Super-rich tax cheats can now expect to avoid audits after years of Republican sabotage guts IRS

Alan Pyke

Alan Pyke Deputy Economic Policy Editor, Think Progress

Here is a picture of neglect: Out of every 100 taxpayers who reported more than $1 million in income last year, just three got audited by the Internal Revenue Service (IRS).

The feds were similarly reticent to examine the filings of corporate taxpayers, auditing less than half of the 633 separate business entities that currently hold assets whose value exceeds $20 billion.

These alarming figures are just the continuation of a multi-year downward trend on basic accountability for those taxpayers who are best positioned to pay fancy accountants to skulk through the tax code looking for places to hide their loot from the public.

The decline in the number of audits of high-income individuals is particularly stark, as Syracuse University’s Transactional Records Access Clearinghouse (TRAC) noted in their report on the data, released Thursday. Twice as many million-dollar earners were audited in 2010, at which time the IRS identified $5.1 billion in unpaid taxes from 32,494 audits. Last year’s considerably more torpid effort to provide oversight of the well-to-do pulled in just $1.9 billion, per TRAC.

Blame for the reduction in high-value audits doesn’t just lie with the widely-loathed federal agency in charge of ensuring that people pay their proper share toward the roads, food inspections, and warplanes that taxpayers buy. The IRS’s investigations and audits budget has been repeatedly slashed in Republican-controlled appropriations bills over the past several years – starting in Fiscal Year 2014 when conservative elected officials used a ginned-up controversy about the agency’s investigations of political non-profits to justify huge cuts.

As a result, it is difficult to find a more seamless form of fiscal self-harm anywhere in public policy. For every dollar of funding given to the tax authority’s auditing and investigations unit, taxpayers see between $6 and $9 in return, depending on the applicable sub-category of tax enforcement. Normally a deficit hawk will brag about salvaging this penny or that nickel for taxpayers. But those bent on torpedoing the IRS’s budget are costing ordinary taxpayers money, and at such a terrifying clip that “cutting off your nose to spite your face” understates the damage done.

It’s worth noting that the Republican legislators who have slowly strip-mined the IRS budget aren’t simpletons who can’t understand the arithmetic the underpins this boon to ordinary taxpayers. Rather, theirs is a knowing effort to achieve that oft-stated goal of anti-tax celebrity Grover Norquist: To make government so small it could be drowned in a claw-footed bath tub. (With the right accountant the aforementioned tub could be easily written off as a business expense as well.)

Per TRAC’s reporting, the steady annual decline in audit rates for both million-dollar earners and corporations adds up to unsettling losses to the public coffers. In terms ofthe raw-dollar comparisons, in 2010 – when 96 percent of all $20 billion corporations had their returns audited – the IRS identified $23.7 billion in tax cheating by those firms. Last year, that figure was just $12.5 billion.

Big numbers tend to fuzz into oblivion when stacked up next to each other, so consider instead what $11 billion a year can mean for real people. Want to reverse the Section 8 rental support vouchers cut proposed in last year’s White House budget? It can be done, and in so doing, roughly a quarter-million families would be spared from losing the rent vouchers that keep a roof over their heads.

Now, how do you want to spend the other $9 billion? There are plenty of good options. That’s about one third of what it would cost to bring food stamp benefit levels up to meet the actual cost of adequate nutrition for every family currently enrolled, based on one 2018 research paper. Or it could get you about a tenth of the way to fully funding the “baby bonds” proposal Sen. Cory Booker’s (D-NJ) team thinks would nearly close the racial wealth gap.

All that just from a back-of-envelope guesstimate of what underfunding IRS audits of corporations is doing to the national balance sheet — and it all comes before a single penny in new taxes is levied.

Then there’s the individual-returns side of the IRS’s missing money problem. Those audits pulled in $3 billion more in 2010 than they did last year, when only half as many such reviews were conducted. And that 2010 figure is likely an undercount itself – 92 percent of all million-dollar income reporters didn’t get a second look from auditors then either.

The people who worry about how the federal government is going to pay for those things that might foster a more equitable society could do well to take a note from Willie Sutton, the famous Depression-era crook who had a simple explanation for why he started robbing banks instead of swiping jewelry: “That’s where the money is.”

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Reposted from ThinkProgress

Alan Pyke is the Deputy Economic Policy Editor for ThinkProgress.org. Before coming to ThinkProgress, he was a blogger and researcher with a focus on economic policy and political advertising at Media Matters for America, American Bridge 21st Century Foundation, and PoliticalCorrection.org. He previously worked as an organizer on various political campaigns from New Hampshire to Georgia to Missouri. His writing on music and film has appeared on TinyMixTapes, IndieWire’s Press Play, and TheGrio, among other sites.

Posted In: Allied Approaches

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Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

Millions of American families are still reeling from the aftershocks of the financial crash a dozen years ago. But a key architect of that debacle, Countrywide Financial CEO Angelo Mozilo, is feeling no pain — and no remorse either. In the decade before the crash, Mozilo took $650 million out of Countrywide, a hefty chunk of that just before the subprime mortgage scam Countrywide exploited started to implode. Earlier this month, Angelo described Countrywide as a “great company” at a conference appearance and declared subprimes as “not the cause at all” of the nation’s 2007-2008 financial wreckage. Added Mozilo: “Somehow — for some unknown reason — I got blamed.” The former CEO is acknowledging that all the blame did at one point bother him. And now? The famously always tanned Mozilo notes simply: “I don’t care.” 

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