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I 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
by therein 8y ago
I 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-...
- deleted 8y ago[deleted]
- diminoten 8y agoThe cost to citizenry aren't on the IRS's books so that's not relevant to them, and corruption also doesn't automatically follow increased funding.
- belltaco 8y agoThere is also the savings from people committing less fraud because they see it's harder get away with it, e.g cases against people they know like friends, relatives, coworkers.
- DenisM 8y agoWhich is pretty much the foundation of law enforcement - make the consequences apparent before the crime happened.
- munk-a 8y agoJust to clarify, where in this thread was increasing it's budget discussed? The statement above pertains to current spending levels and it might be that the next dollar of budget put into the IRS yields $.90, but currently the IRS is assuring laws are obeyed while netting a gain to the US government. The only justification of cutting their balance (from a purely profit driven angle) is if the suspicion is that the first half of the budget to the IRS pays $2.40 per dollar and the second half pays $0 (or some similar less than dollar ratio), but this seems like a quite straight forward win.
- s73v3r_ 8y agoThe article is about the IRS being dangerously underfunded.
- SamReidHughes 8y agoThe thing is, even if you spend $1.00 to bring in $1.01, you're still bringing in money with 1% efficiency. If you didn't care about fairness and justice at all, that would be horrible economics.
- avs733 8y agoSo do people who are found innocent of other crimes. Would it solve your concern to say that anyone found innocent of a government cause of action could claim costs? I've never understood why they can't frankly.
- jonathankoren 8y agoYou could say this about any law enforcement agency.
- s73v3r_ 8y agoThat danger does exist, but I do not believe what are anywhere near that point, given how dramatically underfunded they are.
- datavirtue 8y agoCut the hyperbole, there is nothing dangerous about underfunding the IRS. Overfunding the military, that's another story.
- emodendroket 8y agoWhat's dangerous about it is massive budget shortfalls, not to mention unfairness, as taxes become optional for the very wealthy. > The result is huge losses for the government. Business owners don’t pay $125 billion in taxes each year that they owe, according to I.R.S. estimates. That’s enough to fund the Departments of State, Energy and Homeland Security, with the National Aeronautics and Space Administration tossed in for good measure. Unlike wage earners who have their income separately reported to the I.R.S., business owners are often on the honor system.
- datavirtue 8y agoWealthy will never pay tax. Owners do not pay tax, the people who buy thier products pay the taxes which are built into profit models. If it was a question of fairness everyone would be the owner. Governments should spend only what they can collect. They can't face budget shortfalls unless they are lending in the hopes that taxes flow as they are. States are still trying to recover from borrowing against tax revenue in the 90s.
- s73v3r_ 8y agoI'm not being hyperbolic. And if they are unable to do their jobs, that is quite dangerous, because then we will no longer have revenues to operate as a country.
- jdminhbg 8y agoThe average $1 yielded $1.20, not every $1. The marginal rate of return surely goes down as you spend more, otherwise you could spend $10 trillion dollars and get $2 trillion for free. What would be interesting is what the marginal $1 spent yields.
- Retric 8y agoThat’s direct revenue, enforcing laws has a deterrent effect that vastly outweighs the direct revenue gained. Tax Evasion is around 40 times the IRS budget and gets worse with lowered enforcement as the cost / benifit heavy favors evasion.
- grapehut 8y agoThat is ignoring the enormous externalized costs. I have known business to have spent hundreds of thousands of dollars in professional services when being investigated that have done absolutely nothing wrong.
- gamblor956 8y agoAs one of those former professional services providers, I can count on one hand how many former clients out of hundreds that had done "absolutely nothing wrong" and of those few clients, I can't name any that spent anywhere close to hundreds of thousands of dollars to deal with the audit.
- dsfyu404ed 8y ago>I can count on one hand how many former clients out of hundreds that had done "absolutely nothing wrong" I think the person you're replying to means "violated the tax code in a minor and non-malicious way" whereas you mean "literally did not violate the tax code at all".
- gamblor956 8y agoI'm sure he did, but I don't know any clients that were audited over "minor and non-malicious" issues. There's a materiality threshold in place before the IRS will initiate audits, due to the resources required.
- deleted 8y ago[deleted]
- sokoloff 8y agoNot completely true. I was randomly selected for a TCMP audit. My tax professional is hoping to keep my compliance cost under $2500, but makes no promises. That's for a reasonably typical (and by no means aggressive tax positioned) MFJ + 2 kids return.
