You pay your taxes. Why shouldn’t the rich?
We all know that wealthy individuals and corporations are able to save vast amounts of money by abusing loopholes in our tax code, but the truth is that some of them use the worst tax evasion tactic of them all – lying to the IRS.
Because federal lawmakers have systematically cut funding for IRS enforcement, wealthy corporations and individuals are now able to simply cheat on their taxes with almost no chance of getting caught. A dire shortage of tax investigators means that each year fewer than 5% of households making over a million dollars are audited by the federal government.
This is a huge problem. A small number of rich people are essentially stealing over $400 billion in tax revenue each year because Congress refuses to give the IRS the tools it needs to find that money. That’s nearly 20 percent of all federal tax receipts. Although few of us have a real soft spot in our hearts for the agency that makes us pay our taxes, the IRS is an incredibly important part of the federal government, and weakening it does all of us a disservice.
There’s no way an understaffed agency can compete with the armies of accountants and tax lawyers fielded each year by wealthy individuals and corporations. All they can do is pursue the simplest, most clear-cut cases, which in many instances means a disproportionate focus on poor and middle-class Americans. It is much easier to match up someone’s wages to their W2 than it is for the IRS to verify that businesspeople are properly reporting and calculating their taxable income.
In recent years the IRS has particularly targeted taxpayers who make use of the Earned Income Tax Credit, which is only available to low-income households. It is absurd that poor Americans are being targeted for audits when billionaires are getting away with much worse. A serious re-alignment of agency priorities is clearly necessary, but that’s not going to be possible without giving the IRS the resources necessary to really go after the top-level tax cheats.
Our government’s inability to catch tax evaders has been a problem for decades, but it’s only getting worse. Due to budget cuts, in the last seven years the IRS has lost 38 percent of its examination personnel and 42 percent of its revenue officers. The agency currently has as many enforcement officers as it did in the 1950s, when the economy was one-seventh the size it is now. That’s simply not enough.
We need to increase funding for the IRS so that they can hold tax cheats accountable. This is one of the few issues that Democrats and Republicans can agree on – our typically dysfunctional Congress should put its differences aside to fix this glaring problem.
Increasing the tax enforcement budget is a fiscal no-brainer. Even the most adamantly anti-government-spending conservative should be able to see the mountains of data that show spending more money on tax enforcement more than pays for itself.
If nothing else, all revenue and inequality issues aside, this is a matter of fairness. The vast majority of Americans pay their taxes in full and on time. Why should the wealthy, who have a much greater ability to pay (and who I believe aren’t taxed enough in the first place), be allowed to get away without paying their fair share?
(Reposted with permission from PatrioticMillionaires.org)
Morris Pearl is a former managing director at BlackRock, Inc. and Chair of the Patriotic Millionaires, a coalition of high-net worth Americans concerned about the destabilizing concentration of wealth and power in the U.S.