How you can resist funding the government →
about the IRS and U.S. tax law/policy →
IRS incompetence →
enforcement effort/results →
reduced tax enforcement workforce / furloughs
Some bits and pieces from here and there:
The decay of the federal government’s tax enforcement arm continues. I recently noted the IRS offering early retirement to 5,000 employees, mostly from the tax enforcement division.
Now, the Department of Justice has lost 30% of its tax prosecutors.
How big is the federal government?
It would be a mistake to use the size of the budget as a proxy.
Much of what the federal government does comes from manipulating the tax code through targeted tax preferences, rather than through outright taxing and spending.
But the effect of these manipulations amounts to much the same thing.
If you use the size of the budget, or the amount of taxes coming in as a proxy for government size, you may be fooled into opposing the elimination of targeted tax breaks under the mistaken impression that such a move would increase, rather than decrease, the size of government.
David Cay Johnston notes that this is just the continuation of a long trend of reduced IRS budgets:
“, the IRS will spend 20 percent less per capita in real terms than it did in ,” he says.
“That means a lot of tax money is being left on the table because the IRS lacks the resources to identify cheats, to pursue those who owe taxes, and to make cases the Department of Justice can prosecute.”
La Arena has a brief article about “a violent act and its cover-up.” The violent act in question came when someone fired 23 shots into a vehicle carrying tax inspectors in the Entre Ríos province of Argentina (the inspectors were saved by their paperwork-filled briefcases). The cover-up went something like this:
The violent attack happened, the police quickly identified the aggressor
and raided his home, where they found a small arsenal of weapons of
war — it is not clear if they were registered. They also found proof in
his truck of recently-fired gunpowder residue. With these (and other)
details the case merited at least preventative detention, but the
prosecutor [Juan Sebastián Blanc] intervened in spite of the overwhelming
evidence from the attack, putting the attacker at liberty, judging that
there was not sufficient evidence for such a determination.
While I was working my way through the Spanish Handbook of Economic Disobedience and trying my hand at some amateur translation, interesting links were accumulating in my bookmarks.
I’ll share some of these today:
The erosion of the IRS budget and the expansion of its responsibilities has led to a drop in revenue from its collections/enforcement branch.
“Diminished enforcement could also affect voluntary compliance over time,” according to the Treasury Inspector General for Tax Administration report that revealed the numbers.
The IRS has shed about 8,000 jobs , the report said.
It comes as the IRS is taking on big new responsibilities implementing President Barack Obama’s new health care law, with congressional Republicans wanting to cut the agency’s budget even more.
Dublin household and water charge strikers are fighting back against government attempts to install water meters that would enforce the new tax.
This video demonstrates how resisters have poured concrete blocks to prevent the installation of the meters:
War tax resister Ed Hedemann appeared on Breaking The Set to explain “how Americans can stop financially supporting the military industrial complex by withholding taxes”:
And now these criminal entrepreneurs have struck on the idea of working the game from the other side — they’re impersonating the IRS itself, calling up American citizens, and threatening them with government retribution — such as imminent arrest, deportation, license revocations, or property seizure — if they don’t pay some invented tax liability immediately (but, pay to the scammers, not to the real IRS).
The government calls it the “largest ever” scam of this sort — involving tens of thousands of victims, and millions of dollars in extorted payments.
Hilariously, in warning people about the scam, the Treasury Inspector General for Taxpayer Administration claims:
“If someone unexpectedly calls claiming to be from the IRS and uses threatening language if you don’t pay immediately, that is a sign that it really isn’t the IRS calling,” he [Inspector General J. Russell George] said.
Sounds like Mr. George has never gotten a call from the IRS before!
The upshot of this is that the real IRS is going to have a harder time than usual distinguishing itself from smaller-scale thieves, and is going to have to devote even more energy into trying to assert its legitimacy.
And that’s energy the agency doesn’t have to spare — it has fewer employees now than at any time in the last decade, and much more to do: including implementing much of Obamacare, chasing down the rampant identity thieves, and responding to sweeping Congressional subpoenas regarding the TEA Party-targeting kerfluffle.
The IRS has three tiers of response to people like me who don’t pay their taxes.
The first and least resource-intensive is called the “Notice Stream” — a series of computer-generated letters.
The second tier — “Automated Collection System” — involves actual agency employees, who answer incoming calls from delinquent taxpayers and go hunting for assets to levy.
A third tier — “Collection Field function” — is a more assertive version of this, and may initiate contact with delinquent taxpayers, visit them, or even in rare cases seize property.
This report has to do with the decay of the second tier under the pressure of
budget cuts and the need to shift personnel to cover new challenges. Some
highlights:
, 39 percent of the ACS workforce has been lost due to attrition or reassignment.
The inability to hire behind attrition losses over has caused the ACS to lose 684 (24 percent) of the 2,824 contact representatives who were working in .
In addition to ACS employee attrition, three ACS call sites were taken offline in to work AM function inventory. IRS management made this decision to free up AM function resources to address the IRS’s growing inventory of identity theft cases.
The initiative was originally scheduled to continue for three months, but was subsequently extended and was ongoing at the conclusion of our field work.
This reallocation was the equivalent of losing an additional 410 contact representatives because the employees in these three ACS call sites were answering taxpayer questions rather than working ACS inventory.
As a result of this, combined with ACS employee attrition, the number of ACS contact representatives in was 39 percent less than in .
The IRS made a decision to prioritize being able to answer calls from delinquent taxpayers, believing that such a taxpayer who calls in is the easiest sort to squeeze.
