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I.R.S. Tax Fraud Cases Plummet After Budget Cuts
- jachee 8y agoThat's a funny way of saying "Tax Evasion Skyrockets After I.R.S. Budget Cuts".
- gjm11 8y agoThat's not the same, is it? Suppose the number of people cheating on their taxes remains perfectly constant, but that the IRS gets less money to pursue them. Then there will be fewer tax fraud cases, but the exact same amount of tax fraud.
- losteric 8y agoIf the public knows the IRS has less funding to enforce the law, wouldn't more rich people gamble on tax evasion?
- kevin_b_er 8y agoYes. This was the real point of cutting IRS investigation funding: it enables more cheating by the rich.
- nkrisc 8y agoBut suppose in the real world the IRS has less money to pursue cases. Then it's reasonable there will be more cases of tax fraud as it will be easier to get away with it.
- maxxxxx 8y agoThat seems more likely. The long term effect may be more fraud though since people will learn that they are less likely to get caught.
- eli_gottlieb 8y agoI see no reason people wouldn't respond rationally to the extra incentive to cheat on their taxes, given that they have enough money for their tax evasion to matter in the first place.
- corpMaverick 8y agoTax Evasion will not skyrocket immediately. Only after people realize they will not be prosecuted.
- TeMPOraL 8y agoWhich is public knowledge as soon as it hits mainstream news.
- therein 8y agoI remember reading a while ago that every $1 that goes into IRS to fund tax fraud cases yielded $1.2 in return. When that's the case, it seems like a no-brainer that it should be well-funded.
- SamReidHughes 8y agoThat doesn't follow, because there's a cost to the citizenry of being investigated. Also there's the increased ability of the IRS to abuse its power when you give it a bigger budget.
- therein 8y agoYou're right, it certainly doesn't scale to infinity. For instance shifting the entire military spending onto IRS would be unwise. Unless we are okay with living in an IRS police state. :)
- SamReidHughes 8y agoWell, there's also nonfinancial reasons to spend more, like the inherent goodness of bringing people to justice.
- SilasX 8y ago"You get $10 billion more in your budget this year. Go pull some taxes out of Newfoundland. We got your back."
- neolefty 8y ago"abuse its power" — that sounds more like a talking point than constructive comment.
- creaghpatr 8y agoThe IRS literally did admit to abusing its power in 2017 https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-aggressive-scrutiny-of-conservative-groups https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-...
- gammarator 8y ago"What people don't understand about my job is that chances are you are not the person I'm examining. I examine doctors who expense three Cadillacs, insurance brokers who claim jet skis for business use only, and real estate agents who haven't paid taxes in eight years. The public doesn't realize that tax auditors are the only people between a balanced effective tax rate among all social classes and the bourgeoisie stealing what isn't bolted down. Don't kid yourself; these people are stealing from you. This money helps pay for schools, roads and with any luck can keep mortgage interest deduction alive for a few more years. I read a report on NPR that Italy has 40% of its population evading taxes. Imagine our debt crisis if we had the same problem. (Our tax evasion rate is estimated between 8-18%). So if you're one of those "Joe the Plumber" people who take time out of work to throw teabags at me on my way into the office in the morning: You are the middle class! I'm helping you!" https://www.theatlantic.com/business/archive/2011/09/what-people-dont-get-about-my-job-from-a-rmy-soldier-to-z-ookeeper/244231/?single_page=true https://www.theatlantic.com/business/archive/2011/09/what-pe...
- hueving 8y agoAttempting to frame it as class warfare is a perfect way to lose support from a significant portion of the US population. "I'm Robin hood stealing from rich people" doesn't work for the people on the right who are more likely to complain more about the irs in the first place. Joe the plumber who runs his own plumbing business and doesn't pay taxes is going to get audited as well and he's (rightfully) going to lose despite his position in the middle class. This isn't "the bourgeois" stealing, it's anyone who deducts significant amounts of money, which is a broader/simpler message everyone can get behind. Every small business/individual contractor has the means to illegitimately write off tens of thousands of dollars.
