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IRS budget cuts cost $34.3B in lost revenue from big business

335 points by mars4rp 7y ago

mrnobody_67 7y ago
I don't get why countries always under-invest in tax collection... as long as it's ROI positive, shouldn't budgets be getting increased?
- corybrown 7y ago
  There's a faction of US politicians that are philosophically against (most) government and taxes. It's not about ROI, it's about their goals.
  - RyanAF7 7y ago
    Interesting. A faction you say? You mean like the faction that drafted the Articles of Confederation?
    - SimbaOnSteroids 7y ago
      No, the contemporary one that learned nothing from that folly.
      - RyanAF7 7y ago
        Oh! The one that found success with the Laffer Curve. Right. Freedom isn't an idea. It's an actual place. In terms of kingdoms a free peoples kingdom is a Freedom; and you don't have to pay someone for the right to exist. Oddly enough we agree, there is a faction in the US pursuing its own agenda.
        corybrown 7y ago
        > The one that found success with the Laffer Curve Care to explain? The most recent tax cuts that were supposed to pay for themselves haven't. So where are we on the Laffer Curve right now?
        microcolonel 7y ago
        Hard to measure both over long and short timescales, since so many factors affect the willingness of people to invest personal effort and risk toward earning. You might have more success looking at the amounts while attempting to control for more factors; but of course, you could make it worse, because statistics is hard!
    - deleted 7y ago
      [deleted]
    - nerdponx 7y ago
      Ah, yes. The failed constitution.
  - conanbatt 7y ago
    This faction of the US is unique, which is why the US has some of the lowest tax rates in the world and in consequences has one of the most positive balances in net immigration, specially considering it has one of the harshest immigration policies in the world.
    - SketchySeaBeast 7y ago
      "Give me your tired, your poor, Your huddled masses yearning to breathe free, Those sick of a 35% income tax on earnings over $45,000".
      - conanbatt 7y ago
        I'm literally upset at the US for being so closed for immigration. If it were just a little more lax it would have a lot more than what it has now.
    - microcolonel 7y ago
      The U.S. is by any good measure somewhere between #1 and #3 in median individual income net of taxes and other mandatory transfers; and always #1 in the mean. I think a lot of people look at the gap between the mean and median, and think that something must be going wrong; but to me, the inequality of outcome this measures is more a sign that America is a welcome home of extremely productive people and the smarter of their direct offspring, who inevitably earn ridiculous sums of money when and where doing so is not itself reviled.
    - koyote 7y ago
      The US has some of the lowest tax rates in the world, IFF you are making a large amount of money. If you are earning a median wage a lot of other countries have comparable tax rates. If you are earning minimum wage a lot of other countries have lower tax rates.
      - conanbatt 7y ago
        Yup, not a great country to be poor. Also tax-pressure is still considerable (33% of GDP). This implies the US has lots of regressive expenditures and taxes. On the whole, I think the tax rate is the main difference between the US and most of industrialized countries, and net immigration is hugely positive for the US.
- DerpyBaby123 7y ago
  Governments aren't 'rational actors' trying to maximize revenue. In US, 'starve the beast' [1] comes highly into play https://en.m.wikipedia.org/wiki/Starve_the_beast https://en.m.wikipedia.org/wiki/Starve_the_beast
- rietta 7y ago
  When the executive branch doesn't agree with the law, one tool they have as a separate branch of government is to not enforce the law. In U.S. political history, President Andrew Jackson reportedly responded: "John Marshall has made his decision; now let him enforce it!" referring to the Supreme Court ruling in https://en.wikipedia.org/wiki/Worcester_v._Georgia https://en.wikipedia.org/wiki/Worcester_v._Georgia.
- aantix 7y ago
  George: Still don't know how you can call lunch with me a business expense? Elaine: What do you think of the catalog? George: I think it stinks. Elaine: There, we just talked business. * Imagine the IRS debating grey area scenarios like this against financial teams trained to argue deductions. The ROI quickly becomes a sewer drain.
- jonathankoren 7y ago
  I think it’s because it’s a stealth tax cut. It might be able to win the political argument for lowering taxes, but by cutting funding for enforcement, you’re encouraging scofflaws and thus get the unpopular outcome you desired without having to go on television and defend it. A similar thing plays out when politicians want to cut popular social programs. They manufacture a budget crisis (typically through instituting a popular tax cut) and then solve the crisis by cutting the funding to the thing they already decided they didn’t like.
- conanbatt 7y ago
  If 99.9% of the national income were used to gather 100% of the national income, you would have positive ROI.
  - trophycase 7y ago
    Where does the remaining 0.1% go then 0.o?
  - nybble41 7y ago
    Exactly, which should illustrate just how pointless this calculation is. Obviously spending 99.9% of national resources on tax collection would be a colossal waste from the public's point of view despite the "positive ROI". The IRS supposedly exists to benefit the public; maximizing the amount transferred from private citizens to the government is not the end goal here. The benefit to the public from having that money spent by the government rather than by those individual members of the public who earned it is at best a small fraction of the total amount of tax collected, and may even be negative.
- deleted 7y ago
  [deleted]
berbec 7y ago
The act of reducing the manpower of the IRS needed to enforce the laws may have a greater effect than all the tax cuts combined. If a business is fairly certain an audit isn't coming, their effective tax rate is whatever they want it to be.
- unforeseen9991 7y ago
  Exactly, considering the penalties are just paying whatever is owed anyway, perhaps plus a few minor interest penalties. They make more the fines and interest combined by a long shot just by deploying the saved funds elsewhere.
  - nostromo 7y ago
    > the penalties are just paying whatever is owed anyway, perhaps plus a few minor interest penalties This is not at all true.
  - ummonk 7y ago
    Tell that to Al Capone.
- __jal 7y ago
  Oh, but it is worse. It teaches members of the class that exploit it that taxes are for everyone else. They spend time on efforts to avoid taxes, which not only "starve the beast", but are frankly non-productive while shifting the burden on to others. It breeds sociopathy among the executive class that doesn't need any help in that department while encouraging nonproductive "investment".
- danenania 7y ago
  Also important is what happens to a business that gets caught. If the punishment is 'pay back taxes plus a moderate penalty, and here we'll even set up a convenient payment plan for you', then cheating on taxes is effectively a free roll. You have a 95% chance of saving a ton of money, and 5% chance of paying only a bit more than you would have paid anyway if you followed the laws. That said, the absurd complexity of the tax code is also a problem here, since you don't want the government doling out bankruptcy-inducing penalties on businesses that might just be making an honest mistake. The whole system clearly needs an overhaul. It should be simple enough that when a business severely underpays, it will be very likely that they did so on purpose, and therefore a large, deterrent-worthy penalty can be justified.
numakerg 7y ago
Just one of the many sectors where budget cuts are going turn into huge losses down the line. The consequences of cutting healthcare and education are (going) to be much worse.
- masklinn 7y ago
  Exactly as designed, makes it that much harder for the next government to fix this up so you can shove all the blame on them when it starts going down the drain. This is not something you can fix quickly either, as with State the loss of institutional memory and all the things which should have been tracked but weren't and got lost are going to be a huge supplementary shock.
- abtinf 7y ago
  When have healthcare or education ever been cut? Edit: A lot of downvotes, but no examples. Such cuts are always talked about as if though they have factually happened. To my knowledge, I’ve never actually seen such a cut in the United States at the federal, state, or local level. Sometimes, there have been attempts to limit the rate of spending growth, but those seem to always fail too.
  - sdinsn 7y ago