- sandworm101 8y agoThe same can be said about speeding tickets, that money spend on enforcement comes back. But tax collection isn't business. This is law enforcement, or at least enforcement of laws. We shouldn't judge it on its profitability. Like speed enforcement, it is something that has to be done not just for those who are caught, but to deter all the others who probably won't be caught. There are evil implications should we judge the effectiveness of tax collectors purely on the basis of cost/gain. We don't want a situation where the IRS only ever goes after easy cases. The people who hide the most money have, by definition, the resources to hide it well. If you want the IRS to go after the big fish, they need the budget to do so. We don't want them resorting to drift-net tactics, only scooping up the easy/small fish.
- magduf 8y agoNo, because then you end up squandering enormous resources on trying to make sure everyone is obeying the law, and your end result is far less desirable than if you had relaxed enforcement. What you're proposing is basically a police state; those never work out well in practice. However, you have a good point about going after big fish, because those are the ones where the gov't is losing the most money, most likely. Some drift-net tactics are OK, where you use some random spot-checking to make sure the smaller fry aren't cheating badly and scare the rest of them into being honest, but don't expend a lot of resources on it because you won't get back the money you spend. But yes, I agree, going after the big fish should be the primary strategy, even if it is much more difficult.
- sandworm101 8y ago>> What you're proposing is basically a police state I take it you have never lived in a "police state". I have (middle east). Deterrence is how law works in a modern society. We cannot catch everyone and so must rely on a bit of fear. Fear of being caught it why we obey laws with which we disagree. I personally may think the speed limit on a road is ridiculously low. But that limit wasn't created by the police. I obey it because I don't want to pay a fine, not because I live in a police state. In a police state rules don't matter. I'd get the speeding ticket regardless of how fast or slow I was driving. A real police state is one where the police both enforce and write the rules, where they are no longer under the control of legitimate government. The IRS is nowhere near that. It remains totally subservient to the elected government. Its budget comes from an external source. Allow it to self-fund and that leash is gone.
- throwaway103281 8y agoThat seems surprisingly low to me. My dad used to be a tax officer in Germany and even in a bad year he'd bring in €10,000,000+. One year it was closer to half a billion. $1 -> $1.2 seems honestly barely worse the effort considering the cost on every company that gets audited, guilty or not.
- froindt 8y agoWas your dad working solo on everything he did? Did his collection numbers reflect teamwork? You're comparing revenue on a per-producer basis to a much different number. There are support staff, programmers, benefits, buildings, etc. which all must be paid for too. For what it's worth, this article from 2011 noting a 4:1 ROI. I'm not sure where 1.2 came from, but I was unable to find it after searching. https://www.cbpp.org/research/federal-tax/irs-funding-cuts-compromise-taxpayer-service-and-weaken-enforcement https://www.cbpp.org/research/federal-tax/irs-funding-cuts-c... _ The Treasury estimates, for example, that every additional $1 invested in IRS tax enforcement beyond current levels would yield $4 in increased revenue
- thefounder 8y agoI think IRS's job is more to deter tax evasion not to make a profit.
- s73v3r_ 8y agoWhile that's true, if they're not enforcing the law, they can't deter tax evasion.
- emodendroket 8y agoThe point is that more enforcement deters tax evasion so effectively that it saves money, so there's no sound fiscal reason to cut the budget for tax enforcement. The entire point of slashing the budget is to make it easier to commit tax fraud.
- emodendroket 8y agoIt seems like a no-brainer if you are not coming a position where your main ideology is that rich people shouldn't have to pay taxes.
- chrisbrandow 8y agoYes. Unless your ideological commitments lead you to an opposite conclusion.
- deleted 8y ago[deleted]
- YayamiOmate 8y agoI think you've committed oversimplification. If this relation was absolutely true then feed as much money as you can and get 20% profit. If it isn't then your point has no real basis. This metric can be used only as the performance measurement not it's predictor.
- hugh-avherald 8y agoI think it's more like $12 for every $1. And contrary to a reply, it is the marginal rate, not the average rate. https://www.mckinsey.com/industries/public-sector/our-insights/improving-the-effectiveness-of-tax-collection-30-dollars-in-additional-revenue-for-every-1-dollar-spent https://www.mckinsey.com/industries/public-sector/our-insigh...