- deleted 8y ago[deleted]
- smileysteve 8y ago> Every small business/individual contractor has the means to illegitimately write off tens of thousands of dollars. But I'll add that every small business/contractor has the right to write off a lot of things, or portions of things that they use for business.
- kiernanmcgowan 8y agoI've always wondered if decreasing the budget of the IRS enables political money laundering. Since there is less auditing of suspicious accounts, there is more room for nefarious activity.
- excalibur 8y ago> Starting in 2011, Republicans in Congress repeatedly cut the I.R.S.’s budget, forcing the agency to reduce its enforcement staff by a third. Yes, but money laundering probably isn't the type of nefarious activity that the GOP is most interested in accommodating. (With one very high-profile exception.)
- munk-a 8y agoUS election laws are pretty much swiss cheese already when it comes to the various ways dark money can be funneled and redirected, it may make it easier but you need to try really hard to actually get arrested for campaign donations... and if you do you might just get pardoned anyways.
- emodendroket 8y agoTrue, although you might have more money to donate, thanks to the tax fraud, which you can then direct towards politicians who pledge to further cut the IRS' budget.
- munk-a 8y agoI think that's absolutely a thing, especially at the top levels of wealth. A favorable rewriting of the tax code that saves you a few hundred million could be repaid with a portion of that going to fund the politicians who helped push it through, it's like a win/win!... except that you're pushing all those costs off onto other people.
- maxxxxx 8y agoThere is a certain logic to it. If we cut more then the number if cases will drop even more. Or maybe the tax cuts made people more honest since their burden got reduced? Reminds me of the stock market. You can assign whatever causality you like to changing prices.
- jonathankoren 8y agoIRS enforcement budget seems to always be cut under Republican administrations. Which when you think about it, is kind of a like backdoor tax cut. Go ahead, skimp on your taxes. We're not looking.
- maxxxxx 8y agoThis reminds me of the bailouts. If you play by the rules you are a sucker.
- creaghpatr 8y agoKind of strange they had a whole article about decreasing fraud cases, and don't mention the IRS had to apologize for aggressive targeting of conservative groups in October 2017. Maybe that's why their budget got cut? https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-aggressive-scrutiny-of-conservative-groups https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-...
- tacomonstrous 8y agoFrom the Wikipedia article: "In October 2015, the Justice Department notified Congress that there would be no charges against the former IRS official Lois Lerner or against anyone else in the IRS. The investigation found no evidence of illegal activity or the partisan targeting of political groups and found that no IRS official attempted to obstruct justice”
- ams6110 8y agoFunny then that they apologized for what were totally legal and non-partisan actions?
- moate 8y agoHow are those related? They got their budget cut in retaliation for (perceived) partisan targeting by an administration on the same side as the groups they were auditing. That doesn't mean these groups weren't committing fraud, or just that they were committing fraud at a rate out of line with any other randomly selected group, just that the people who control the IRS's funding wanted to send a message to the IRS about how they should behave.
- creaghpatr 8y agoCorrect, which makes it strange not to be mentioned in the article.
- tasty_freeze 8y agoNo, it was the usual right wing noise machine at work. More than 100 left-leaning groups were investigated as well. And what is completely ignored is that the root of it was a spike in PACs claiming to be charity organizations in order to hide their donor lists.
- liftbigweights 8y agoYou mean the IRS pays for wars. "The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses." https://www.irs.gov/about-irs/brief-history-of-irs https://www.irs.gov/about-irs/brief-history-of-irs > You are the middle class! I'm helping you!" What do you expect someone working for the IRS to say? They are unconstitutionally robbing the middle class blind?
- X6S1x6Okd1st 8y ago> They are unconstitutionally robbing the middle class blind? What part of the constitution are they violating?
- apengwin 8y agosurely not the 16th amendment
- liftbigweights 8y agohttps://www.investopedia.com/ask/answers/09/income-tax-constitutional.asp https://www.investopedia.com/ask/answers/09/income-tax-const... The original constitution.