    The governor of Alaska just signed a bill that cut 41% off the state budget for higher education.
    - abtinf 7y ago
      Thank you for the example. However, it appears that the governor reversed course just yesterday: https://news.yahoo.com/alaska-governor-reverses-course-controversial-032522288.html https://news.yahoo.com/alaska-governor-reverses-course-contr... I've noticed this is a frequent occurance--one faction will try to score political points by appearing to take an action, only to capitulate at the end when fewer people are looking.
      - 7y ago
devoply 7y ago
> IRS is auditing fewer tax returns from corporations because it has fewer people and resources available to identify potential errors and follow up on questionable tax returns On one hand I do want businesses to pay their fair share. On the other hand I don't want to encourage massive tax agencies which must justify their numbers by auditing and harassing as many people as possible. Often small businesses that don't have to resources to defend themselves like large corporations. Very similar to police departments who justify their existence by writing tickets and have quotas set up to encourage cops to harass people. Does not seem much more than a shakedown.
- Spellman 7y ago
  Generally they don't harass people unless something seems amiss and there is a large enough discrepancy to justify it. And there's eventually a marginal tipping point where more money spent in audits won't net more recovered revenue. Generally the smaller the fry, the less you can recover from them.
  - devoply 7y ago
    I remember reading in Australia they specifically went after small businesses because as I said they had little ability to defend themselves. > Two Australian Taxation Office whistleblowers have told a joint Four Corners and Fairfax investigation about a toxic internal culture where vulnerable small businesses and individuals are deliberately targeted to help meet revenue goals. Perverse incentives. https://www.abc.net.au/news/2018-04-09/whistleblower-exposes-ato-cash-grab-targeting-small-businesses/9633140 https://www.abc.net.au/news/2018-04-09/whistleblower-exposes...
  - txsoftwaredev 7y ago
    Unless you were a conservative group a few years back. 'The controversy began in 2013 when an IRS official admitted the agency had been aggressively scrutinizing groups with names such as "Tea Party" and "Patriots."' 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-...
Kapura 7y ago
Greed is winning in America. Any person or political party that is trying to reduce staffing for a tax collection agency is trying to get away with tax fraud or they are working for somebody who is. It is far past the time to recognise this.
- nostromo 7y ago
  “Anyone opposing more police officers and equipment is looking to break the law.” Just as I don’t want a bored cop on every street corner, I also don’t want the IRS to be staffed to maximize revenue. It’s a balance.
  - vkou 7y ago
    That's because when cops have nothing better to do, they harass and assault people for all sorts of subjective made up infractions. I do not expect a properly staffed tax agency to.
    - utopian3 7y ago
      The IRS has (this decade) targeted specific institutions by their affiliations: https://en.m.wikipedia.org/wiki/IRS_targeting_controversy https://en.m.wikipedia.org/wiki/IRS_targeting_controversy (Read the fourth paragraph of this page)
      - vkou 7y ago
        And? Why are audits targeted to a type of organization a problem? If doctors started forming non-profits to do financial engineering to get tax-exempt status, I'd sure as hell hope that the IRS would devote a bit more scrutiny than usual to practitioners of that profession. Political groups started doing financial engineering to get tax-exempt status. The IRS started auditing them a bit more closely. I don't see the issue.
        vageli 7y ago
        > And? Why are audits targeted to a type of organization a problem? > If doctors started forming non-profits to do financial engineering to get tax-exempt status, I'd sure as hell hope that the IRS would devote a bit more scrutiny than usual to practitioners of that profession. > Political groups started doing financial engineering to get tax-exempt status. The IRS started auditing them a bit more closely. I don't see the issue. The country's inspector general deemed it unlawful. Given the report that came out from the investigation, there seems to be more to the audits than neutral scrutiny that is not performed on the basis of ideology.
abtinf 7y ago
The paper itself is locked behind a paywall. No mention of the methodology in either the linked article or the paper's abstract. No indication of the overall economic effects. This is non-knowledge.
- mtmail 7y ago
  https://webcache.googleusercontent.com/search?q=cache:r_DDSEsGOqMJ:https://aaapubs.org/doi/pdf/10.2308/accr-52520+&cd=2&hl=en&ct=clnk&gl=de https://webcache.googleusercontent.com/search?q=cache:r_DDSE... has the full content
pmoriarty 7y ago
And yet some people manage to whip themselves in to a righteous frenzy over someone collecting welfare or immigrants getting a microscopic bit of state aid. Such people really need to get a sense of proportion. The destitute, despised, downtrodden guy who slaves away to support their family by mowing your lawn, picking apples for you, driving you somewhere, or serving you your burger is not your enemy.
- davinic 7y ago
  Last week I saw a person on Facebook sharing an anecdote patterned after the "welfare queen" trope and arguing against food stamps. I noticed from her Facebook page that she owned a ranching operation, so I searched her name in the EWG Farm Subsidy Database and saw that she and her husband had received $18k in subsidies in 2018, and nearly $250k since 1995.
  - adventist 7y ago
    I'm against people living off of food stamps also, and if there is a subsidy out there for the taking, then i'm going to take it. I agree that government should not be involved in either of those things, but promoting certain kinds of businesses might be worth the subsidy for some people.
    - SketchySeaBeast 7y ago
      Would you be against other people getting the subsidy? I'm just trying to figure out if it's hypocrisy or selfishness.
      - nerdponx 7y ago
        Why not both?
    - dlp211 7y ago
      Thanks for wanting to make sure I didn't have dinner on my table as a child while my mom took care of my brother with leukemia.
tathougies 7y ago
The Obama administration proved that tax agencies can be used as agents of political censorship. The power of government to censor political speech should be opposed at all levels and at all points of the political spectrum. One easy way of doing this is to reduce the size of these governmental agencies. 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-...
- tlmchncl 7y ago
  It's worth noting that an FBI investigation found no evidence that the IRS was targeting conservative groups, and that the apology was issued by the Trump Administration, who might have a vested interest in making the IRS look bad. "In January 2014, James Comey, who at the time was the FBI director, told Fox News that its investigation had found no evidence so far warranting the filing of federal criminal charges in connection with the controversy, as it had not found any evidence of "enemy hunting", and that the investigation continued. On October 23, 2015, the Justice Department declared that no criminal charges would be filed. On September 8, 2017, the Trump Justice Department declined to reopen the criminal investigation into Lois Lerner, a central figure in the controversy.[1] In late September 2017, an exhaustive report by the Treasury Department's inspector general found that from 2004 to 2013, the IRS used both conservative and liberal keywords to choose targets for further scrutiny." https://en.wikipedia.org/wiki/IRS_targeting_controversy https://en.wikipedia.org/wiki/IRS_targeting_controversy
  - tathougies 7y ago
    I'm sorry, what? Your response to my criticism that the IRS has been known to use its authority to censor political speech is to point out that they are using it to censor both conservative and liberal speech? So, my argument that the IRS is being used for censorship was basically understated, and your claim is that the IRS's willingness to censor goes well beyond what I insinuated. Thank you for making my point. Was your argument supposed to prove me wrong that an overly large taxation bureaucracy has been shown to be an instrument by which the government can threaten political groups' fundamental right to free speech? I think perhaps you need to try again.
aaronbrethorst 7y ago
There was an excellent podcast interview with Jesse Eisinger from ProPublica on this subject back in February. It goes into quite a bit of detail on the problem: https://www.nbcnews.com/think/opinion/can-we-tax-rich-jesse-eisinger-explains-ncna970581 https://www.nbcnews.com/think/opinion/can-we-tax-rich-jesse-...
