If you think that there is a different legal system for those with money and power, you are absolutely right. Aside from the ability to make massive campaign contributions and deploy professional lobbying experts, one of the most significant bases for that power is the ability to engage expensive teams of lawyers, creating mazes of transparency barrier to sidestep laws and regulations, that truly intimidate governmental enforcement officials. You’ve watched Donald Trump use the system to delay and deflect civil and criminal prosecution. Lots of lawyers! You wonder how Fortune 100 companies wind up paying little or no tax, but when you look at the staffing of their legal departments and see over 100 in-house tax lawyers, you might get a hint.
When state tax authorities and the federal Internal Revenue Service seek to audit mega-wealthy individuals or very large corporations, they are acutely aware of the need to have a sizeable team of committed auditors spend a very long time to find the hidden treasure. Not the same as auditing a middle-class taxpayer who would generate a very small result but consumes a very small effort from a single auditor. That IRS is understaffed is hardly a secret.
Even as the GOP reduced federal taxes on corporations from 35% to 21% in 2017 (a pre-pandemic gift to the rich from the Trump administration), creating an additional trillion-dollar hole in the federal deficit, Republicans remain deeply committed to helping the mega-rich avoid paying taxes. In their new anti-“woke” efforts, they expect to fill that deficit hole by cutting programs that benefit the bottom 90% of Americans.
The recent Inflation Reduction Act provision that added $80 billion to the IRS is in the crosshairs of the Republican Party. The ultra-right-wing conservative constituency of House Republicans wants that $80 billion repealed as a condition to their lifting the debt ceiling. They apparently want to make it too difficult for the agency to pursue the mega-rich, forcing them to turn ordinary taxpayers into the IRS’ major collection focus. Between that and the recently passed infrastructure bill, slightly higher taxes for corporations and the super-wealthy actually reduce that deficit hole. Biden’s new $6.8 billion budget would further reduce the deficit, with minor increases in tax rates that only impact those earning over $400,000 a year. Needless to say, the GOP has made it clear that this budgetary request is dead on arrival.
Meanwhile, in addition to overstaffing, the IRS is burdened by an antiquated hardware and software system that further slows that federal agency down. Surprisingly, an alarming number of audits still rely on “paper” documentation and review. Not surprisingly, it is an open secret that without the ability (read: budget) to deploy sophisticated teams of senior auditors against deep rich pockets, the IRS is forced to rely much more heavily and soaking the little guys. Rebecca Chen, writing for the March 12th Yahoo!Finance illustrates the nation and scope of the problem: “Financially vulnerable families are burdened with never-ending notices and refund delays.
"‘Families with low incomes are relatively easy and inexpensive to audit compared to more wealthy individuals and corporations,’ Joanna Ain, associate director of policy at Prosperity Now, a national nonprofit driving change towards racial economic equality, told to Yahoo Finance. ‘I can imagine a huge and a very scary burden for low-income families to get these notices from the IRS and to go through that process.’…
“Nearly 50% of the IRS' total audits went to families making less than $25,000 and claiming the Earned Income Tax Credit, or EITC, according to Syracuse University's Transactional Records Access Clearinghouse (TRAC). The burden of the IRS audits disproportionately falls on lower-income families, with households making less than $25,000 facing the largest audit scrutiny among other income ranges in 2022, according to data released by TRAC… Dragged-out audits can hurt lower-income households because many depend on tax refunds to pay bills. Although the IRS recently released a new website portal to help fix issues faster, many families must amend returns during an audit, which can take up to another 16 weeks to process.
“[Jan Lewis, a CPA and chair of the tax executive committee at American Institute of Certified Public Accountants], for example, is helping a young family claim the Child Tax Credit and she can see the impact… ‘They have two kids under the age of four, they are working, they are trying to do their best and it's a real hardship,’ the CPA said. ‘I've been waiting for that refund since April of 2022. We're in February of 2023. And we can't even tell them when they're going to get their refund.’… But that's not all. Lewis said some taxpayers are so afraid of the IRS that they just pay the agency even if they're in the right… ‘They are scared the IRS is gonna come get them so they pay the balance when they really shouldn't,’ Lewis said.
“More than 97% of lower-income families who got audited in 2022 receive the audit by mail. This is because the tax agency replaced many of its face-to-face audits with letter audits as a cost cutting measure… ‘The way [the IRS] audits the family is mechanical, whereas the higher-income family, when they're being audited, they (may) have lawyers involved,’ Ain said. ‘You need to spend more money on the higher-income audits than the lower-income audits.’
“Lower-income taxpayers also often have trouble understanding the audit letters and navigating the process… ‘Correspondence audit letters fail to provide a point of contact,’ Erin Collins, the National Taxpayer Advocate, wrote in her annual report to Congress. ‘Low-income taxpayers encounter communication barriers that hinder audit resolution, leading to increased burdens and downstream consequences for taxpayers.’” But you do have to hand it to the Republican Party; they have successfully traded supporting religious fundamentalism, minimizing non-White/non-Christian minorities’ power at the polls and waging a culture war in exchange for a philosophy that government needs to be severely constrained in regulating the environment, the financial system and taxation, and a continued special treatment for the rich (that failed “a rising tide floats all boats” strategy).
I’m Peter Dekom, and we are watching GOP supported special interests eroding equal treatment under the law, moving our nation away from democracy into the illiberal world of autocracy, theocracy and plutocracy… in short, the majority of Americans simply do not matter.
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