But in order to be able to handle the same volume of incoming calls with fewer employees, they had to deprioritize working on the rest of the cases in their inventory.
In , 35% of
ACS
employee hours were devoted to the inventory; this shrank to 24% in
— a
decrease of “43 percent, from 695,860 to 396,386 [hours].” As a result, the
inventory increased from 5.94 million accounts to 7.79 million accounts (a 31%
increase), while the average age of the accounts in inventory has increased
from 46 to 62 weeks (a 35% increase).
[W]e reviewed ACS business results for and determined that:
New inventory [of delinquent tax cases] is outpacing case closures, so the
inventory is growing.
Inventory is taking longer to close, so the cases in inventory are
aging.
Revenue declined and more cases were closed as Currently Not Collectible
(CNC)
Fewer enforcement actions (liens and levies) were taken.
More, and older, cases were transferred to the Queue [where cases sit
between the time when
ACS
gives up on them and when Collection Field function begins work on them],
which further reduces the probability of collection by the
CFf.
In , the ACS collected $3.22 billion and wrote off $3.65 billion as “currently not collectible.” The equivalent numbers for were $2.82 billion and $4.03 billion.
Levies and liens have also dropped during this span, from 2.94 million and 0.55 million respectively to 1.22 million and 0.22 million.
These drops are in part a direct effect of the agency having fewer employees to
initiate collection actions, but also an indirect effect of the agency wanting
to meet its “Level of Service” goals — that is, how many incoming phone calls
it is able to answer successfully. Because enforcement actions often lead to
calls from upset taxpayers, the agency has been engaging in fewer such actions
merely as a way to cut down on call volume!
ACS management advised us that they take certain steps to control and manage the volume of incoming calls in an effort to assist the ACS in achieving its Level of Service goal.
In addition, the Joint Operations Center advised us that under the direction of IRS Headquarters, the ACS decreased the number of enforcement actions taken to proactively reduce the volume of incoming calls.
Congress has engaged in its traditional year-end brinkmanship, passing a set of
retroactive extensions of popular tax breaks. These also included some changes
that may be of interest to tax resisters. For example:
Tax penalties for failure to file and failure to pay will now be indexed
for inflation, as of .
Congress has created a new variety of tax-advantaged savings accounts,
designed to help people fund accounts for disabled people. If I’m
interpreting what I’ve read about this correctly, the tax advantages are
modest: deposits to these trust funds are not deducted from taxable income,
but any investment gains on the amounts in the funds, as well as the
principle, are not taxable to the disabled person they are given to if they
are withdrawn for the purposes of paying the qualified expenses of that
person.
Meanwhile, the IRS has begun pronouncing doom and gloom as a result of the latest cuts to its budget.
Quick to appeal to American’s bottom-line, IRS Commissioner John Koskinen said that people may experience delays in getting their income tax refunds.
With any luck this will encourage more people to reduce their withholding so they aren’t owed refunds at tax filing time.
Koskinen says the cuts will hurt the IRS enforcement arm:
“In some ways,” he said, “these budget cuts are really a tax cut for tax cheats.
Because to the extent we have fewer people to audit and enforce the tax code, that means some people cutting corners on their taxes or not complying are going to get away with it.”
The IRS is envisioning hiring freezes and furloughs this year, but also seems to be showing a strange lack of care when it does hire people — particularly as tax-season temporary help.
According to a Treasury Inspector General for Tax Administration audit, the agency rehired hundreds of former employees who had significant “substantiated conduct or performance issues” during a previous stint with the agency, including “unauthorized access to taxpayer information, leave abuse, falsification of official forms, unacceptable performance, misuse of IRS property, and off-duty misconduct” — indeed five such new hires “had willfully failed to file their Federal tax returns.”
The Nuclear Resister profiles war tax resister and activist Bonnie Urfer.
“Bonnie’s conscientiously self-limited income keeps her from supporting the war system which now gets about half of everyone’s federal income taxes.
Living under the taxable limit has always been part of her life of resisting militarism in thought, word and deed.”
IRS head John Koskinen spoke at the National Press Club about how hiring freezes, low morale, and funding cuts have made it difficult for the agency to attract younger workers.
Excerpts:
Koskinen said that over half of IRS staffers are over 50, and that roughly two in five employees will be eligible for retirement by .
On the flip side, the agency only has around 1,900 staffers under 30, which amounts to roughly 3 percent of the workforce.
“Essentially, the IRS is facing its own version of the baby bust,” Koskinen said.
Some links that have flashed by my browser in recent days:
IRS
Follies
It takes so long to reach the IRS by phone that a company has gone into business selling places in the phone queue.
That’s right.
They have many lines on which they call the IRS and stay on hold, and then you call them and buy the line that has been on hold longest so you don’t have to wait so long.
Somewhere, a star on Obama’s economic team is tallying this up as “innovative job creation.”
Padamsee claimed that he always does everything legal and correct.
He said, “I checked with lawyers.
We are a group of like-minded people, and the tax paying population of this country, and they said, anyone who works together could form a union.
And by law, a union is allowed to strike.
We will strike by not paying tax.
We plan to assemble a million people with a fee of Re 1 each, but all this is at the planning stage.
We are talking with senior lawyers and will have them on board.
Our main aim will be to make the government accountable.
If there are any recommendations, people can contact me.”
However, it is not yet specified which tax the Tax Payers’ Union will not pay, as there are various taxes in India, and most of them are indirect tax, which one pays in form of service, or while buying products.