alanwil2 7y ago
Amazon doesn't pay taxes despite being worth $793 billion. How can I do this?
- sdinsn 7y ago
  Survive through years of losing money, then use the saved tax credits over the course of the first few profitable years.
- wysifnwyg 7y ago
  There are a lot of companies which completely avoid paying any taxes through multiple sources of side stepping taxes. Immoral but not illegal.
- jumbopapa 7y ago
  The market cap of a company has nothing to do with how much tax they pay. Can we please quit spreading misinformation about Amazon?
- tick_tock_tick 7y ago
  Aquire $793 billion and then do nothing with it. You will not be taxed at all.
- sseveran 7y ago
  One of the reasons (among many) is the expense treatment of stock based compensation was changed I believe as part of Sarbanes-Oxley. Companies are now required to expense stock given as compensation since it will have a dilutive effect on existing shareholders. Amazon issue billions of dollars in stock each year to its employees. Amazon also operates high cashflow but low margin businesses which make its net income very small. The company has emphasized free cash flow to investors for at least 20 years. https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-based-compensation https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-...
- spamlord 7y ago
  Amazon pays taxes, not sure how anybody still believes this piece of misinformation. You do realize it is Congress who creates the tax rules to begin with, so if anyone is at fault for the tax 'loop holes' these companies leverage, it's corrupt legislators. "In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount jumped to $1.18 billion, accounting for local, state, and international taxes." https://www.forbes.com/sites/stephaniedenning/2019/02/22/why-amazon-pays-no-corporate-taxes/#1118762c54d5 https://www.forbes.com/sites/stephaniedenning/2019/02/22/why...
ptero 7y ago
IRS budget cuts seem to be thrown around a lot, but to me this is just a symptom of the real problem -- a tax code that is way too complex. Years of congress pandering to special interests, fixing minor issues with pages of new tax rules and no implementation accountability (implementation and enforcement is dumped on IRS) brought US tax code to a state that can overwhelm any staffing levels. Simplifying tax code will go much further than trying to staff up IRS. My 2c.
- jorblumesea 7y ago
  The reason the IRS's budget is being slashed is the same as why the tax code is complex. Political elites, corporations and those who truly call the shots want less transparency of their finances, not more. Complicated tax codes and no one to audit them greatly benefit the wealthy. There's clearly a strong vested interest in this country of using the government as tool to enrich oneself as the expense of society.
- asciident 7y ago
  Simplifying would be great, but it's not really possible to do because you won't get the exactly same tax distribution with a simplified set of rules. So politicians will frame it as "why do you want to raise taxes on single moms?" and "why are you taking away the deduction for teachers?" and "this bill hurts vulnerable people who have been hit by natural disasters." So any suggestion to simplify the tax code is a no go.
  - humanrebar 7y ago
    Seems like it should be possible to make a credible disparate impact case in response.
  - SkyBelow 7y ago
    It feels like voters are voting for pouring lighter fuel on the wood and throwing lit matches at the wood but vote strongly against having a bonfire. They want politicians to fix problems that they wanted the politicians to create and then don't want the actual fixes to the problems they want fixed.
Spooky23 7y ago
The GOP direction has been to break the IRS since the 90s. None of the administrations were willing or able to take a stand against it, and this administration is actively trying to break the executive branch overall. A good friend was a specialist in a few tax evasion schemes used by real estate developers and a few other more obscure areas with similar methods. Basically, there were about 50 people nationally doing this in the early 90s, but the program was defunded over time and when he retired, there were 4. He spent about 60% of his time flying all over the country to testifying in court. Today there is nobody, the last guy retired last year. By my friend's reckoning, his direct work accounted for $100M in recovered revenue per year. Some big cases were multiples of that. They have models that show the deterrent effect that enforcement has -- that $100M in recovery may deter $1B in undetected fraud. That is money being stolen from the treasury.
- humanrebar 7y ago
  To be fair, large portions of the GOP (current presidents nothwithstanding) has also been advocating for simplified tax schemes that would make a smaller IRS more than capable enough for the job.
  - dlp211 7y ago
    Show me the bills that they have brought to committee/the floor that actually simplify the tax code to make auditing & enforcement simpler. Don't confuse rhetoric with action.
- alt_f4 7y ago
  > That is money being stolen from the treasury. Actually, that is money being stolen by the treasury from the business owner.
  - chowells 7y ago
    No. Taxes are not theft. Taxes are payment for services. Failure to pay is theft.
todipa 7y ago
Taxpayer service defunding is another problem: https://www.treasury.gov/about/budget-performance/budget-in-brief/bib19/16.%20irs%20fy%202019%20bib.pdf https://www.treasury.gov/about/budget-performance/budget-in-...
buttholesurfer 7y ago
That's the point of tax cuts...?
jorblumesea 7y ago
It really feels like there's a vested interesting in this country of destroying this country in favor of short term profits. The government can no longer claim it's even remotely acting in the interest of the average person. It's also pretty clear that one party is far more devoted to this than the other.
m000 7y ago
"budget cuts"
SubiculumCode 7y ago
You call it revenue, I call it inflation reduction.
citilife 7y ago
How much was made up from the tariffs? I suspect it was the roughly the lost revenue.
- colejohnson66 7y ago
  Are those tariffs being used to fund the government? Or are they just going to the treasury? Genuine question.
- dlp211 7y ago
  Zero. The lost revenue is still lost. It can only be made up by funding and staffing the IRS. The existence of new taxes does not negate this outcome.
turc1656 7y ago
What does the last sentence mean exactly? "The IRS is fundamental in preventing businesses from engaging in transactions that aggressively reduce their tax liability." It's not clear to me what is actually being said here because engaging in transactions that reduce tax liability is legal.
rayiner 7y ago
The article is rather misleading. Here is the underlying article, which will be published this year but was actually received in September 2016: https://www.ntanet.org/wp-content/uploads/proceedings/2016/158-nessa-schwab-stomberg-towery-irs-resources-paper.pdf https://www.ntanet.org/wp-content/uploads/proceedings/2016/1... (follow the link in the article, which lists the receive date as September 30, 2016). The article mentions the Tax Cuts and Jobs Act of 2017 (Trump's tax cuts). But the IRS budget cuts discussed in the article are actually from 2015, stemming from the kerfuffle over the IRS allegedly targeting conservative groups for increased scrutiny. Separately, the article fails to address the nature of the additional revenue that could hypothetically have been collected. Pages 26-27 of the article address the study's finding that "the IRS collects a larger portion of proposed deficiencies when it has fewer resources." In the authors' view, that could be because "the IRS focuses on weaker taxpayer positions when its resources are limited." In other words, a larger enforcement budget leads the IRS to go after cases where the IRS is less certain it will win because the facts are more debatable. The authors do not assess the merits of those cases or whether it would be socially desirable to pursue them.
ryanmercer 7y ago
Abolish all of the tax code, pass a federal sales tax, almost entirely do away with the IRS, much more efficient - the end.
- dlp211 7y ago
  This would be the absolute fastest way to shift the federal tax burden from the top 20% to the bottom 50% and would likely cause consumer spending to plummet resulting in a recession. It's also a very nice way to punish lower through upper middle class savers. This may be an ideal solution in theory, but it would likely be devastating in practice.
  - ryanmercer 7y ago
