 AM PDT

                      [ Parent ]

                      •  I think we're getting somewhere (6+ / 0-)

                        in this discussion. You say:

                        Only the very wealthy have primarily investment income.
                        My view is that this is where the problem is centered. According to Forbes, the top 400 increased their net worth by some $300 billion over the course of the year ending last August or so. The 400 now  have an aggregate net worth of $2 Trillion.

                        This is a serious figure. If the trend (17% increase annually) continues, in a few decades they will own everything everything of value in the country. Obviously, they cannot spend this money on consumer goods. Unless they resolve to give it away (As Bill Gates and Warren Buffett have done) their fortunes will continue to increase without bound. Very little of that $2 Trillion can be considered venture capital.

                        This is very bad for the country (and the world, for that matter), and it can only be checked by a rational tax policy, IMHO.

                        Too soon old, too late smart (-7.25, -6.21)

                        by Tim DeLaney on Mon Apr 21, 2014 at 10:24:30 AM PDT

                        [ Parent ]

                    •  Tax policy did not just affect capital gains (2+ / 0-)
                      Recommended by:
                      Ljanney, kfunk937

                      The biggest change was the change in how dividends are handled.  Historically, they were taxed as income. However, that is no longer true, so if you structure your investments so you can live off the dividends you earn, you will pay a lower tax rate than if you earned that same amount as normal income.

                      Also, we all know about how the upper tax rate has change, and the intermediate tax rates as well.  90% was, I believe, the peak rate, so for every dollar over the threshhold, 90 cents was taxed.  Since capital gains was taxed at a lower rate, the rich had more incentive to invest in productive industries than to lay back, collect dividends, and cut coupons.

                      Personally, I have always thought (even back then) that 90% was too high.  I have no personal problem contemplating a 66% top rate though, which would (with reverting dividends to normal income) be a great force towards encouraging more investments, leading to industry growth, innovation, and (based on history) better paying jobs at the worker level.

                      "[T]his is playing the long game, but it's about time we start playing the long game."
                      ^^^^^ THIS ^^^^^

                      by Laughing Vergil on Mon Apr 21, 2014 at 02:07:05 PM PDT

                      [ Parent ]

                      •  LV - top marginal rates don't mean much (0+ / 0-)

                        What matters is effective rates, what people actually paid. Few people ever paid a 90% marginal rate as it was very easy to shelter earned income before the Tax Reform Act of 1986. You could take passive losses and deduct them dollar for dollar against earned income. The TRA86 completely revised the IRS code for individuals, so much so that rates before 1986 and those after have no relationship to one another. They are apples and oranges.

                        "let's talk about that"

                        by VClib on Mon Apr 21, 2014 at 04:53:28 PM PDT

                        [ Parent ]

          •  That's a red herring. If he paid the full 39%... (5+ / 0-)
            Recommended by:
            Shirlgirl, rose528, hbk, Ljanney, indedave

            ... he'd have paid a shit-ton more than $2 million dollars. Closer to triple that. This garbage we hear when we're told how many more dollars the wealthy pay in taxes sounds like a lot more compared to most of America. Conservatives trot out the dollar figure every chance they get. But that's at a lower percentage rate than a janitor might make in an expensive part of the country. We have 1 in 4 corporations that pay nothing at the end of the year.

            My point is that income inequality is so high that the mind boggling numbers we hear in dollars are what they pay at a severely discounted rate compared to most Americans. Perhaps talking more about that would get people's attention. Most people have no concept of how much these people are worth.

            No matter how high that dollar figure seems, it would be about tripled if they paid the percentage most Americans pay. And none of them pay the 39% maximum rate they are currently taxed at. We need to eliminate more loopholes for the rich and have more for the middle class. A progressive flat tax where the higher your rate, the fewer exemptions you get. Sooner or later I think Americans will hit these folks with something closer to 50% or above. And it will be payback for their greed.

      •  28% (2+ / 0-)
        Recommended by:
        hbk, indedave

        When that asshole pays the 28% I pay then he can talk.

        1.9 million is nothing to these people.

