The Left claims that additional IRS funding would help close the so-called “tax gap” by making wealthy people pay the taxes they allegedly don’t pay.
In reality, the wealthy and large corporations already have armies of lawyers and accountants that ensure they legally take advantage of the credits and deductions offered by the tax code.
The IRS already audits the largest corporations at extremely high rates. In 2017, the IRS had just closed or were conducting examinations on 34 percent of the 1,200 largest corporations, according to IRS Statistics of Income (SOI) data.
Given these corporations are publicly traded, it is unlikely that executives would conduct widespread tax fraud that could see their stock plummet. The fact is, there is not widespread tax fraud from the “rich” or corporations.
So, who will be the target of new IRS funding? Middle-class families and small and medium-sized businesses.
One way they will do this is by giving the IRS vast authority to create a new financial account reporting regime which would force the disclosure of any business or personal account that exceeds $600, opening virtually every American citizen up to privacy violations and IRS abuse. The new reporting regime would require institutions, including third-party payment providers like Venmo and CashApp, to report inflows and outflows of accounts exceeding $600 in value to the IRS.
This low threshold means that new reporting requirements will fall on virtually every American – not just the wealthy. It will provide the IRS with a new tool to conduct audits and investigations into taxpayers that the agency thinks may be paying too little in tax. It is not difficult to see how this could be abused.
In fact, the IRS Criminal Investigation Division (IRS-CI) regularly violated taxpayers’ rights and skirted or ignored due process requirements when investigating taxpayers for allegedly violating the existing $10,000 currency transaction reporting requirements, according to a 2017 report by the Treasury Inspector General for Tax Administration (TIGTA).
The report found numerous abuses – IRS agents often failed to properly identify themselves, seized financial assets before ever having talked or consulted with investigated taxpayers, didn’t attempt to verify reasonable explanations investigated taxpayers offered, and did not inform taxpayers of important information nor the purpose of interviews. The outcome of these cases was often determined by how willing a taxpayer was to engage in litigation against the government, rather than how severe the alleged offense was, a clear violation of the Eighth Amendment.
Most taxpayers targeted were innocent – less than one in ten investigations uncovered violations of tax law.
These findings should be concerning, but not surprising. The IRS has a long history of incompetence and ineptitude.
For example, this filing season almost 40 percent of printers were not working at tax processing centers, yet in many cases the only thing wrong with the printers is that no employee had replaced the ink or emptied the waste cartridge container. A 2017 TIGTA report found that the IRS rehired more than 200 employees who were previously employed by the agency but fired for previous conduct or performance issues.
Each year, the IRS hangs up on millions of callers – a practice they refer to as “Courtesy Disconnects.” If you call the IRS, you have a 1-in-50 chance of reaching a human being.
The agency has repeatedly failed to compile legally-required tax complexity reports which are supposed to contain the IRS’s specific recommendations on how to make the tax code easier to comply with. Since 1998, the IRS has done so just twice – in 2000 and 2002.
According to the National Taxpayer Advocate’s 2014 Annual Report to Congress the IRS was unable to justify spending decisions.
These are just of few examples of the IRS’s incompetence. This isn’t a problem of funding; this is a problem of ineptitude.
An additional $80 billion in IRS funding would only make these problems worse. It would not only reward the agency for its incompetence and corruption, but it would also subject everyday taxpayers and businesses to the IRS’s abuse. ✪