    >This would be the absolute fastest way to shift the federal tax burden from the top 20% to the bottom 50% Bezos bought a 65 million dollar jet... at 20% federal sales tax that would have been 13 million dollars in revenue. He would pay more in taxes in one purchase than I'll earn in gross income in 10-13 lifetimes. I paid a bit over $8000 in w2 employment taxes last year (21.8% of my gross income, with a 20% sales tax I'd have MORE money and yes, I would buy less crap I don't need and use once), in one purchase Bezos would have paid 1974x what I paid last year. Never mind that under most federal sales tax proposals, a flat-rate rebate is issued monthly, quarterly or annually to everyone which greatly softens the blow for the lowest earners.
rhacker 7y ago
I'm going to keep saying this in every goddamn tax thread I see here - We need to switch around the way we are taxing from the US level getting the largest pie to the state. I'm not saying I figured it out - but right now there are enormous issues with the way we tax. 1. We have a system where the fed. government holds states hostage for money when it wants to bully things around. (emergencies, etc..). 2. The current system is actively encouraging people to domicile in TX, FL, WA, SD, etc... (income tax free states) and not actually live there, hoping to play the tax lottery (or move around so much they can't be convicted). 3. The "sales tax" system in the US is ridiculous. It's egregiously illegal according to our tax-once rule. If we can get a tax break on all sales tax we paid, that would be one thing, but we can't. 4. Ind. contractors are taxed in extremely unfair ways, often have no recourse to get discounts or tax breaks on health insurance. My solution - I say it's time to start having states collect that 25% and the feds are hands-off of taxing individuals. Beyond that it would make sense for people to declare a state of residence (one that they most want roads repaired at, police hired, etc..). Get rid of sales tax completely - it's a massive waste of time if states are getting a fair amount. Move MOST fed employees to the state level and remove major govt. contractors that are bilking the public (in the long run companies like Northrup Gruman etc.. are paying the heads billions each - there's no oversight.). Remove the national army and start creating state-armies. Re-write the constitution that changes how states operate within the federal level, and completely change the role of the federal government to be allowed to make laws that are scoped towards fairness across states. Make the fed. government in charge of analytics and cross-state environmental regulation. States would then have the right to make laws that apply to the people. Some might say this is ridiculous but in a time where we getting to the "end of capitalism" a MASSIVE re-write to how money is moved around is damn fucking necessary.
tasty_freeze 7y ago
Taxing businesses at all has been objected to as double taxation: the business is taxed, then the residual profits are distributed to shareholders, who are taxed. It isn't a fringe idea: in 2015, many of the Republican candidates in the running for President stated they thought making corporate tax rates 0% would not only "boost the economy", it would essentially remove all tax laws from the books, greatly simplifying things. Superficially it sounds reasonable. But it isn't. The US military spends $700B+ every year, often times very pointedly protecting the interests of US businesses. The state department has untold people spending billions more opening markets and making trade favorable for US businesses. By and large, the benefits to individuals is an afterthought -- what is good for US business is good for US citizens is the thinking. Large swaths of the government function is spent optimizing conditions for business activity. So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? Apple derives far more benefit and far more directly than I do. Why aren't they paying their portion of the taxes to support it? If part of the cost of doing business is running overseas bases so we can exert influence, that cost should be built into the business expenses as taxes, instead of being externalized to John Q. Public. The answer is, of course, the super wealthy have captured government and a large part of the media which promotes their interests.
- nybble41 7y ago
  > So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? You'll end up paying those taxes regardless. When companies are taxed directly then those taxes are baked into the prices of everything they sell, just like every other business expense. This functions like an inefficient and regressive sales tax except that, unlike normal sales taxes, buyers don't see it as a separate line-item on the bill.
  - tasty_freeze 7y ago
    Thank you for replying instead of simply downvoting. That isn't true. If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity. In reality, they might raise the price of their products some, but that is fine -- the people who use the products and benefit from the government's expenditures to promote Apple's business interests are exactly who should be paying for them. I don't buy Apple products, so I shouldn't be subsidizing their products via taxes. As for calling it a regressive tax, the costs of production of the product should be built into the product price. If it is abnormally low because Apple isn't paying their share of taxes, that is a market distortion. It is regressive if you only stop at first order thinking. Apple's prices would go up, which hurts some consumers, but they would also be paying significantly more in taxes, which helps consumers. Let's pick another example. Would it be OK with you if the government decided to donate $5B/year of crude oil to Exxon? Hey, it would make Exxon's bottom line look great. I don't think anyone (except Exxon) thinks that would be right, yet that is exactly what is being done in kind: Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing. (As for $5B, I just picked a number out the air).
gok 7y ago
Reading the actual study [1], the headline is a bit deceptive. The study looked at audits between 2000 and 2010, a period during which funding to the IRS increased, and found that generally more funding for audits led to more money recovered from audits (duh). But that $34.3B figure is over 10 years, so it's a tiny fraction of a percent of overall federal revenue, and it's not offset by the amount of more money the IRS would have taken to run those audits. Also unmentioned is the very real negative externalities that IRS audits cause. Audits disproportionately affect poor people [2], who are also the least able to spend time dealing with them. The United States already has extremely low tax evasion rates [3]. Rather than spending money to catch more of the very few cheaters by audits, other country's tax authorities have found "nudge" letters were found to be similarly effective and vastly cheaper. [1] https://www.aaajournals.org/doi/abs/10.2308/accr-52520?utm_source=15-kelley-research-on-irs-budget-cuts&utm_medium=email&utm_content=How+do+IRS+resources+affect+the+corporate+audit+process?&utm_campaign=ag https://www.aaajournals.org/doi/abs/10.2308/accr-52520?utm_s... [2] https://projects.propublica.org/graphics/eitc-audit https://projects.propublica.org/graphics/eitc-audit [3] https://www.researchgate.net/figure/Size-and-development-of-tax-evasion-in-of-GDP-in-38-OECD-countries-accounting-for_tbl2_256040463 https://www.researchgate.net/figure/Size-and-development-of-...
- cm2012 7y ago
  The latest IRS changes prioritize low income over high income audit targets: https://www.google.com/amp/s/www.forbes.com/sites/rachelsandler/2019/05/21/why-are-the-super-rich-getting-audited-less/amp/ https://www.google.com/amp/s/www.forbes.com/sites/rachelsand...
  - rsynnott 7y ago
    This seems absolutely insane. > For those making less than $25,000, the audit rate fell 0.02% (to .69%) from 2017 to 2018. Frankly, for it to be significantly above 0 seems grossly inefficient. I would assume that average rate of return for public money spent on auditing a millionaire is... a fair bit higher than that spent auditing someone earning 25k.
    - 7y ago
sbochins 7y ago
From reading the comments, I really wonder how many HN Users are tax evaders. I see the top two comments are “the tax code is too complicated, we shouldn’t be going after tax evaders” and “this isn’t actually a big problem.” If the government is getting more money collecting unreported taxes than it costs to fund the collecting of said taxes, what’s the problem?
- slantaclaus 7y ago
  The tax code is too complicated, which, so NPR tells me, is mostly Intuit’s fault
deleted 7y ago
[deleted]
ausbah 7y ago
Biggest ROI the government can get, invest in the fucking IRS. Something like a 1:15 or 1:20 return if I remember correctly.
Proven 7y ago
Double win! Less bureaucracy AND lower taxes!
londons_explore 7y ago
I'd like to see better treatment of those who fill in tax forms mistakenly wrongly, but still end up paying the right amount of tax. We currently punish those people badly, which is wrong IMO