        I would tell you the only word in the English language that has all the vowels in order but, that would be facetious.

        by roninkai on Mon Apr 21, 2014 at 01:04:45 PM PDT

        [ Parent ]

  •  They don't get around paying (2+ / 0-)
    Recommended by:
    goodpractice, rose528

    The have written the laws with their own loopholes built in. This is by design, and both parties have their hand in the jar. Its all honest politics.

    A true craftsman will meticulously construct the apparatus of his own demise.

    by onionjim on Sun Apr 20, 2014 at 04:14:58 PM PDT

  •  BENNNGHAAAZZZ....ooops...wrong hearing. (1+ / 0-)
    Recommended by:

    Legal means "good".
    [41984 | Feb 4, 2005]

    by xxdr zombiexx on Sun Apr 20, 2014 at 04:21:35 PM PDT

  •  Collecting from deadbeat rich? (7+ / 0-)
    Arthur Laffer agreed:
    "You really can't collect much money from upper-income people. They know how to get around taxes."
    Especially when they get to write the tax code. I'm looking at you, AFP.

    What stronger breast-plate than a heart untainted! Thrice is he arm'd, that hath his quarrel just; And he but naked, though lock'd up in steel, Whose conscience with injustice is corrupted. Henry VI Part II Act 3 Scene 2

    by TerryDarc on Sun Apr 20, 2014 at 04:26:32 PM PDT

  •  My master's thesis was on why taxpayers pay taxes (9+ / 0-)

    It turns out that it is not because people are afraid of enforcement by the tax collectors.  Those who had a high level of fear about getting caught were just as likely to cheat as those who had no fear.  The two characteristics most strongly correlated with tax cheating were:

    (1) a belief that tax cheating was morally acceptable
    (2) a belief that many other people cheat on their taxes

    In other words, cynicism and anti-government sentiment actually shape real-world behavior.  This analysis was based on studies 1975-1985, but even then it was clear that the Reagan Republican ideology was actively encouraging tax cheating.  And even back then the Republicans started gutting the IRS.

  •  The sad part (10+ / 0-)

    of the hyperbolic attacks the Republicans perpetrate on the IRS - tales of endless audits, jack-booted IRS agents busting down your door....

    ...none of those things would ever happen to most people who actually work for a living.

    They have but one income from full-time employment.  Their income is taxed before they even receive it via wage withholding.  Their tax forms are relatively simple - copying information from their W2, figuring out a few simple exemptions and deductions, and they're done.  If they played they didn't cut it right to the edge with the number of deductions they claimed on their W4 form they filed with their employer, they might even get a refund back of what they overpaid throughout the year.

    Their return is ultra-simplistic.  Even if it is audited, it'll be painless and done behind the scenes without them knowing in 99.9999999999999999% of cases because the return us ultra simplistic.

    Yet it is people like this - who make up the vast majority of people in this nation in general - who the Republicans can convince to fear the IRS - and then go pull the lever for a Republican.  They never catch on that they're being used as useful idiots to weaken the IRS so that people who actually bring in lots of income from varied sources and actually can cheat are more able to get away with it because IRS resources were reduced because of the public outrage of the useful idiots.

    It's maddening.

    I'll also add that given my experience dealing with taxes from the government side of the table - I'd anecdotally state that estimates on the tax gap are likely very conservative and on the low side in the first place.  The shit I saw on some of those returns would make even the staunchest of conservative rank-and-filers heads spin.  Audit and enforcement needs to be beefed up considerably at both the Federal and state levels.

    "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

    by Darth Stateworker on Sun Apr 20, 2014 at 04:48:27 PM PDT

  •  The continuing enablement of theft (4+ / 0-)
    Recommended by:
    cocinero, goodpractice, Eric Nelson, hbk

    is one reason that we have the insane tax code we do. The tax loophole industry, along with the [your pet subsidy here] industry, is one reason Republicans play the game they do. They constantly attack the IRS and seek to deprive it of funding, but on the other hand refuse to work on reform of the tax code. A key improvement to the tax code has to include indirect taxes, such as a financial transaction tax and a national sales tax. Direct taxes are notoriously inefficient for obvious reasons. However, we can't have that conversation because Republicans exist in order to loot the public treasury on behalf of their owners.