The other important taxes which concern an individual directly, include income tax and professional tax.
This idea seems to be catching on.
Justice Arun Chaudhari, from the Nagpur bench of Bombay High Court, in a ruling during a recent corruption case, said:
In my considered opinion, corruption can be beaten if all work together.
To eradicate the cancer of corruption — the “hydra-headed monster,” it is now a high time for the citizens to come together to tell their governments that they have had enough.
That is the miasma of of corruption.
If the same continues, taxpayers may resort to refuse to pay taxes by “non-cooperation movement.”
Tommaso Cerno, a journalist and gay rights activist in Friuli, Italy, has made waves by announcing, in a letter published in Repubblica, a tax strike for gay rights.
If the government does not allow us the freedom to direct our taxes toward more enriching and sustainable funds, we will begin the process of taking that freedom for ourselves.
We will discontinue paying taxes to the government, and instead redirect our money into a community fund that distributes our income in a way that serves all of us.
As long as we continue paying for the current system in the form of taxes, we are complicit in the violence and corruption committed by it.
By withdrawing our funding of it, we withdraw our consent of its actions.
Bernard J. Berg recalls how he came out of the U.S. military doubtful that what he was doing deserved to be called “service”:
I too served in the Navy, just before Vietnam, helping to keep the sea lanes safe for United Fruit Co. and the Dulles brothers.
I later joined the war tax resistance effort sponsored by Lehigh-Pocono Committee of Concern.
Money which should have gone to the IRS to pay for our war crimes went into the fund to be used for worthy causes.
But the IRS had the last laugh as it garnered my bank account and got more money for illegal wars with the fines it extracted from me.
Miscellany
I just learned about the following presentation which was made at the 2013 Bitcoin Conference, and features Angela Keaton from AntiWar.com, Carla Gericke of the Free State Project, and Teresa Warmke of Fr33Aid, discussing how nonprofits can benefit from using BitCoin:
The number of U.S. citizens who are renouncing their citizenship is climbing, continuing a dramatic trend since 2008.
Some bits and pieces from here and there:
war tax resistance
Jesse Maceo Vega-Frey recalls his time with Juanita & Wally Nelson, and his own ambivalent experiences with war tax resistance, in an article for the Boston Review.
I stumbled on this quote, shared recently by “tandy_jack” on Instagram, from the back of a Joan Baez album:
We paid the taxes that bought the war that hired the men and dropped the fire that burned the huts and killed the people who then were the bodies that Scott counted.
It’s a rotten thing to brainwash someone into doing the dirty part of the killing while we stay at home.
It’s a rotten thing to pretend the war is coming to an end when it’s only taken to the air.
And in if you don’t fight against a rotten thing you become part of it.
What I’m asking you to do is take some risks.
Stop paying war taxes, refuse the armed forces, organize against the air war, support the strikes and boycotts of farmers, workers, and poor people, analyze the flag salute, give up the nation state, share your money, refuse to hate, be willing to work… in short, sisters and brothers, arm up with love and come from the shadows.
virtual cash
exiled American dissident Edward Snowden made waves recently by promoting tax resistance to the incoming Trump regime
National governments are trying to discourage cash, so as to eliminate the sorts of anonymous, untraceable transactions that are difficult to tax.
For example, the government of India recently made a surprise announcement that 500 and 1,000 rupee notes would no longer be legal tender after a certain deadline.
If the IRS does decide to crack down on virtual currencies, it may have to do so with virtual employees, as its real enforcement staff numbers have been dropping year after year:
This article, concerning another TIGTA report, gives a good indication of how strapped the agency is.
Even when shown that there’s money on the table that just needs to be picked up (in this case, high-income people who haven’t filed income tax returns but whom the agency knows about), the IRS complains it doesn’t have enough people to do the picking.
Before the U.S. federal government “shutdown,” back in , I ordered a batch of this year’s tax forms from the IRS.
I like to file on paper, rather than electronically, in part because if we all did that we’d bring the IRS to its knees.
But anyway… during the “shutdown” the IRS sent me a letter saying it had gotten my order but would not be able to fulfill it right away.
Here we are in mid-February, three weeks after the “shutdown” ended, and I’m still waiting.
That’s just a superficial indication of the chaos that’s roiling the already-overtaxed (ha!) agency.
Years of increasing responsibilities, budget cuts, blows to employee morale, and ever-more-dilapidated IT infrastructure (“profoundly archaic”, one recent report put it, and risking a “catastrophic systems collapse”) have taken their toll.
Hiring freezes have led to a graying workforce that is retiring in droves.
The “shutdown” was further insult to the injuries.
And that, in a year when the agency has had to change its rules and processes to deal with a new tax law and the most radically restructured tax forms in recent memory.
That all requires employee retraining which was supposed to have been happening in the weeks leading up to tax filing season, that is, the time when the agency had to shut its doors and send its seasonal employees home.
The new federal income tax law that goes into effect this filing season was the usual slapdash exercise in political posturing and lobbyist pissing matches.
Naturally a plethora of loopholes and shelters bubbled to the surface after the ooze settled.
A set of tax law experts has made “an effort to supply the analysis and deliberation that should have accompanied the bill’s consideration and passage,“ and they conclude that “[m]any of the new changes fundamentally undermine the integrity of the tax code and allow well-advised taxpayers to game the new rules through strategic planning.”
Details here: The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the 2017 Tax Legislation
After all of the talk of tax cuts, Americans may be surprised at getting fewer, smaller, and later-to-arrive income tax refunds than they’re used to this year.