335 points by mars4rp 7y ago

I don't get why countries always under-invest in tax collection... as long as it's ROI positive, shouldn't budgets be getting increased?

corybrown 7y ago
There's a faction of US politicians that are philosophically against (most) government and taxes. It's not about ROI, it's about their goals.
- RyanAF7 7y ago
  Interesting. A faction you say? You mean like the faction that drafted the Articles of Confederation?
  - SimbaOnSteroids 7y ago
    No, the contemporary one that learned nothing from that folly.
    - RyanAF7 7y ago
      Oh! The one that found success with the Laffer Curve. Right. Freedom isn't an idea. It's an actual place. In terms of kingdoms a free peoples kingdom is a Freedom; and you don't have to pay someone for the right to exist. Oddly enough we agree, there is a faction in the US pursuing its own agenda.
      - corybrown 7y ago
        > The one that found success with the Laffer Curve Care to explain? The most recent tax cuts that were supposed to pay for themselves haven't. So where are we on the Laffer Curve right now?
        microcolonel 7y ago
        Hard to measure both over long and short timescales, since so many factors affect the willingness of people to invest personal effort and risk toward earning. You might have more success looking at the amounts while attempting to control for more factors; but of course, you could make it worse, because statistics is hard!
  - deleted 7y ago
    [deleted]
  - nerdponx 7y ago
    Ah, yes. The failed constitution.
- conanbatt 7y ago
  This faction of the US is unique, which is why the US has some of the lowest tax rates in the world and in consequences has one of the most positive balances in net immigration, specially considering it has one of the harshest immigration policies in the world.
  - SketchySeaBeast 7y ago
    "Give me your tired, your poor, Your huddled masses yearning to breathe free, Those sick of a 35% income tax on earnings over $45,000".
    - conanbatt 7y ago
      I'm literally upset at the US for being so closed for immigration. If it were just a little more lax it would have a lot more than what it has now.
  - microcolonel 7y ago
    The U.S. is by any good measure somewhere between #1 and #3 in median individual income net of taxes and other mandatory transfers; and always #1 in the mean. I think a lot of people look at the gap between the mean and median, and think that something must be going wrong; but to me, the inequality of outcome this measures is more a sign that America is a welcome home of extremely productive people and the smarter of their direct offspring, who inevitably earn ridiculous sums of money when and where doing so is not itself reviled.
  - koyote 7y ago
    The US has some of the lowest tax rates in the world, IFF you are making a large amount of money. If you are earning a median wage a lot of other countries have comparable tax rates. If you are earning minimum wage a lot of other countries have lower tax rates.
    - conanbatt 7y ago
      Yup, not a great country to be poor. Also tax-pressure is still considerable (33% of GDP). This implies the US has lots of regressive expenditures and taxes. On the whole, I think the tax rate is the main difference between the US and most of industrialized countries, and net immigration is hugely positive for the US.
DerpyBaby123 7y ago
Governments aren't 'rational actors' trying to maximize revenue. In US, 'starve the beast' [1] comes highly into play https://en.m.wikipedia.org/wiki/Starve_the_beast https://en.m.wikipedia.org/wiki/Starve_the_beast
rietta 7y ago
When the executive branch doesn't agree with the law, one tool they have as a separate branch of government is to not enforce the law. In U.S. political history, President Andrew Jackson reportedly responded: "John Marshall has made his decision; now let him enforce it!" referring to the Supreme Court ruling in https://en.wikipedia.org/wiki/Worcester_v._Georgia https://en.wikipedia.org/wiki/Worcester_v._Georgia.
aantix 7y ago
George: Still don't know how you can call lunch with me a business expense? Elaine: What do you think of the catalog? George: I think it stinks. Elaine: There, we just talked business. * Imagine the IRS debating grey area scenarios like this against financial teams trained to argue deductions. The ROI quickly becomes a sewer drain.
jonathankoren 7y ago
I think it’s because it’s a stealth tax cut. It might be able to win the political argument for lowering taxes, but by cutting funding for enforcement, you’re encouraging scofflaws and thus get the unpopular outcome you desired without having to go on television and defend it. A similar thing plays out when politicians want to cut popular social programs. They manufacture a budget crisis (typically through instituting a popular tax cut) and then solve the crisis by cutting the funding to the thing they already decided they didn’t like.
conanbatt 7y ago
If 99.9% of the national income were used to gather 100% of the national income, you would have positive ROI.
- trophycase 7y ago
  Where does the remaining 0.1% go then 0.o?
- nybble41 7y ago
  Exactly, which should illustrate just how pointless this calculation is. Obviously spending 99.9% of national resources on tax collection would be a colossal waste from the public's point of view despite the "positive ROI". The IRS supposedly exists to benefit the public; maximizing the amount transferred from private citizens to the government is not the end goal here. The benefit to the public from having that money spent by the government rather than by those individual members of the public who earned it is at best a small fraction of the total amount of tax collected, and may even be negative.
deleted 7y ago
[deleted]

berbec 7y ago

The act of reducing the manpower of the IRS needed to enforce the laws may have a greater effect than all the tax cuts combined. If a business is fairly certain an audit isn't coming, their effective tax rate is whatever they want it to be.

unforeseen9991 7y ago
Exactly, considering the penalties are just paying whatever is owed anyway, perhaps plus a few minor interest penalties. They make more the fines and interest combined by a long shot just by deploying the saved funds elsewhere.
- nostromo 7y ago
  > the penalties are just paying whatever is owed anyway, perhaps plus a few minor interest penalties This is not at all true.
- ummonk 7y ago
  Tell that to Al Capone.
__jal 7y ago
Oh, but it is worse. It teaches members of the class that exploit it that taxes are for everyone else. They spend time on efforts to avoid taxes, which not only "starve the beast", but are frankly non-productive while shifting the burden on to others. It breeds sociopathy among the executive class that doesn't need any help in that department while encouraging nonproductive "investment".
danenania 7y ago
Also important is what happens to a business that gets caught. If the punishment is 'pay back taxes plus a moderate penalty, and here we'll even set up a convenient payment plan for you', then cheating on taxes is effectively a free roll. You have a 95% chance of saving a ton of money, and 5% chance of paying only a bit more than you would have paid anyway if you followed the laws. That said, the absurd complexity of the tax code is also a problem here, since you don't want the government doling out bankruptcy-inducing penalties on businesses that might just be making an honest mistake. The whole system clearly needs an overhaul. It should be simple enough that when a business severely underpays, it will be very likely that they did so on purpose, and therefore a large, deterrent-worthy penalty can be justified.

numakerg 7y ago

Just one of the many sectors where budget cuts are going turn into huge losses down the line. The consequences of cutting healthcare and education are (going) to be much worse.

masklinn 7y ago
Exactly as designed, makes it that much harder for the next government to fix this up so you can shove all the blame on them when it starts going down the drain. This is not something you can fix quickly either, as with State the loss of institutional memory and all the things which should have been tracked but weren't and got lost are going to be a huge supplementary shock.
abtinf 7y ago
When have healthcare or education ever been cut? Edit: A lot of downvotes, but no examples. Such cuts are always talked about as if though they have factually happened. To my knowledge, I’ve never actually seen such a cut in the United States at the federal, state, or local level. Sometimes, there have been attempts to limit the rate of spending growth, but those seem to always fail too.
- sdinsn 7y ago
  The governor of Alaska just signed a bill that cut 41% off the state budget for higher education.
  - abtinf 7y ago
    Thank you for the example. However, it appears that the governor reversed course just yesterday: https://news.yahoo.com/alaska-governor-reverses-course-controversial-032522288.html https://news.yahoo.com/alaska-governor-reverses-course-contr... I've noticed this is a frequent occurance--one faction will try to score political points by appearing to take an action, only to capitulate at the end when fewer people are looking.
    - 7y ago

devoply 7y ago

> IRS is auditing fewer tax returns from corporations because it has fewer people and resources available to identify potential errors and follow up on questionable tax returns On one hand I do want businesses to pay their fair share. On the other hand I don't want to encourage massive tax agencies which must justify their numbers by auditing and harassing as many people as possible. Often small businesses that don't have to resources to defend themselves like large corporations. Very similar to police departments who justify their existence by writing tickets and have quotas set up to encourage cops to harass people. Does not seem much more than a shakedown.