    Voting is the means by which the public is distracted from the realities of power and its exercise.

    by Anne Elk on Sun Apr 20, 2014 at 05:12:25 PM PDT

  •  So we are becoming Greece after all. (2+ / 0-)
    Recommended by:
    Iberian, goodpractice

    As Michael Lewis so eloquently explained in his book about the financial crisis, one of the factors that brought about Greece's collapse was that virtually everyone cheated on their taxes.  But since Greece was on the Euro and couldn't print it's own money, it was screwed.  

    Freedom of speech, in my view, does not mean the freedom to buy the United States government -- Bernie Sanders

    by OnePingOnly on Sun Apr 20, 2014 at 05:40:21 PM PDT

    •  Yes... and no. (0+ / 0-)

      Note how "the little people" here essentially can't cheat on their taxes...  as their employers take the money right out of their paychecks to being with.

      It's not that the wealthy here don't like taxes.  It's that they don't like paying taxes themselves.  They're perfectly fine getting Congress ad state legislatures to tax working people as much as they can possibly get away with in a manner where they simply don't have the ability to "cheat."

      "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

      by Darth Stateworker on Sun Apr 20, 2014 at 08:16:33 PM PDT

      [ Parent ]

  •  Steve King is still at it. (4+ / 0-)

    On April 15, King sent out a fund-raising email.

    "Abolishing the IRS would not only remove the burden on taxpayers to fund their services, but also end the IRS's reign of political witch-hunting," King wrote. "Your immediate gift of $25, $50, $100 or more to my re-election campaign will help me stay in Congress to continue to work toward abolishing the IRS."
  •  When the IRS begged for more funds... (6+ / 0-)

    From my notes (I re-watched on cspan 2X because I couldn't believe what he was saying):

    2/27/2014, Russell George TIGTA:
    U.S. Treasury Inspector General for Tax Administration (TIGTA)
    ➔ before the Subcommittee on Financial Services & General Government of the Appropriations Committee

    ➢ Individuals subject to withholding report 99% of their income
    ➢ Self-employed individuals non-farm businesses report 44% of their income
    ➢ Self-employed people operating businesses on a cash basis report only 11% of their income
    Noted that more & more people becoming self-employed since onset of the Recession.

    Rep Yoder: It's about not under-staffing, it's about the tax code! Simplify the tax code & you won't need more people, you'll need fewer! Rep Crenshaw: if we had a fair tax, we wouldn't need the IRS!
    Also, the IG talked about the Tax Gap: the underreporting tax gap last year is about $376 billion. (2006, $450B tax gap, eventually recovered $65B [14.4%!] - GAO)

    "All politics is national."

    by Auriandra on Sun Apr 20, 2014 at 05:59:49 PM PDT

    •  Statistics that should be repeated (3+ / 0-)
      Recommended by:
      Amber6541, Shirlgirl, Auriandra

      again.  And again.  And again.  And again.

      The righties tend to be all about "enforcing the law as written."  It's their excuse on guns right now - simply stating the law isn't being enforced.  

      So, use that against them.  Start getting the drumbeat out there that the tax gap is real, that these statistics are real, and that if we could only enforce current tax law better, we could close the deficit completely without one penny of new taxes.

      Sure, many of them would grumble incoherently about how "unfair" and "complex our current tax structure is like Yoder and Crenshaw did at the hearing.  But maybe a few would start to question whether or not the problem is one that needs addressing.

      We can't change all their minds at once, but if we can change the minds of a few, and a few more, and a few more....  We can get somewhere.

      "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

      by Darth Stateworker on Sun Apr 20, 2014 at 08:21:40 PM PDT

      [ Parent ]

  •  The best solution is actual tax reform. (3+ / 0-)

    Any one of us, in a few hours, could write a tax code that is cheat-proof. Let me have a go at it:

    Individual income taxes are due on all forms of income equally. Household is the only taxable unit.

    Brackets: (2014  $$)

    $0 - household poverty line -- 0%
    Next $20K:      10%
    Next $50K:      20%
    Next $100K:    30%
    Next $500K:    40%
    Next $1mm:    50%
    Above:            60%

    (Actual percentages might be different based on revenue needs, but proportional to the above)

    No other tax breaks of any kind whatsoever. All taxes are calculated on the earner's top line. (Just like FICA)

    Tax evasion penalty: mandatory 5 years hard time in a real concrete and steel prison, plus triple fines for lost revenue. No suspended sentences or early parole.