- skj 8y agoDid you know that the original Constitution had provisions for amending it, and such has happened many times? Amendments trump the original.
- munk-a 8y agoThis is a false statement, the constitution has provisions for amendments in it, stating that income tax wasn't accounted for in the original version of constitution and amendments is accurate, but stating that it violates the constitution is incorrect.
- X6S1x6Okd1st 8y ago
- yason 8y agoIt would be wise to let IRS fund its investigations with the recovered taxes, and not on a budget.
- e40 8y agoThat's the last thing the ruling class of rich white folk in this country would allow.
- hueving 8y agoHow do you know? Are you privy to the minutes of the secret rich white people meetings where they decide priorities?
- zdragnar 8y agoThat would be a rather perverse incentive, since any budget surpluses could be gimmicked into new investigations into political targets.
- theandrewbailey 8y agoAmerica has something like that right now. It's called civil forfeiture. How would your idea not end up as a similar trainwreck?
- quasse 8y agoLet's take a moment to examine a similar incentive system and hopefully learn from it: Civil asset forfeiture by police, who can seize money or other assets and use them for the department. So far, the results have been widespread abuse, especially targeting people who don't have the means and clout to fight back using the legal system. No thank you.
- everybodyknows 8y agoWhat you propose creates the same incentives that pervert seized-asset finding of police: Big, easily-siezed assets become the priority, rather than gravity of the original offense.
- Glyptodon 8y ago
- NTDF9 8y agoWhen people ask what happens when govt debt and deficits skyrocket? This. There will be more crime. Or at least, laws will be enforced disproportionately on vulnerable because its the vulnerable who don't have the resources to fight them.
- bliblah 8y agoI find it crazy that the IRS is so underfunded and every year for some reason elected officials / citizens keep pushing this narrative of "The IRS is evil!". How is keeping department continuously underfunded going to lead to any sort of improvement? Imagine if roads are full of potholes; are you just going to cut the budget of the Department of Transportation to fix the problem? The only ones who benefit from this state of affairs seem to be people who have no intentions of filing taxes or can afford to hire other people to do it. Meanwhile the average Joe has to deal with hour long wait times, online services that do not work, month long correspondence chains that lead nowhere. Obviously business like Quicken, HR Block, etc make a lot of money off this inefficiency since they can offer a service charge to save you the headache. It is a shame because in my experience as an accountant some local/state department of revenues are really well run and super convenient. It is also a shame because a lot of talented people work in the IRS forensics department which in my opinion is one of the coolest jobs out there.
- craftyguy 8y ago> How is keeping department continuously underfunded going to lead to any sort of improvement? It doesn't, and they know that. A classic tactic is to underfund a thing you don't like, then point to it failing as an excuse for killing it outright.
- simongr3dal 8y agoThis also happens very often in software. A feature gets a crippled UI that makes at awkward and hard to use or even discover. Then a few months later the feature is removed because stats are showing it doesn't get used.
- gred 8y ago> A classic tactic is to underfund a thing you don't like, then point to it failing as an excuse for killing it outright. I've seen this assertion made online a few times, but have never seen any actual examples. Are there examples that you're aware of at the federal level? Or maybe a couple at the state level? Just curious...
- anticensor 8y agoI see. Due to budget cuts, tax office ran out of tax enforcers.
- mncharity 8y agoCorruption Gutted South Africa’s Tax Agency. Now the Nation Is Paying the Price. https://www.nytimes.com/2018/06/10/world/africa/south-africa-corruption-taxes.html https://www.nytimes.com/2018/06/10/world/africa/south-africa... -- A nice article I stumbled upon recently.
- duxup 8y agoMass tax evasion didn't work out for Greece either (among other things).
- rectang 8y agoThat raises an interesting question: Can unlimited political money post-Citizens-United buy not just tax cuts, but outright national fiscal suicide in the form of abandoning tax collection?