Spellman 7y ago
Generally they don't harass people unless something seems amiss and there is a large enough discrepancy to justify it. And there's eventually a marginal tipping point where more money spent in audits won't net more recovered revenue. Generally the smaller the fry, the less you can recover from them.
- devoply 7y ago
  I remember reading in Australia they specifically went after small businesses because as I said they had little ability to defend themselves. > Two Australian Taxation Office whistleblowers have told a joint Four Corners and Fairfax investigation about a toxic internal culture where vulnerable small businesses and individuals are deliberately targeted to help meet revenue goals. Perverse incentives. https://www.abc.net.au/news/2018-04-09/whistleblower-exposes-ato-cash-grab-targeting-small-businesses/9633140 https://www.abc.net.au/news/2018-04-09/whistleblower-exposes...
- txsoftwaredev 7y ago
  Unless you were a conservative group a few years back. 'The controversy began in 2013 when an IRS official admitted the agency had been aggressively scrutinizing groups with names such as "Tea Party" and "Patriots."' 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-...

Kapura 7y ago

Greed is winning in America. Any person or political party that is trying to reduce staffing for a tax collection agency is trying to get away with tax fraud or they are working for somebody who is. It is far past the time to recognise this.

nostromo 7y ago
“Anyone opposing more police officers and equipment is looking to break the law.” Just as I don’t want a bored cop on every street corner, I also don’t want the IRS to be staffed to maximize revenue. It’s a balance.
- vkou 7y ago
  That's because when cops have nothing better to do, they harass and assault people for all sorts of subjective made up infractions. I do not expect a properly staffed tax agency to.
  - utopian3 7y ago
    The IRS has (this decade) targeted specific institutions by their affiliations: https://en.m.wikipedia.org/wiki/IRS_targeting_controversy https://en.m.wikipedia.org/wiki/IRS_targeting_controversy (Read the fourth paragraph of this page)
    - vkou 7y ago
      And? Why are audits targeted to a type of organization a problem? If doctors started forming non-profits to do financial engineering to get tax-exempt status, I'd sure as hell hope that the IRS would devote a bit more scrutiny than usual to practitioners of that profession. Political groups started doing financial engineering to get tax-exempt status. The IRS started auditing them a bit more closely. I don't see the issue.
      - vageli 7y ago
        > And? Why are audits targeted to a type of organization a problem? > If doctors started forming non-profits to do financial engineering to get tax-exempt status, I'd sure as hell hope that the IRS would devote a bit more scrutiny than usual to practitioners of that profession. > Political groups started doing financial engineering to get tax-exempt status. The IRS started auditing them a bit more closely. I don't see the issue. The country's inspector general deemed it unlawful. Given the report that came out from the investigation, there seems to be more to the audits than neutral scrutiny that is not performed on the basis of ideology.

abtinf 7y ago

The paper itself is locked behind a paywall. No mention of the methodology in either the linked article or the paper's abstract. No indication of the overall economic effects. This is non-knowledge.

mtmail 7y ago
https://webcache.googleusercontent.com/search?q=cache:r_DDSEsGOqMJ:https://aaapubs.org/doi/pdf/10.2308/accr-52520+&cd=2&hl=en&ct=clnk&gl=de https://webcache.googleusercontent.com/search?q=cache:r_DDSE... has the full content

pmoriarty 7y ago

And yet some people manage to whip themselves in to a righteous frenzy over someone collecting welfare or immigrants getting a microscopic bit of state aid. Such people really need to get a sense of proportion. The destitute, despised, downtrodden guy who slaves away to support their family by mowing your lawn, picking apples for you, driving you somewhere, or serving you your burger is not your enemy.

davinic 7y ago
Last week I saw a person on Facebook sharing an anecdote patterned after the "welfare queen" trope and arguing against food stamps. I noticed from her Facebook page that she owned a ranching operation, so I searched her name in the EWG Farm Subsidy Database and saw that she and her husband had received $18k in subsidies in 2018, and nearly $250k since 1995.
- adventist 7y ago
  I'm against people living off of food stamps also, and if there is a subsidy out there for the taking, then i'm going to take it. I agree that government should not be involved in either of those things, but promoting certain kinds of businesses might be worth the subsidy for some people.
  - SketchySeaBeast 7y ago
    Would you be against other people getting the subsidy? I'm just trying to figure out if it's hypocrisy or selfishness.
    - nerdponx 7y ago
      Why not both?
  - dlp211 7y ago
    Thanks for wanting to make sure I didn't have dinner on my table as a child while my mom took care of my brother with leukemia.

tathougies 7y ago

The Obama administration proved that tax agencies can be used as agents of political censorship. The power of government to censor political speech should be opposed at all levels and at all points of the political spectrum. One easy way of doing this is to reduce the size of these governmental agencies. 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-...

tlmchncl 7y ago
It's worth noting that an FBI investigation found no evidence that the IRS was targeting conservative groups, and that the apology was issued by the Trump Administration, who might have a vested interest in making the IRS look bad. "In January 2014, James Comey, who at the time was the FBI director, told Fox News that its investigation had found no evidence so far warranting the filing of federal criminal charges in connection with the controversy, as it had not found any evidence of "enemy hunting", and that the investigation continued. On October 23, 2015, the Justice Department declared that no criminal charges would be filed. On September 8, 2017, the Trump Justice Department declined to reopen the criminal investigation into Lois Lerner, a central figure in the controversy.[1] In late September 2017, an exhaustive report by the Treasury Department's inspector general found that from 2004 to 2013, the IRS used both conservative and liberal keywords to choose targets for further scrutiny." https://en.wikipedia.org/wiki/IRS_targeting_controversy https://en.wikipedia.org/wiki/IRS_targeting_controversy
- tathougies 7y ago
  I'm sorry, what? Your response to my criticism that the IRS has been known to use its authority to censor political speech is to point out that they are using it to censor both conservative and liberal speech? So, my argument that the IRS is being used for censorship was basically understated, and your claim is that the IRS's willingness to censor goes well beyond what I insinuated. Thank you for making my point. Was your argument supposed to prove me wrong that an overly large taxation bureaucracy has been shown to be an instrument by which the government can threaten political groups' fundamental right to free speech? I think perhaps you need to try again.

aaronbrethorst 7y ago

There was an excellent podcast interview with Jesse Eisinger from ProPublica on this subject back in February. It goes into quite a bit of detail on the problem: https://www.nbcnews.com/think/opinion/can-we-tax-rich-jesse-eisinger-explains-ncna970581 https://www.nbcnews.com/think/opinion/can-we-tax-rich-jesse-...