    10% finder's fee for whistle blowers upon conviction. (Could be a foreign national who works at a bank. Think about it.)

    If you were ultra wealthy, would you try to cheat?

    Too soon old, too late smart (-7.25, -6.21)

    by Tim DeLaney on Sun Apr 20, 2014 at 08:00:08 PM PDT

    •  The complicated part about tax law (2+ / 0-)
      Recommended by:
      johnny wurster, Mother Shipper

      is defining and then determining "taxable income."  The parts you wrote are just a few pages of the current code and regulations.

      "Well, I'm sure I'd feel much worse if I weren't under such heavy sedation..."--David St. Hubbins

      by Old Left Good Left on Sun Apr 20, 2014 at 08:34:29 PM PDT

      [ Parent ]

    •  Sounds reasonable. (4+ / 0-)

      Except 3 things:

      1.  The basing it on a "household" part.

      Reason being:  minor children.  They're part of the household.  They shouldn't pay a huge tax rate on their part time job at the mall because mom and dad do well.  Let the kids have their spending money.  There are certainly other situations where a "member" of the "household" shouldn't be taxed at the rate of the primary breadwinners either.

      2.  "All forms of income" also becomes problematic in some cases.  

      For example, I would not expect to see child support going to a custodial parent being taxed - but it is a form of income.

      3.  Your proposed tax evasion penalty.  

      One set penalty isn't a very good idea.  A guy who cheats on reporting $1000 in income going to jail for the same 5 year term as someone cheating on reporting $10M doesn't make much sense.  Penalties should increase by dollar amount, with plenty of protections in place to prevent anyone going to jail for an honest mistake or clerical error - such as having to display a pattern of evasion over multiple years to prove it was intentional and not an accident.

      But the proposed tax structure itself, the brackets, the lack of any specialized breaks and the whistle blower finders fee are perfect.  A simple, progressive tax structure like this essentially gives the simplicity of a flat tax while maintaining the fairness of a progressive tax system and avoiding the regressiveness inherent in flat taxes.

      "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

      by Darth Stateworker on Sun Apr 20, 2014 at 08:35:39 PM PDT

      [ Parent ]

      •  We're mostly on the same page (3+ / 0-)

        As regards the household, it would be defined in terms of a group that shares economic assets. No individual in a household is taxed separately, it's the gross income of all that is taxed. Certainly, the parents can allow the child to keep 100% of what s/he earns, and just live with the tax consequences.

        The real problem arises when a minor child, say a Shirley Temple, acquires extraordinary income. But this is a rare circumstance.

        Your second point is a good one. I suppose the answer is that child support and alimony represent a "hybrid household" situation, and therefore must be treated as a special case.

        With regard to your third point, the primary safeguard for the individual is the right to a jury trial. The government would have to prove intent, as opposed to an honest error, and the jury would determine if the government met its burden.

        Quite possibly, the mandatory sentence feature should kick in only above a threshold amount, much like the distinction between petty larceny and grand larceny. My intent was to make it unlikely that a rich tax evader could buy his way out of prison, or get a mere slap on the wrist by a judge sympathetic to the rich.

        Anyway, as I said in the subject line, we mostly agree..

        Too soon old, too late smart (-7.25, -6.21)

        by Tim DeLaney on Sun Apr 20, 2014 at 09:50:45 PM PDT

        [ Parent ]

        •  I follow. (2+ / 0-)
          Recommended by:
          Tim DeLaney, Amber6541

          I'm just thinking from a voluntary compliance and enforcement perspective, maintaining our current system of individual or MFJ filing is a bit easier than connecting everyone in a "household" - hence the idea to let the kids (and others) keep their own incomes separate.

          Not trying to appeal to authority, but from my perspective - as a guy that has done the job for a long time, I can see where the pitfalls would be in auditing such a setup and in taking enforcement actions.  There would simply be too many.

          For example:  to combine your household idea with the penalty idea for a tax cheat - what happens to a whole household when someone in that household cheats?