While that’s not a very meaningful metric in the big scheme of things, it is something that can contribute to the degradation of taxpayer morale, as many taxpayers — subconsciously or merely short-sightedly — see their tax refund as a measure of how generous or costly the government is to them.
The usual stories about massively profitable companies like Netflix or Amazon not paying taxes (or indeed getting tax refunds) are also doing the rounds and eroding taxpayer morale this year.
Susanne Großmann of Pax Christi and Netzwerk Friedenssteuer attempted last week to appeal for a refund of 5% of her taxes, on conscientious objection to military taxation grounds.
In other news:
the phrase “29/3 No Brexit? No Council Tax!” painted onto a wall near Wearhead Drive in Sunderland
The House Joint Committee on Taxation prepared a report on the “Tax Cuts and Jobs Act” that went into effect .
The report was designed to to address how the act affects taxpayers at different income levels, but I was mostly interested in the bottom-line, which showed that the law is expected to result in the government bringing in $259,454,000,000 less in federal taxes than it otherwise would have .
“Nearly half of
IRS’s
Senior Executive Service (SES) is eligible to retire” (along with 21.3% of
the rest of the employees).
“IRS
exit survey results found 32 percent of separating employees indicated poor
office morale strongly influenced their decision to leave.”
Reductions in staff from 2011 to 2017 “have been most significant within
IRS
Enforcement, where staffing declined by 27 percent.”
“IRS
officials told us that, unlike other areas where the agency is legally
required to perform certain functions, the agency has flexibility to
curtail many enforcement activities when attrition rates increase. Auditing
tax returns, for example, is a critical part of
IRS’s
strategy to ensure tax compliance and address the tax gap, or the
difference between taxes owed and those paid on time. Our analysis of
IRS
data shows the number of individual returns audited has declined each year
between fiscal years 2011 through 2017, a 40 percent decline.” Audits of
large corporation have fallen even more dramatically.
Revenue Officers are the
IRS
employees who handle individual cases of tax noncompliance, including
meeting face-to-face with such scofflaws and initiating enforcement actions
like filing liens and seizing property. “[T]he total number of
revenue officers at
IRS
declined by nearly 40 percent from fiscal years 2011 through 2017, and
entry-level revenue officers declined by 86 percent during that same
period.”
“IRS
decided to scale back nonfiler investigations in light of declining
staffing, according to
IRS
officials. We reported in tax year 2010 that
IRS
started 3.5 million individual nonfiler cases and 4.3 million business
nonfiler cases. In tax year 2014, nonfiler cases dropped to 2 million for
individuals and 1.8 million for businesses, a reduction of 43 percent and
58 percent, respectively. More recently in fiscal year 2018,
IRS
data show nonfiler investigations declined to 0.8 million for individuals
and 0.4 million for businesses.”
Some bits and pieces from here and there:
The gilets jaunes movement in France continues its series
of weekend protests. The focus of the movement drifted over time from
opposition to increased motor fuel taxes to regime-change, with every other
opposition movement in the land seeming to want to try to hitch their wagon
to the cause as well (which made it hard for me to get a good grip on
things from this side of the language barrier). Recently, the government
began to crack down more severely on the protests: bringing in
counter-terrorist military units to supplement law enforcement, and banning
protesters and protest regalia from certain urban areas. Now the movement
seems to be struggling to maintain its momentum and the government is trying to wait it out.
[W]e want to examine the different practices and forms of withholding and
avoiding personal and financial duties, fees and taxes over time and
among different social, professional and other groups. This includes, on
the one hand, open and organized tax resistance on moral, economic and
political grounds, challenging the existing legal or political order and
claiming more or a different form of tax justice and redistribution, or a
modification of how taxes are collected. In these cases, personal or
financial duties were often seen as a form of humiliation and a marker of
subordinated status. On the other hand, taxes and duties were often not
resisted publically but rather avoided or evaded in secret. These terms
refer to notions that distinguish between legal practices of lowering the
intended burden and thus saving taxes or fees, and maneuvers that were
classified as illegal or criminal. Such categorizations, though, depend
on changing moral and legal perceptions and/or on class-related
negotiating power.
They are accepting proposals for papers until
.
Citizen Truth reviews the new documentary about war tax resister Larry Bassett: “The Pacifist” and American war tax resister and holocaust survivor Bernard Offen is also featured in a new documentary: “Love, Light & Courage”.
Every year, the Tax Foundation announces what it bills as “Tax Freedom Day” — the day when Americans have earned enough money to pay their annual tax bill.
This year that day comes on .
Up to now, we’ve all been working for The Man.
The calculation and the Tax Foundation’s publication of it is a reasonable attempt at making the tax bite less anesthetic.
Here’s yet another article about the staffing crisis at the IRS.
This one quotes the new Service Commissioner Charles Rettig as saying “the IRS ‘lost an entire generation’ of employees during a hiring freeze that took place between 2011 and 2018.”
Their trained, experienced employees are retiring in droves, with no replacements.
And they’re trying to fill crucial Information Technology positions at a time when there’s high demand for talent in that industry from the private sector, which is able to make much more attractive offers.
War tax resisters in the United States celebrated “Tax Day” with the usual protests, penny polls, leafletting, and other methods of outreach.
The Berkeley Daily Planet covered the People’s Life Fund annual granting ceremony in which they redirected $15,000 in taxes from the federal government to local charitable groups.