alanwil2 7y ago

Amazon doesn't pay taxes despite being worth $793 billion. How can I do this?

sdinsn 7y ago
Survive through years of losing money, then use the saved tax credits over the course of the first few profitable years.
wysifnwyg 7y ago
There are a lot of companies which completely avoid paying any taxes through multiple sources of side stepping taxes. Immoral but not illegal.
jumbopapa 7y ago
The market cap of a company has nothing to do with how much tax they pay. Can we please quit spreading misinformation about Amazon?
tick_tock_tick 7y ago
Aquire $793 billion and then do nothing with it. You will not be taxed at all.
sseveran 7y ago
One of the reasons (among many) is the expense treatment of stock based compensation was changed I believe as part of Sarbanes-Oxley. Companies are now required to expense stock given as compensation since it will have a dilutive effect on existing shareholders. Amazon issue billions of dollars in stock each year to its employees. Amazon also operates high cashflow but low margin businesses which make its net income very small. The company has emphasized free cash flow to investors for at least 20 years. https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-based-compensation https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-...
spamlord 7y ago
Amazon pays taxes, not sure how anybody still believes this piece of misinformation. You do realize it is Congress who creates the tax rules to begin with, so if anyone is at fault for the tax 'loop holes' these companies leverage, it's corrupt legislators. "In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount jumped to $1.18 billion, accounting for local, state, and international taxes." https://www.forbes.com/sites/stephaniedenning/2019/02/22/why-amazon-pays-no-corporate-taxes/#1118762c54d5 https://www.forbes.com/sites/stephaniedenning/2019/02/22/why...

ptero 7y ago

IRS budget cuts seem to be thrown around a lot, but to me this is just a symptom of the real problem -- a tax code that is way too complex. Years of congress pandering to special interests, fixing minor issues with pages of new tax rules and no implementation accountability (implementation and enforcement is dumped on IRS) brought US tax code to a state that can overwhelm any staffing levels. Simplifying tax code will go much further than trying to staff up IRS. My 2c.

jorblumesea 7y ago
The reason the IRS's budget is being slashed is the same as why the tax code is complex. Political elites, corporations and those who truly call the shots want less transparency of their finances, not more. Complicated tax codes and no one to audit them greatly benefit the wealthy. There's clearly a strong vested interest in this country of using the government as tool to enrich oneself as the expense of society.
asciident 7y ago
Simplifying would be great, but it's not really possible to do because you won't get the exactly same tax distribution with a simplified set of rules. So politicians will frame it as "why do you want to raise taxes on single moms?" and "why are you taking away the deduction for teachers?" and "this bill hurts vulnerable people who have been hit by natural disasters." So any suggestion to simplify the tax code is a no go.
- humanrebar 7y ago
  Seems like it should be possible to make a credible disparate impact case in response.
- SkyBelow 7y ago
  It feels like voters are voting for pouring lighter fuel on the wood and throwing lit matches at the wood but vote strongly against having a bonfire. They want politicians to fix problems that they wanted the politicians to create and then don't want the actual fixes to the problems they want fixed.

Spooky23 7y ago

The GOP direction has been to break the IRS since the 90s. None of the administrations were willing or able to take a stand against it, and this administration is actively trying to break the executive branch overall. A good friend was a specialist in a few tax evasion schemes used by real estate developers and a few other more obscure areas with similar methods. Basically, there were about 50 people nationally doing this in the early 90s, but the program was defunded over time and when he retired, there were 4. He spent about 60% of his time flying all over the country to testifying in court. Today there is nobody, the last guy retired last year. By my friend's reckoning, his direct work accounted for $100M in recovered revenue per year. Some big cases were multiples of that. They have models that show the deterrent effect that enforcement has -- that $100M in recovery may deter $1B in undetected fraud. That is money being stolen from the treasury.

humanrebar 7y ago
To be fair, large portions of the GOP (current presidents nothwithstanding) has also been advocating for simplified tax schemes that would make a smaller IRS more than capable enough for the job.
- dlp211 7y ago
  Show me the bills that they have brought to committee/the floor that actually simplify the tax code to make auditing & enforcement simpler. Don't confuse rhetoric with action.
alt_f4 7y ago
> That is money being stolen from the treasury. Actually, that is money being stolen by the treasury from the business owner.
- chowells 7y ago
  No. Taxes are not theft. Taxes are payment for services. Failure to pay is theft.

todipa 7y ago

Taxpayer service defunding is another problem: https://www.treasury.gov/about/budget-performance/budget-in-brief/bib19/16.%20irs%20fy%202019%20bib.pdf https://www.treasury.gov/about/budget-performance/budget-in-...

buttholesurfer 7y ago

That's the point of tax cuts...?

jorblumesea 7y ago

It really feels like there's a vested interesting in this country of destroying this country in favor of short term profits. The government can no longer claim it's even remotely acting in the interest of the average person. It's also pretty clear that one party is far more devoted to this than the other.

m000 7y ago

"budget cuts"

SubiculumCode 7y ago

You call it revenue, I call it inflation reduction.

citilife 7y ago

How much was made up from the tariffs? I suspect it was the roughly the lost revenue.

colejohnson66 7y ago
Are those tariffs being used to fund the government? Or are they just going to the treasury? Genuine question.
dlp211 7y ago
Zero. The lost revenue is still lost. It can only be made up by funding and staffing the IRS. The existence of new taxes does not negate this outcome.

turc1656 7y ago

What does the last sentence mean exactly? "The IRS is fundamental in preventing businesses from engaging in transactions that aggressively reduce their tax liability." It's not clear to me what is actually being said here because engaging in transactions that reduce tax liability is legal.

rayiner 7y ago

The article is rather misleading. Here is the underlying article, which will be published this year but was actually received in September 2016: https://www.ntanet.org/wp-content/uploads/proceedings/2016/158-nessa-schwab-stomberg-towery-irs-resources-paper.pdf https://www.ntanet.org/wp-content/uploads/proceedings/2016/1... (follow the link in the article, which lists the receive date as September 30, 2016). The article mentions the Tax Cuts and Jobs Act of 2017 (Trump's tax cuts). But the IRS budget cuts discussed in the article are actually from 2015, stemming from the kerfuffle over the IRS allegedly targeting conservative groups for increased scrutiny. Separately, the article fails to address the nature of the additional revenue that could hypothetically have been collected. Pages 26-27 of the article address the study's finding that "the IRS collects a larger portion of proposed deficiencies when it has fewer resources." In the authors' view, that could be because "the IRS focuses on weaker taxpayer positions when its resources are limited." In other words, a larger enforcement budget leads the IRS to go after cases where the IRS is less certain it will win because the facts are more debatable. The authors do not assess the merits of those cases or whether it would be socially desirable to pursue them.

ryanmercer 7y ago

Abolish all of the tax code, pass a federal sales tax, almost entirely do away with the IRS, much more efficient - the end.