          Let's say you've got a pretty well off primary breadwinner pulling in $2M a year - who underreports on purpose by $800k.  The spouse has his/her own small shop in town, and accidentally underreports another couple thousand in income.  Junior and Sally - the kids - well, Sally forgot to give mom and dad their W2s at tax time, and Junior never told mom and dad he was working, because mom and dad expect he will pay them his share of the taxes from his income.  And for a kicker, let's add grandma and grandpa, who are part of the household living in an in-law suite - pulled $20k each out of two separate retirement accounts, but only reported to their son and daughter in law (or daughter and son in law) the $20k withdrawn from one account.  Who goes to jail?  They all screwed up in one way or another - two on purpose, the rest by accident or unintentional, non-criminal negligence.  But because they all file one return as a "household", the issue is now extremely complicated.

          This may sound like a far-fetched outlier, but extended families living together is far more common today than you'd think.

          We already deal with this issue to some extent with some frequency today with MFJ filers.  In many cases, one spouse hides income from another, commits evasion by failing to report it, but because both sign the return, both are responsible.  Then one spouse has to fight to get innocent or injured spouse relief depending on the circumstances and possibly even defend against criminal charges.  The household idea, while I think well intentioned, just adds even more complexity to an already difficult enforcement system.

          Additionally, again, from the standpoint of tax enforcement - I think it still makes more sense to have to show a pattern of abuse.  Firstly - we could spend hundreds of millions of dollars annually having to sort through cases that really are little more than clerical errors - and that's before you get to the costs incurred by the legal system.  Secondly, a pattern of abuse makes more sense because a jury will be more likely to understand and believe the evasion if it occurred over more than one year.  There's a reason why the US Attorneys office, state AG offices, and local district attorneys usually don't try cases where they will only be able to allege abuse has occurred in only one year - its far too easy for the defense to say "honest mistake" and have the jury believe them.

          Again, great ideas.  I just wanted to give you a little more perspective on why I disagreed on the points I did.  My initial response was pretty lax on those details.  

          "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

          by Darth Stateworker on Sun Apr 20, 2014 at 10:26:28 PM PDT

          [ Parent ]

          •  I appreciate your explanation (3+ / 0-)

            Maybe my "household only" idea is misbegotten -- it wouldn't be my first. The thing is that I am put off by multiple filing options that don't seem to have any rationale.

            After reading your reply, it occurred to me that my "household only" idea has another drawback: Who has the legal obligation to file?

            With regard to prosecution for evasion, I would think that the government would (should) choose one of two options: civil remedy or criminal prosecution. My thinking is that the prosecutor would not pursue a dubious case. My intent was to find a way to deter the most egregious tax evasion.

            Anyway, thanks for your very civil and well-reasoned discussion.

            Too soon old, too late smart (-7.25, -6.21)

            by Tim DeLaney on Sun Apr 20, 2014 at 11:11:25 PM PDT

            [ Parent ]

            •  My pleasure. (3+ / 0-)
              Recommended by:
              Tim DeLaney, Amber6541, Shirlgirl

              One thing I do enjoy is a good discussion about tax policy.  Having seen so much of it implemented firsthand - and how screwed up much of it is - it's nice to brainstorm about ways the system could be improved.

              "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

              by Darth Stateworker on Sun Apr 20, 2014 at 11:26:22 PM PDT

              [ Parent ]

              •  I Agree (0+ / 0-)

                A Flat Tax would be the most appropriate solution to the mess that is our tax policy. Would either of you two commentators like to run for Congress???

                •  Neither of us (1+ / 0-)
                  Recommended by:

                  said any such thing in support of a flat tax.

                  Either you need to re-read what we wrote because you misunderstood it or you're being purposely annoying.

                  "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

                  by Darth Stateworker on Mon Apr 21, 2014 at 12:01:27 PM PDT

                  [ Parent ]

                •  my state has a flat tax. it's also (0+ / 0-)

                  always broke. we've cut services to the bone. and we're still cutting.

                  so...not so sure about this flat income tax.

                  Dawkins is to atheism as Rand is to personal responsibility. uid 52583 lol

                  by terrypinder on Mon Apr 21, 2014 at 01:02:03 PM PDT

                  [ Parent ]

  •  Meanwhile, all those (1+ / 0-)
    Recommended by:

    'Tea Party' groups — all beleaguered and 'targeted' as they wailed and sniffled before Issa's clownshow hearing — are busy shakin' their booties in a virtual conga-line of GOP campaigns, flipping the middle finger to the 501(c)(4) regulation that oughta have their sorry asses in jail for tax fraud.

