Pascrell aims for tax review upside down
It turns out that in recent years, even as wealthy Americans claimed an ever larger share of the national wealth, the IRS was less and less likely to audit them, according to a report by the United States General Accounting Office which was commissioned by Representative William Pascrell (D-NJ-09), chairman of the the House Ways and Means Oversight Subcommittee.
It’s his instinct to request this kind of vexing research that makes me believe this 85-year-old congressman is not just a New Jersey treasure, but a national treasure.
For decades, like Wall Street and the lobbyists whose mission is to protect great wealth, designed the bespoke tax code and then lobbied Congress to roll back IRS funding, it was Pascrell who stayed on their case. He never forgot that he works for working-class voters in places like Paterson who send him back to Congress election after election.
In fact, it is clearly a privilege.
“The GAO’s findings on IRS audit rates are another five-alarm bell for our national system,” Pascrell wrote in a statement ahead of his May 18 hearing on the findings. “Over the past decade, the liability of the wealthiest tax cheats has dropped so much that it is almost touching the ground. Looking at the numbers, a filer who earns less than $25,000 per year is more more likely to be audited than someone with an income between $200,000 and $500,000. I worry that wealthy taxpayers are not being prosecuted at the rate things are going. Don’t get me wrong: these trends are the a logical result of Republican policies to gut tax enforcement in the United States so the wealthy can avoid paying their fair share.
Pascal continued. “Americans’ confidence in their tax system itself will continue to crumble as long as the rich do what they want. Building a truly fair system requires fixing the IRS so it can hold wealthy tax cheats accountable. Creating tax fairness is essential for our economy and for American democracy.
According to GAO analysis, the IRS budget for fiscal year 2021 was $2.7 billion lower than in fiscal year 2010, a reduction of 22% in real terms even as the volume of tax returns deposited have continued to grow. The agency’s 74,200 employees are equivalent to what they had in 1973. As a result, the number of IRS tax agents decreased by 40% and the number of tax auditors by 18% between 2011 and 2020.
Due to the funding crunch with Congress, the IRS has reduced audits across all income cohorts and it is high earners who have seen the greatest reduction in oversight by the agency. The results were perverse, with the most needy families claiming the Earned Income Tax Credit which came under greater scrutiny.
“Audit rates for high-income taxpayers have declined the most, largely because high-income audits tend to be more complicated and require auditors to manually review multiple issues, IRS officials say. “, reported the GAO. “Because the audit staff has shrunk, the IRS cannot perform as many of these audits, compared to low-income audits which are generally less complex and involve more automated processes. Additionally, IRS officials said the number of returns filed by high-income populations is increasing, meaning more audits are needed to achieve the same audit rate.
The GAO found that the IRS required fewer hours per audit for low-income taxpayers because many did not respond to IRS correspondence or provided inadequate responses. According to a 2021 report of National Taxpayer Advocate in its review of returns from taxpayers with less than $50,000 in income, the IRS closed 35% of audits without a taxpayer response, and 14% of them involved a notice that was not deliverable to the taxpayer.
At the May 18 hearing, Representative Stacey E. Plaskett (D-VI), who is black, recounted her family’s negative experience with the IRS.
“My dad was a New York City police officer so he had quite a bit of overtime,” Placket said. “My mother worked in the justice system in New York. They were both unionized and earned decent wages. Donated a lot to charity. My mother was an orphan, so she gave back to the organization that supported her as a child. And I remember one [IRS] auditor coming to our house and the absolute fear that my parents had – in the 1970s – of this white man coming to their house to audit them and his remark about how beautiful a house it was – that really appalled them too.
Plaskett cited research that found it was high earners who were more likely to try to evade taxes or reduce their income than taxpayers of more limited means.
“I believe in the data and I think the data would confirm that the IRS would get more by going after fewer individuals who make more money than those who make $200,000 or less,” Plaskett suggested.
“In terms of income tax under-reporting and the tax gap, I think it’s important to note that of the $245 billion in under-reporting that I mentioned, $110 billion dollars are tied to Schedule C income, mostly one-time props. [proprietors] or small businesses that report on a 1040,” testified James R. McTigue of the GAO. “That’s about 25% of the gross tax gap and to the extent that it can reduce that underreporting, that would be beneficial.”
Based on the GAO’s findings, the money spent on campaign donations and lobbying by Wall Street’s wealth protectors has paid off. Talk about return on investment! Pascrell told the May 18 hearing that there was a $600 billion discrepancy between what is owed to the IRS and what it collects. Hmm. Wondering where it is?
“There’s something wrong there – it’s a change – it’s not a silly change,” Pascrell said.
In March, Pascrell described what he had learned from the blockbuster Pandora’s Papers published by the Investigative Consortium of Investigative Journalists, a group of 300 journalists from around the world with a watchful eye on world-class tax evaders. In December, he held hearings on how our country’s wealthiest families managed to pass their vast wealth “from one generation to the next intact”, allowing their inherited wealth to grow “exponentially”. avoiding taxes.
“The Pandora Papers investigation uncovered the secret assets of 130 billionaires in 45 countries,” Pascrell wrote. “Building on this landmark work, our hearing further unmasked a vast network of shelters used by America’s wealthiest families. We showed they were doing right here on our shores.
Specifically, states like South Dakota and Wyoming “have become the Grand Cayman of the prairie by enacting laws that are nothing less than an open invitation to wealthy families to hide their money in the Great Plains”, Pascrell wrote. “My fear is that more states will seek to emulate these outliers while facilitating the titanic tax avoidance of our wealthiest citizens.”
That’s right, South Dakota and Wyoming, two Republican states, are both quite dependent on the same federal government they want to help the ultra-rich avoid taxes from. Wyoming receives $1.58 for every dollar sent to Uncle Sam, while South Dakota does even better at $1.65.
New Jersey ranks last of all states and the District of Columbia in rates of return, according to the website money geek. We get 78 cents on the dollar.
Sounds like “change stupidity”.
(Visited 230 times, 2 visits today)