- village-idiot 8y agoIf you're asking whether or not political systems are capable of causing their own completely predictable demise in general: history says yes, emphatically. As far as purposefully starving your own government of all funds and then triggering a collapse of society, it sure seems like we're about to find out.
- TimJRobinson 8y agoMany near future cyberpunk shows/novels feature a corporate congress that began after the government collapsed from debt overload and corporations decided to "help out" by taking over their role. Every year this seems to become more and more inevitable, it's just a natural progression of how things are going.
- gdubs 8y ago“Robocop” and its Delta Corporation is one of the best 1980s satires of exactly this outcome.
- pjc50 8y ago
- emodendroket 8y agoWow, it's so great that everyone stopped committing tax fraud voluntarily after they cut the budget to the IRS!
- flattone 8y agoHa. That was my first take also. At least it isn't: "Tax Fraud Rates Plummet After Budget Cuts"
- realandreskytt 8y agoEstonian tax and customs board has reduced its size by 30% over the last ten years all the while having cost of euro collected and percentage of euros collected figures trending up to the point of being in top three globally in both terms. Smart use of tech and a rock solid identity scheme help.
- bbrian 8y agoI just signed up for the IRS website and their password requirements are: > Password Rules: > 1) At least 8 characters long. > 2) Must contain at least one numeric and one special character (!@#$%&). (and asterisks, which is ruining formatting here) > 3) At least one uppercase and at least one lowercase letter. My standard password pattern* has a different special character in it, so now I'm locked out for 24 hours because I can't remember what substitution/alteration I made! It kills me when "password requirements" purportedly for security are more restrictive on one site than the majority of others. I also infer the sites are rarely updated. *I'm implementing Dashlane at work. To date, having a unique password for every site/service has felt secure.
- zavi 8y agoMany banks also have these arbitrary password limitations which make it less convenient and less secure at the same time.
- maimeowmeow 8y agoI just keep a google docs with username/password/recovery question, with website abbreviation as header. As long as my google 2fa isn't compromised, I think this is safe.
- zachberger 8y agoI wish they would use login.gov which has sane requirements and allows code generator 2FA instead of SMS.
- datavirtue 8y agoSo boot the whole problem by swapping from pull to push. Sales tax instead of income tax. Oh that's right, the banking industry relies on income tax to drive everyone into the arms of debt so we can fuel a constant swell of the aggregate money supply. Nevermind, the government is an out of control addict snorting the substance of easy money to prop up a debt ceiling that no longer exists.
- emodendroket 8y agoSales taxes are extremely regressive. Funding the government entirely through them would be a social disaster and they'd have to be wildly high to compensate for all the income that is being saved rather than spent.
- tome 8y agoWhy is no one here talking about Georgist land taxation? Has that HN meme completely burnt out? I rather liked it.
- galaxyLogic 8y agoIt's not only about them being unable to assess if you reported all your lawful income. It may be more about whether they can assess whether you have no lawful income yet seem to be filthy rich. Remember Al Capone. He would have never got caught if it was not for being caught for tax-evasion.
- salawat 8y agoSeems to me this is more a metrology problem than economic. They've decreased the sampling rate of the measuring instrument, and cut down on the resolution by cutting a necessary input, (operating funds). So it is a fairly foregone conclusion that a task which is heavily throttled by manpower and outdated infrastructure will lose efficacy, thereby generating lower metrics. I can see a couple different ways to handle it. Some incredibly controversial. A) Increase budget until we start seeing the point of diminishing returns getting out of hand. B) Say screw it, make returns public record, open access to everyone, and either crowd-source or deputize people on a voluntary basis to help sift through the data to root out the worst offenders for further scrutiny by the what few meager resources remain. Something has to give, and it is fairly obvious to me at least that the non-institutional taxpayer is getting handed the short-end of the stick. Plus, it'll give companies a taste of what having their "personal data" all agglomerated in one place in front of God and everyone is like for your piece of mind. No matter what happens, however, I'm not expecting much political will to actually remedy the problem due to a reticence to bit the hand that feeds that is industry donors.