    Funny, ain't it?

  •  And.... the $6-trillion in tax cheat caches. (1+ / 0-)
    Recommended by:
    By means of a method he carefully describes, Zucman estimates that the world's wealthy are using tax havens, including Swiss banks, to hide at least $4.5 trillion but more likely $6 trillion from the tax collectors. Just to make it clear, that's $6,000,000,000,000—in the neighborhood of six percent of the entire world's gross economic output for one year. In other words, not chickenfeed.

    -- Meteor Blades

    A simple approach can be to establish an anti-piracy standard: something like a 25% one-time tax or a 5%-a-year tax for money hidden in these so-called "havens."

    This is a Wealth Tax.

    "Stealing kids' lunch money makes them strong and independent." -- Ryan Paul von Koch

    by waterstreet2013 on Mon Apr 21, 2014 at 04:16:54 AM PDT

  •  And you really can't collect from the poor either (0+ / 0-)

    As the GOP has worked hard to eliminate jobs and workers who can live on their wages, the IRS is faced with a simple decision... try to get money from people who have no money OR try to get the money from people who HAVE most of the money. Hmmm. Why do bank robbers rob banks? Because that is where the money is. Why do the very rich not pay taxes? The argument has been because they have the money to prevent being taxed. PHOOEY! Tax them, take the cash, seize the houses and meet them in court in 16 months, postpone the court date over and over until they give up. That's how the IRS would handle getting MY back taxes.

  •  The GOP, gaming the system—since always. (0+ / 0-)
    "…I see nothing wrong with playing the game because we set it up to be a game."
    So: if all your friends jumped off a bridge you would too?
    Idiot. Fund the nation you traitorous pig.

    The GOP, gaming the system—since always.

    I would tell you the only word in the English language that has all the vowels in order but, that would be facetious.

    by roninkai on Mon Apr 21, 2014 at 01:02:25 PM PDT

  •  Too painful to regurgitate (0+ / 0-)

    because it makes me ill. We peons are fecked, just die quickly. Thankfully the plutocrats have not yet figured out a legal way to turn our corpses into something profitable--hence nursing homes and opposition against end-of-life planning because they want to bleed every last penny from you before you die. Coming soon, grave-site securities!

    "My ignorance is just as good as your knowledge." - Isaac Asimov

    by provocateur52 on Mon Apr 21, 2014 at 02:16:33 PM PDT

  •  The current "Scandal" is a win-win-win for the GOP (0+ / 0-)

    The allegations of the IRS targeting Tea-Party "non-profit" organizations has three goals:

    1. Undermine the Obama administration;
    2. Undermine the IRS; and
    3. Stop the IRS from reviewing the non-profit status of organizations with clear political agendas that should not be entitled to that tax status.

    Promoting this fiction is a big win for the 1% and the organizations they have set up to promote and protect their interests.

  •  The IRS (0+ / 0-)

    must be fully funded and fully staffed.
    The republicans, and particularly the teatards are trying to systematically dismantle the IRS.  This must be stopped and reversed.

  •  Tax evasion is a natonal sport in Greece, and in (0+ / 0-)

    the US is the favored sport of the 0.1%. Our rich tax evaders just pay for propaganda about the "death tax" and "job creators", and bribe politicians to write laws directly favoring them.

  •  GOP funding groups ASKED for it... (0+ / 0-)

    The Republican PACs and Super-PACs ASKED for it concerning being targeted for closer scrutiny by the IRS when they abused their nonprofit, tax-exempt 501(c)(4) status for political gain. That section of the tax code SPECIFICALLY states that such status requires the money to be spent for social welfare, NOT primarily used for political purposes. The Republicans' use of the money contributed to their PACs and Super-PACs was extremely murky, and many times, it was blatantly obvious that it was being used to finance conservative politicians and causes. THAT is why the IRS audited them so carefully. They were NOT targeted just for shits and giggles. They were engaged in some financial skulduggery that warranted investigation.

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