dlp211 7y ago
This would be the absolute fastest way to shift the federal tax burden from the top 20% to the bottom 50% and would likely cause consumer spending to plummet resulting in a recession. It's also a very nice way to punish lower through upper middle class savers. This may be an ideal solution in theory, but it would likely be devastating in practice.
- ryanmercer 7y ago
  >This would be the absolute fastest way to shift the federal tax burden from the top 20% to the bottom 50% Bezos bought a 65 million dollar jet... at 20% federal sales tax that would have been 13 million dollars in revenue. He would pay more in taxes in one purchase than I'll earn in gross income in 10-13 lifetimes. I paid a bit over $8000 in w2 employment taxes last year (21.8% of my gross income, with a 20% sales tax I'd have MORE money and yes, I would buy less crap I don't need and use once), in one purchase Bezos would have paid 1974x what I paid last year. Never mind that under most federal sales tax proposals, a flat-rate rebate is issued monthly, quarterly or annually to everyone which greatly softens the blow for the lowest earners.

rhacker 7y ago

I'm going to keep saying this in every goddamn tax thread I see here - We need to switch around the way we are taxing from the US level getting the largest pie to the state. I'm not saying I figured it out - but right now there are enormous issues with the way we tax. 1. We have a system where the fed. government holds states hostage for money when it wants to bully things around. (emergencies, etc..). 2. The current system is actively encouraging people to domicile in TX, FL, WA, SD, etc... (income tax free states) and not actually live there, hoping to play the tax lottery (or move around so much they can't be convicted). 3. The "sales tax" system in the US is ridiculous. It's egregiously illegal according to our tax-once rule. If we can get a tax break on all sales tax we paid, that would be one thing, but we can't. 4. Ind. contractors are taxed in extremely unfair ways, often have no recourse to get discounts or tax breaks on health insurance. My solution - I say it's time to start having states collect that 25% and the feds are hands-off of taxing individuals. Beyond that it would make sense for people to declare a state of residence (one that they most want roads repaired at, police hired, etc..). Get rid of sales tax completely - it's a massive waste of time if states are getting a fair amount. Move MOST fed employees to the state level and remove major govt. contractors that are bilking the public (in the long run companies like Northrup Gruman etc.. are paying the heads billions each - there's no oversight.). Remove the national army and start creating state-armies. Re-write the constitution that changes how states operate within the federal level, and completely change the role of the federal government to be allowed to make laws that are scoped towards fairness across states. Make the fed. government in charge of analytics and cross-state environmental regulation. States would then have the right to make laws that apply to the people. Some might say this is ridiculous but in a time where we getting to the "end of capitalism" a MASSIVE re-write to how money is moved around is damn fucking necessary.

tasty_freeze 7y ago

Taxing businesses at all has been objected to as double taxation: the business is taxed, then the residual profits are distributed to shareholders, who are taxed. It isn't a fringe idea: in 2015, many of the Republican candidates in the running for President stated they thought making corporate tax rates 0% would not only "boost the economy", it would essentially remove all tax laws from the books, greatly simplifying things. Superficially it sounds reasonable. But it isn't. The US military spends $700B+ every year, often times very pointedly protecting the interests of US businesses. The state department has untold people spending billions more opening markets and making trade favorable for US businesses. By and large, the benefits to individuals is an afterthought -- what is good for US business is good for US citizens is the thinking. Large swaths of the government function is spent optimizing conditions for business activity. So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? Apple derives far more benefit and far more directly than I do. Why aren't they paying their portion of the taxes to support it? If part of the cost of doing business is running overseas bases so we can exert influence, that cost should be built into the business expenses as taxes, instead of being externalized to John Q. Public. The answer is, of course, the super wealthy have captured government and a large part of the media which promotes their interests.

nybble41 7y ago
> So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? You'll end up paying those taxes regardless. When companies are taxed directly then those taxes are baked into the prices of everything they sell, just like every other business expense. This functions like an inefficient and regressive sales tax except that, unlike normal sales taxes, buyers don't see it as a separate line-item on the bill.
- tasty_freeze 7y ago
  Thank you for replying instead of simply downvoting. That isn't true. If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity. In reality, they might raise the price of their products some, but that is fine -- the people who use the products and benefit from the government's expenditures to promote Apple's business interests are exactly who should be paying for them. I don't buy Apple products, so I shouldn't be subsidizing their products via taxes. As for calling it a regressive tax, the costs of production of the product should be built into the product price. If it is abnormally low because Apple isn't paying their share of taxes, that is a market distortion. It is regressive if you only stop at first order thinking. Apple's prices would go up, which hurts some consumers, but they would also be paying significantly more in taxes, which helps consumers. Let's pick another example. Would it be OK with you if the government decided to donate $5B/year of crude oil to Exxon? Hey, it would make Exxon's bottom line look great. I don't think anyone (except Exxon) thinks that would be right, yet that is exactly what is being done in kind: Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing. (As for $5B, I just picked a number out the air).

gok 7y ago

Reading the actual study [1], the headline is a bit deceptive. The study looked at audits between 2000 and 2010, a period during which funding to the IRS increased, and found that generally more funding for audits led to more money recovered from audits (duh). But that $34.3B figure is over 10 years, so it's a tiny fraction of a percent of overall federal revenue, and it's not offset by the amount of more money the IRS would have taken to run those audits. Also unmentioned is the very real negative externalities that IRS audits cause. Audits disproportionately affect poor people [2], who are also the least able to spend time dealing with them. The United States already has extremely low tax evasion rates [3]. Rather than spending money to catch more of the very few cheaters by audits, other country's tax authorities have found "nudge" letters were found to be similarly effective and vastly cheaper. [1] https://www.aaajournals.org/doi/abs/10.2308/accr-52520?utm_source=15-kelley-research-on-irs-budget-cuts&utm_medium=email&utm_content=How+do+IRS+resources+affect+the+corporate+audit+process?&utm_campaign=ag https://www.aaajournals.org/doi/abs/10.2308/accr-52520?utm_s... [2] https://projects.propublica.org/graphics/eitc-audit https://projects.propublica.org/graphics/eitc-audit [3] https://www.researchgate.net/figure/Size-and-development-of-tax-evasion-in-of-GDP-in-38-OECD-countries-accounting-for_tbl2_256040463 https://www.researchgate.net/figure/Size-and-development-of-...

cm2012 7y ago
The latest IRS changes prioritize low income over high income audit targets: https://www.google.com/amp/s/www.forbes.com/sites/rachelsandler/2019/05/21/why-are-the-super-rich-getting-audited-less/amp/ https://www.google.com/amp/s/www.forbes.com/sites/rachelsand...
- rsynnott 7y ago
  This seems absolutely insane. > For those making less than $25,000, the audit rate fell 0.02% (to .69%) from 2017 to 2018. Frankly, for it to be significantly above 0 seems grossly inefficient. I would assume that average rate of return for public money spent on auditing a millionaire is... a fair bit higher than that spent auditing someone earning 25k.
  - 7y ago

sbochins 7y ago

From reading the comments, I really wonder how many HN Users are tax evaders. I see the top two comments are “the tax code is too complicated, we shouldn’t be going after tax evaders” and “this isn’t actually a big problem.” If the government is getting more money collecting unreported taxes than it costs to fund the collecting of said taxes, what’s the problem?

slantaclaus 7y ago
The tax code is too complicated, which, so NPR tells me, is mostly Intuit’s fault

deleted 7y ago

[deleted]

ausbah 7y ago

Biggest ROI the government can get, invest in the fucking IRS. Something like a 1:15 or 1:20 return if I remember correctly.

Proven 7y ago

Double win! Less bureaucracy AND lower taxes!

londons_explore 7y ago

I'd like to see better treatment of those who fill in tax forms mistakenly wrongly, but still end up paying the right amount of tax. We currently punish those people badly, which is wrong IMO