The refusal to collaborate economically with the state, in the financing
of military spending and other things that we consider socially unjust
or harmful, empowers us and allows us, collectively and cooperatively,
to show our opposition to certain state policies, to generate a social
debate about the model of society that we want, while at the same time to
promote the construction of “another possible world” by giving economic
support in solidarity with other transformative struggles that exist in
our society and elsewhere.
Mike Causey, at Federal News Network, adds another article to the growing consensus that the IRS is in a world of pain. Causey includes a long quote from an anonymous “long-time career IRS manager” who says:
…There are barely enough people left keeping the lights on to barely
allow enough people to barely meet far reduced goals.… Millions of
dollars of production are lost due to not having hundreds of dollars of
resources on a regular basis.
Most of the personnel with most of the talent and experience have retired
or fled to the private sector…
The Republican tax reform legislation does seem to have cut taxes for just
about everyone. But only a minority of people think they personally got a tax cut.
This may be in part because of Democratic talking points about the cuts
having only gone to the wealthy — they seem to have hit their target and
sown doubt about what the legislation accomplished. It may also be because
tax refunds haven’t gotten any bigger for the typical taxpayer,
and changes in tax withholding aren’t salient enough to make an impression.
This may also erode tax morale by contributing to the impression that
lawmakers are jiggering the tax code to favor the other guy.
A majority of Americans
believe the federal tax system is not fair, and among Democrats in
particular, perceptions of the fairness of the federal tax system are lower
than they have been in recent memory.
Automated traffic-ticket-dispensing radar cameras in France have undergone
an extraordinary wave of attacks by frustrated motorists. Statistics on the
extent of the attacks and their effect on government revenue continue to
come in. The latest show that revenue from radar vans in particular dropped 42% last year.
The IRS is hoping to get a bunch of new funding for a desperately-needed computer modernization effort. Problem is, this isn’t the first time, and the last couple of times they’ve gotten a bunch of new funding for desperately-needed computer modernization efforts, they’ve bungled it badly. Will Congress let them take another swing? Do they have a choice?
The
IRS
Advisory Council has issued its latest
public report. It adds
to the chorus of
IRS
oversight bodies raising the alarm about the effects of reduced budgets at the
agency. Excerpts:
[F]unding for the
IRS
has decreased about 20 percent on an inflation-adjusted basis
, and
is now below
levels. These reductions largely do not include the effects of the unfunded
mandates of significant program costs, like [Obamacare and the 2017 tax reform
law]… Over the past several years, the
IRS’s
workload and responsibilities increased even as staffing levels declined. For
example, , the
total number of returns filed increased by nine percent. The number of
IRS
employees is down by more than one-third from past staffing levels, primarily
in compliance and enforcement… In
,
the IRS
audited 0.6 percent of all individual returns filed, compared to 1.1 percent
in ,
a drop of approximately 50 percent. In
,
the IRS
audited 2.5 percent of all business returns (assets greater than $10 million)
filed, compared to 5.7 percent in
,
a drop of more than 50 percent. Meanwhile, cybersecurity and identity theft
refund fraud prevention programs consume a larger share of the budget.
The implications of this, according to the report:
The degraded service and enforcement functions may adversely affect the
voluntary compliance of many taxpayers. Our tax system is one of
self-assessment. The cost of collecting the taxes imposed by the government to
enable funding of government programs is orders of magnitude less than it
would have to be if taxpayers did not themselves voluntarily assess and
collect those taxes. We are on a slippery slope in that once taxpayers lose
confidence in the present system, that voluntary compliance may significantly
erode.
[W]hile much of the lower collections [from enforcement underfunding] will be
attributable to the relatively small percentage of taxpayers who have
traditionally ignored their responsibilities, a growing amount may be
attributable to the effects of increasing cynicism of taxpayers about the
fairness and integrity of the tax system. Thus, previously honest and diligent
taxpayers who would otherwise end up paying more to subsidize noncompliance by
others could themselves be tempted toward noncompliance.
The IRS
Criminal Investigation division recently released its
annual report.
Here’s the Orwellian happy face the Commissioner of the
IRS
(Charles Rettig) puts on the group:
“CI
supports the efforts of compliant taxpayers by visibly demonstrating the risks
of noncompliance thereby helping otherwise honest taxpayers stay honest and
compliant.”
The report is mostly a glossy rah-rah yearbook featuring group photos of the
inevitably “dedicated” workers at its field offices around the country and
brief narratives of some of the more celebrated take-downs (e.g. “Members of
Fraudulent Jamaican Sweepstakes Ring Sentenced”).
As with most of the rest of the
IRS,
the Criminal Investigations division has had to do more with less in recent
years. Budgets and staff have dropped, while responsibilities (such as
Obamacare enforcement, figuring out how bitcoin works, and combatting
increasingly organized and international identity theft and refund fraud) have
grown.
The report breaks down the numbers of investigations, prosecutions, and
convictions resulting from Criminal Investigations work. It’s surprising just
how few federal criminal prosecutions for tax matters there are, given the
scope of the agency’s bailiwick and the amount of tax law flouting out there.
For example, there are probably tens of millions of American taxpayers
(individuals and businesses) who simply do not file tax returns at all in any
given year. Of those, the criminal investigations division investigated 271,
recommended 128 for prosecution, and managed to bring down the hammer of
justice on 111 .
They don’t even report numbers for people like me who file but refuse to pay.
There is such a thing as a failure-to-pay crime, but it’s rarely prosecuted.
Adding up all of the Criminal Investigations activity
,
which includes everything from Bank Secrecy Act violations to Narcotics to
Terrorism to Money Laundering to scofflaws like me, you get this story of
continuing decline:
The IRS lost more than 29,618 full time positions … These losses directly correlate with a steady decline in the number of individual audits during the past nine years.
