4 ms·

There is an aspect of seeming illogic I want to call out here. Maybe it's just my lack of understanding. Assuming the IRS is underfunded, saying they focus on

There is an aspect of seeming illogic I want to call out here. Maybe it's just my lack of understanding. Assuming the IRS is underfunded, saying they focus on low income people as a consequence, when it would be more lucrative to target high earners, makes no sense. The claims could all be true, but they don't appear to be connected. Why would the total amount of funding force the IRS to spend less on individual cases? An alternative hypothesis might be that it actually is more cost effective to target people with less money, for instance, people paid mainly in cash tips, but I don't have any idea if that is plausible, I'm just saying the narrative doesn't make sense to me. In general, targeting rich people seems obvious because rich people "have the money", but mathematically, it depends on how many there are when you multiply it out. Anyway, I am very open to the idea that the IRS is being stupid and counterproductive, or politically avoiding prosecuting the rich, but I think it raises the question of "why" that is not answered by saying "underfunding". They still have funding to go after one or more high earners, right, so the total amount is irrelevant if it's taken as a given.

clusterfish 6y ago
Maybe IRS just knows that they're being underfunded precisely to stop them from auditing Congress's rich sponsors, so they proactively self-censor their audits to prevent further cuts?
- EGreg 6y ago
  Pretty much this. I don’t understand how Republicans can argue cutting funding to the IRS will save the government’s spending. Instead their goal is to make the tax base richer by cutting taxes of the rich. Many of them are all about cutting taxes to the rich and corporations, doubling down on the trickle down. They even blocked payroll tax cuts to the lower and middle class: http://www.washingtonpost.com/politics/house-republicans-defeat-two-month-payroll-tax-cut/2011/12/20/gIQAj8RI7O_story.html http://www.washingtonpost.com/politics/house-republicans-def...
content_sesh 6y ago
Wealthy people have the resources to defend themselves in court. If you live paycheck to paycheck, you generally cannot afford lawyer fees, taking time off work for court appearances, or the risk of actually losing a case, or the probably million other things I'm not thinking about right now. It is almost always easier to go after the poor than it is to go after the rich and powerful.
ac29 6y ago
The article linked in the parent comment explains it. Audits of lower income people are largely automated - a letter is generated and sent in the mail. Auditing higher income people takes paid investigators, lawyers and time. They are both considered "audits", but its not the same procedure.
- jdhn 6y ago
  By this logic, they should be focusing on higher income people if audits of lower income people are automated and therefore require drastically less manpower.
  - Moto7451 6y ago
    The cost of sending the letters is a lot less than bringing a lawyer into court. Low income individuals just pay up. If it costs pennies to send and you make $100, you’re going to keep optimizing that. If you lack the funding to take down a hedge fund manager, you’re not going to bother trying. The IRS also sends the letters to people that they owe money. This year my accountant didn’t realize I was owed a credit. The IRS mailed me a check and a letter explaining why they adjusted my return and issued the credit.
    - zxcmx 6y ago
      Systemically, threatening letters, while practically free for the government to send - cause a lot of stress for people. Both those who owe tax and those who have to prove they don't. It's hard to know where to draw the line but you could reasonably argue that chasing low income people for small amounts is net negative societal utility, even when you get them to pay up.
      - naniwaduni 6y ago
        Humans are notoriously good at ignoring externalities when they're not held to account for them.
      - m-p-3 6y ago
darawk 6y ago
Audits of the rich are not economical for the IRS. Audits of the poor are extremely cost efficient, because they can be automated, and because they don't fight back.
x86_64Ubuntu 6y ago
It's because the costs for going after well-funded and well-defended tax cheats is higher than going after middle and lower income people who can't defend themselves. This has been known since George Bush II's tenure.
- refurb 6y ago
  The IRS selects which returns to audit based in part on a statistical formula that identifies returns most likely to be at risk of having an error So yes, you're correct. Analyzing whether or not someone is eligible for EITC (those making less than ~$50,000) can be automated and if flagged, a letter sent telling them they aren't eligible or asking for more information. [1]https://www.taxpolicycenter.org/briefing-book/how-do-irs-audits-affect-low-income-families https://www.taxpolicycenter.org/briefing-book/how-do-irs-aud...
jcrawfordor 6y ago
I also read an article on this a while ago that said that at least informally, the metrics changed in the IRS - the practice went from evaluating auditors based on the dollar value they recovered to evaluating auditors based on the number of files they opened and closed. So of course now the auditors focus on the small cases because they're quick and easy, and they don't want to have to explain to a performance management system why they closed fewer cases than their coworkers.
cortesoft 6y ago
'Cost effectiveness' doesn't help them since they don't get to use the money they collect in their own budget. They can't choose to spend more, knowing they will make it back.... they don't have the money to invest in going after rich tax payers. They can only spend the budget they are given, and that isn't enough to go after rich people, even if it would bring more money in.
- ethbr0 6y ago
  Does anyone have a citation for this? I expected this was a big reason for the seemingly illogical behavior, but am curious how it shakes out. Where does money they recover go? It would seem to make sense to seed a high income investigative unit, checked by the courts, and then allow them to retain a substantial portion of their recoveries to self-fund.
  - mod 6y ago
    > https://www.irs.gov/pub/irs-pdf/f1040v.pdf https://www.irs.gov/pub/irs-pdf/f1040v.pdf "Make your check or money order payable to “United States Treasury.” " That's, you know, the federal government. Not the department called the IRS. The IRS gets a budgeted amount of funds.
  - bobthepanda 6y ago
    IRS is funded out of the general fund by Congress, which is also where the money the IRS finds goes. > It would seem to make sense to seed a high income investigative unit, checked by the courts, and then allow them to retain a substantial portion of their recoveries to self-fund. For an example of how this could go horribly, horribly wrong, look at police use of civil forfeiture. https://www.nbcnews.com/think/opinion/police-abused-civil-forfeiture-laws-so-long-supreme-court-stepped-ncna974086 https://www.nbcnews.com/think/opinion/police-abused-civil-fo...
    - ethbr0 6y ago
      >> checked by the courts If you limited their targets to high net worth individuals, I daresay they'd be able to afford a robust (and as fair as we can make it) defense. Unlike the abuses in civil forfeiture, where the primary targets tend to be without legal recourse.

clusterfish 6y ago

Maybe IRS just knows that they're being underfunded precisely to stop them from auditing Congress's rich sponsors, so they proactively self-censor their audits to prevent further cuts?