The IRS anticipates up to 31 percent of its current workforce (about 19,719 full-time employees) will retire within , creating a significant risk of a large knowledge and experience gap for the nation’s tax agency.
The audit rate for individuals declined to 0.45% for , down from 0.9% in , according to IRS data.
Even a decade ago, the audit rate was sharply lower than in , when the agency audited about 2.5% of individual returns.
The IRS now has fewer auditors than at any point since World War Ⅱ.
One of the enforcement challenges the report names is the “syndicated conservation easement” dodge.
Let’s say you own a big hunk of property somewhere.
Instead of developing it, you donate the right to develop on the property to a land trust or some such organization that is dedicated to preserving wetlands or the greenbelt or something, and so your property goes undeveloped.
That forgone development was worth something, and in giving it away you gave away something of value, so you can get a tax deduction for that.
But the scam part comes in by fudging how much the foregone development is worth.
You basically pay someone to sign off on a phoney assessment that inflates the value of the donation way beyond what it’s worth.
Furthermore you then sell out bits of this potential tax deduction to other taxpayers (that’s the “syndicated” part), who only have to pay in the real value of the property in order to get their cut.
So they get a deduction that far exceeds their investment.
But it would take resources for the IRS to figure out the source of the deduction, trace it back to the property in question, figure out what’s fishy about the assessment, get it reassessed, prosecute someone, and so forth.
And the IRS is doing just that, with dozens of court cases pending.
But they’re popping up quicker than the IRS can suppress them.
A recent news article put it this way:
The imperviousness of the scam’s promoters and investors has left tax experts flummoxed.
“Boy, it isn’t like the old days, when people were fearful of the IRS,” said Steven Miller, who oversaw enforcement and tax-exempt organizations during his 25 years at the IRS and is now national tax director with consulting firm Alliantgroup.
“I’m worried people aren’t afraid of the cop on the beat any more.”
[T]he syndicated deals are structured in a way that insulate the wealthy individual investors, leaving the promoters and outside lawyers to do battle with the IRS.
Their fight is fueled with “audit reserves” of as much as $1 million that are set aside as part of every syndication partnership.
Some deals even offer “audit insurance” from Lloyds of London to offset disallowed write-offs.
Some links that have floated through my facemask in recent days:
Thousands of IRS Employees Are Currently Home With Pay, But Not Working is the sort of headline that brings a smile to my face.
The gist of the accompanying article is that most of the IRS workforce has been sent home to avoid infecting one another at the office, but only a minority of the employees are equipped to work from home.
The rest continue to collect paychecks, but have nothing to do.
People are travelling less, commuting less, and shipping less. As a result, people are burning less motor vehicle fuel, and as a result large drops in gasoline excise tax revenue are expected.
The hashtag #RebeliónFiscal is trending on the Twitter, as small business owners in Argentina plot a tax strike.
The business owners are upset that the government has offered them no tax relief as business activity has gone into an epidemic-induced slump.
They’re joined by antiauthoritarian activists and by the general public, who are throwing coordinated cacerolazos (noisy pot-and-pan banging protests) from the windows of their apartments as they remain sequestered.
Now, while mostly at home, we find plenty of things to do, but running out to a big demonstration is not one of them.
This got me thinking about war tax resistance as a perfect protest for the isolated.
That led me to think of the many individual acts of resistance in antiwar history and thus to Ammon Hennacy and his “one man revolution.”
There’s a roadblock to the Democrats’ plans to use increased IRS enforcement to bring in more money to pay for their ambitious federal budget:
The fact that under Congressional budgeting rules, increasing the IRS budget counts as an expense, but increases in tax revenue that might be expected as a result don’t offset that expense.
Which means Congress has to jump through extra hoops to justify that extra spending.
Republicans smell blood in the water, and suspect that beefing up such IRS tax enforcement might not be politically popular.
They hope they can exploit anti-tax-snoop sentiment to stymie Democratic spending priorities.
The IRS expects to lose 52,000 of its 83,000 employees to retirement over .
Hiring freezes and budget cuts have aged its workforce.
But now they’re going on a hiring spree to try to make up for it.
That sort of identity theft and refund fraud has made the IRS eager to tighten up security.
They’re under pressure to allow taxpayers to conveniently view their tax statements and other such information on-line in the same way they have come to expect to view their bank accounts, utility bills, and everything else in our digital age.
On the other hand, cunning and not-so-cunning fraudsters like Florida Man see such convenient access as a recklessly-guarded vault full of government money ripe for the picking.
What is the IRS to do?
Their response was to invite the usual suspects in government contracting to bid on a contract to square the circle and make the problem go away.
The winning bidder apparently was military contractor ID.me, and the IRS has begun rolling out their solution and telling users of on-line IRS account services that they’ll need to reenroll with ID.me if they want to continue to access their accounts.
However, the rollout has gone poorly.
As I noted last month the sign-up process is clumsy, time-consuming, and buggy.
It’s also uncomfortably invasive — requiring a face scan and copies of a variety of documents.
ID.me sent out a press release claiming that those face scans were only used in a very limited way to verify identity but then had to walk back that claim when it was shown to be untrue.
Privacyadvocates and people & groups with a host of otherconcerns have been urging the IRS to reconsider.
Danny Burns’s excellent history of the Poll Tax Rebellion has been released in free text and PDF forms on-line, apparently with the blessing of the author.
Clarification: the number of Americans who renounced their citizenship hit new highs in , according to numbers released , but it looks like ’s numbers dropped considerably from there, with the unwillingness of embassies to process renunciations being one reason for the drop. ―♇
Just when I think I’ve heard it all about the troubles at the IRS, everything turns out to be worse than I heard:
Remember when I told you about how the IRS was rolling out a new way for people to sign on to their on-line systems, and that it was a bit invasive, difficult, and buggy?
And then remember when I told you how the rollout was going poorly and generating a lot of push-back?
Well, the awful just continues to pile up and now the IRS is scrapping the new sign-on process and going back to the drawing board.
Meanwhile, some seven million people may have tried to use the new process to log in, a process that included sending in “selfies” for biometric testing, which attracted the ire of privacy advocates.
The contractor who designed and operated the identification verification service says these people can request to have these selfies deleted.
Reading between the lines, I think this contractor is going to try to force everybody to use the back-up plan that was already in place for if the automatic selfie-check didn’t work: to have a video chat with an employee who would “eyeball” the chatter to see if their identity matches up with what’s on their paperwork.
This isn’t really any less invasive than the selfie method, but maybe it triggers people’s “big brother” alarms less.
It’ll certainly be less automated and therefore more expensive and time-consuming.
But the IRS is no stranger to doing things the more expensive and time-consuming way.
For example, their mail-sorting and -opening machines have been broken for a long time, and IRS employees now have to do the work by hand.
This means that if you send them a check, it takes them longer than it should for them to get that check out of the envelope and into the U.S. Treasury.
This delay also means the government loses out on interest they could be earning on that money.
How much interest? About $165 million a year.
It would only cost $650,000 to buy completely new machines, or $365,000 to repair the broken ones.
And remember how I told you how the IRS had stopped sending out some enforcement notices to taxpayers?
Taxpayers were getting frightening notices suggesting that the IRS didn’t think they’d filed their taxes, when in fact their tax returns were sitting in an enormous pile of tax returns the agency hadn’t gotten around to processing yet.
So the IRS said it would stop sending out a few types of notice until it got all that sorted out — but said that it couldn’t stop sending out a bunch of others because it might mean they’d lose their chance to go after genuine tax scofflaws.
Well, now they’ve thrown in the towel and said they’ll stop sending out a dozen more types of notices including the balance due, balance due second notice, notice of intent to levy, and withholding compliance letters that are standard issue to tax resisters like myself.
And remember how I told you that the IRS had a backlog of some 14 million unprocessed tax returns and other taxpayer correspondence?
Turns out it’s more like 24 million.
Meanwhile: “The agency sought to fill 5,000 positions for several campuses across the country in time for this tax season but was able to hire fewer than 200.”
In other news, the IRS is eager to reduce the size of the underground economy by demanding more reports on gig workers and others who get irregular payments through platforms like Paypal, Venmo, Etsy, and Zelle.
But this isn’t going smoothly either.
It seems to be raising more resentment than tax money, at least so far. And it’s easy to bypass.
If you pay someone using one of these platforms and explicitly say you’re paying for goods or services, maybe it’ll eventually get reported as income.
But if you don’t say this, as far as the platform is concerned maybe you’re just sending a gift or reimbursing someone for part of a meal you shared where they picked up the tab.
Is today’s IRS going to send auditors out to make sure nothing falls through the cracks this way?
Yeah sure.
In other news:
The tax strike against the Edmonton Incinerator continues to attract more strikers as the early adopters prepare for their first day in court.
Turkish opposition politician Kemal Kılıçdaroğlu announced that he plans to refuse to pay his utility bills until president Erdoğan withdraws 50% price hikes instituted at the beginning of the year. Some Alevist cemevis have also stopped paying.
The ragtag human guerrilla war against the traffic ticket robots continues, with robots succumbing to human attacks or being frustrated by human ingenuity in the U.K., Australia, Brazil, Italy, and France in recent weeks.
Yesterday I was on a panel concerning “Resisting Taxes in the Trump Era” at the National War Tax Resistance Coordinating Committee’s spring gathering.
Below is a summary of my remarks:
We can no longer reliably extrapolate from long-standing precedent about how the government operates, or how it responds to tax resisters, to anticipate the near future.
While past tax policy changes have been slow, gradual, and predictable, near-future changes are likely to be abrupt, arbitrary, and unstable.
This presents us with new challenges but also new opportunities.
I want to consider five areas the war tax resistance movement in the U.S. should be aware of, observant about, and prepared for.
But it’s too early to draw strong conclusions about any of them:
Changes at the IRS
The possible end of the federal income tax
Expanded government information-sharing
Anti-Trumpery tax resistance
How to resist tariffs
Changes at the IRS
First: the IRS is being significantly degraded and is in disarray.
There have been four acting IRS commissioners already in the first four months of the Trump Administration, serving between four days and six-and-a-half weeks each.
There is no Senate-confirmed commissioner.
In addition there have been thousands of dismissals of probationary IRS employees, and many others have accepted buyout offers to retire early.
Furthermore, the recently-released presidential budget assumes a further 25–50% headcount reduction at the agency.
The enforcement & collection branches have not been spared from this slaughter.
The agency was already on-the-ropes before all this happened.
For years they have lost headcount and their budget has dwindled, even as their responsibilities and the number of taxpayers has increased.
There was briefly some hiring and a budget boost at the agency during Biden’s term, but that hardly had begun to take effect before Trump’s crew came in and eviscerated it.
As a result, we can predict that the already feeble agency will be further incapacitated.