EGreg 6y ago
Pretty much this. I don’t understand how Republicans can argue cutting funding to the IRS will save the government’s spending. Instead their goal is to make the tax base richer by cutting taxes of the rich. Many of them are all about cutting taxes to the rich and corporations, doubling down on the trickle down. They even blocked payroll tax cuts to the lower and middle class: http://www.washingtonpost.com/politics/house-republicans-defeat-two-month-payroll-tax-cut/2011/12/20/gIQAj8RI7O_story.html http://www.washingtonpost.com/politics/house-republicans-def...

content_sesh 6y ago

Wealthy people have the resources to defend themselves in court. If you live paycheck to paycheck, you generally cannot afford lawyer fees, taking time off work for court appearances, or the risk of actually losing a case, or the probably million other things I'm not thinking about right now. It is almost always easier to go after the poor than it is to go after the rich and powerful.

ac29 6y ago

The article linked in the parent comment explains it. Audits of lower income people are largely automated - a letter is generated and sent in the mail. Auditing higher income people takes paid investigators, lawyers and time. They are both considered "audits", but its not the same procedure.

jdhn 6y ago
By this logic, they should be focusing on higher income people if audits of lower income people are automated and therefore require drastically less manpower.
- Moto7451 6y ago
  The cost of sending the letters is a lot less than bringing a lawyer into court. Low income individuals just pay up. If it costs pennies to send and you make $100, you’re going to keep optimizing that. If you lack the funding to take down a hedge fund manager, you’re not going to bother trying. The IRS also sends the letters to people that they owe money. This year my accountant didn’t realize I was owed a credit. The IRS mailed me a check and a letter explaining why they adjusted my return and issued the credit.
  - zxcmx 6y ago
    Systemically, threatening letters, while practically free for the government to send - cause a lot of stress for people. Both those who owe tax and those who have to prove they don't. It's hard to know where to draw the line but you could reasonably argue that chasing low income people for small amounts is net negative societal utility, even when you get them to pay up.
    - naniwaduni 6y ago
      Humans are notoriously good at ignoring externalities when they're not held to account for them.
    - m-p-3 6y ago

darawk 6y ago

Audits of the rich are not economical for the IRS. Audits of the poor are extremely cost efficient, because they can be automated, and because they don't fight back.

x86_64Ubuntu 6y ago

It's because the costs for going after well-funded and well-defended tax cheats is higher than going after middle and lower income people who can't defend themselves. This has been known since George Bush II's tenure.

refurb 6y ago
The IRS selects which returns to audit based in part on a statistical formula that identifies returns most likely to be at risk of having an error So yes, you're correct. Analyzing whether or not someone is eligible for EITC (those making less than ~$50,000) can be automated and if flagged, a letter sent telling them they aren't eligible or asking for more information. [1]https://www.taxpolicycenter.org/briefing-book/how-do-irs-audits-affect-low-income-families https://www.taxpolicycenter.org/briefing-book/how-do-irs-aud...

jcrawfordor 6y ago

I also read an article on this a while ago that said that at least informally, the metrics changed in the IRS - the practice went from evaluating auditors based on the dollar value they recovered to evaluating auditors based on the number of files they opened and closed. So of course now the auditors focus on the small cases because they're quick and easy, and they don't want to have to explain to a performance management system why they closed fewer cases than their coworkers.

cortesoft 6y ago

'Cost effectiveness' doesn't help them since they don't get to use the money they collect in their own budget. They can't choose to spend more, knowing they will make it back.... they don't have the money to invest in going after rich tax payers. They can only spend the budget they are given, and that isn't enough to go after rich people, even if it would bring more money in.

ethbr0 6y ago
Does anyone have a citation for this? I expected this was a big reason for the seemingly illogical behavior, but am curious how it shakes out. Where does money they recover go? It would seem to make sense to seed a high income investigative unit, checked by the courts, and then allow them to retain a substantial portion of their recoveries to self-fund.
- mod 6y ago
  > https://www.irs.gov/pub/irs-pdf/f1040v.pdf https://www.irs.gov/pub/irs-pdf/f1040v.pdf "Make your check or money order payable to “United States Treasury.” " That's, you know, the federal government. Not the department called the IRS. The IRS gets a budgeted amount of funds.
- bobthepanda 6y ago
  IRS is funded out of the general fund by Congress, which is also where the money the IRS finds goes. > It would seem to make sense to seed a high income investigative unit, checked by the courts, and then allow them to retain a substantial portion of their recoveries to self-fund. For an example of how this could go horribly, horribly wrong, look at police use of civil forfeiture. https://www.nbcnews.com/think/opinion/police-abused-civil-forfeiture-laws-so-long-supreme-court-stepped-ncna974086 https://www.nbcnews.com/think/opinion/police-abused-civil-fo...
  - ethbr0 6y ago
    >> checked by the courts If you limited their targets to high net worth individuals, I daresay they'd be able to afford a robust (and as fair as we can make it) defense. Unlike the abuses in civil forfeiture, where the primary targets tend to be without legal recourse.