Second: there has been a collapse of the post-Nixon consensus that put a firewall between IRS enforcement and political appointees.
For the last 50 years it would have been considered a serious taboo for the president or one of his political appointees to try to go to the IRS and say “you should audit so-and-so; I think they’re up to something (or: I don’t like them).”
IRS enforcement decisions were firmly in the hands of career IRS employees, not political appointees.
Trump is putting an end to that.
He’s put a political appointee in charge of the IRS Criminal Investigation Division.
He’s being aggressive in using his powers to punish political enemies or to shake down deep-pocketed victims.
We can expect that he will use the IRS in this way, too.
Will this affect American war tax resisters?
Probably not right away.
I don’t think we’re on Trump’s enemies radar, and we’re not attractive shakedown targets.
But if tax resistance becomes a more prominent part of the anti-Trumpery movement, then, yes: expect politically-motivated reprisals.
The possible end of the federal income tax
Trump has repeatedly claimed that he plans to replace the IRS with an “External” Revenue Service, and replace income taxes with tariffs.
Of course, Trump claims a lot of things, and that’s never been a good reason to take those claims seriously.
But there are some other lines of evidence that suggest this may be for real.
Trump’s nominee for IRS Commissioner, Billy Long, when he was in Congress, co-sponsored legislation to abolish the IRS and replace the federal income tax with a sales tax.
This idea of replacing income taxes with consumption taxes has been floating around conservative circles for decades, but hasn’t had enough traction to go anywhere yet.
The “serious people” mostly ignore these proposals as being too onerous to accomplish and too likely to go very badly, but Trump shows strong signs of being willing to do very disruptive things and to not care much if they’ll go badly, so I think we have to consider the possibility.
This is not something Trump could do directly by fiat.
Congress would have to act to eliminate the federal income tax or the Internal Revenue Service.
But potentially Trump could force their hand by 1) unilaterally enacting tariffs, as he can do and has done, and 2) making the IRS so dysfunctional that it can no longer effectively collect income taxes, as he seems to be doing.
At that point, Congress might be faced with a fait accompli and might believe that if it wants to continue to have a budget to spend, it must allow Trump to raise tariffs (or other consumption taxes) to make up for what the IRS is unable to collect.
This is probably not happening right away.
The current Trump budget and tax proposals are for income tax cuts and for cuts to the IRS but not elimination of either.
Where would this leave war tax resisters, who tend to concentrate on the federal income tax as the most important source of war funding?
We would have to retool to resist these new taxes in new ways. (More on this below.)
Expanded information-sharing among federal agencies
A variety of legal firewalls, bureaucratic hurdles, and incompatibilities have prevented federal government agencies from sharing information with each other.
Some of that fell away during the consolidation of the Department of Homeland Security after 9/11.
Now many of the remaining firewalls seem to be dropping to DOGE.
Most news I’ve seen about this is in the immigrant-crackdown context.
For example, the IRS is sharing info from people’s tax returns, and the postal service is sharing information about people’s mailing addresses, to help ICE find immigrants to deport.
Potentially this could make it easier for the IRS to find assets or previously shadowy income.
There’s no sign that this is happening yet, and it would be yet another task for a gutted IRS to try to tackle, so maybe it’s unlikely, but it’s worth keeping on the radar, and we should raise the alarm if anyone notices anything.
Anti-Trumpery tax resistance and war tax resistance
There’s a lot of eagerness among anti-Trumpery activists for some strong, collective action, which could include tax resistance (see for example the National Tax Strike under the Choose Democracy umbrella).
Where does the war tax resistance movement fit in?
Anti-Trumpery tax resistance isn’t “war” tax resistance.
Sure, you can stretch “war” metaphorically to cover deportations, civil liberties collapse, evasion of due process, Constitutional crisis, willful malgovernance, fascism, white supremacy, and so forth, but it’s awkward.
Most of NWTRCC’s outreach and educational material assumes that war and militarism are the focal concern of tax resisters, and to these new resisters this has the potential to be alienating at worst or confusing at best.
Of course, if Trump invades Greenland or Canada or something, then the anti-Trumpery movement will probably develop a strong anti-war focus, and then war tax resistance rhetoric will fit right in.
I suppose we can’t rule that out.
It’s an encouraging sign that the War Tax Resisters Penalty Fund mutual aid program now explicitly welcomes anti-Trumpery tax resisters as well as traditional war tax resisters.
Maybe we can learn from the process they went through as they decided to become more accommodating to a new set of resisters.
Correction: the WTRPF board has since released a statement that says they are not going to extend the fund to cover tax resisters who are not resisting from anti-war motives.
I had based what I said here on a statement from a member of the WTRPF board who apparently misstated the position of the organization.
How to resist tariffs
Trump would seemingly prefer that tariffs permanently make up a predominate portion of federal government income (and therefore military budget income), as they did in the 19th century.
How could war tax resisters continue to resist if this were to come to pass?
Tariffs are taxes that apply to imported goods and that are paid by the U.S. importer.
So you can resist to some extent simply by not importing anything so that you personally do not pay the tax.
But the typical American is going to be paying tariffs indirectly as a consumer of goods whose prices include the costs of tariffs to the importer or manufacturer.
Note that tariffs apply not only to consumer-ready goods (like imported cars) but also to imported raw materials and intermediate manufacturing goods.
For this reason, the prices of many “domestic” products will embed tariffs just as much as do imported ones.
A tax resistance strategy of consuming only “Made in the U.S.A.” domestic goods will not be effective.
Some tactics that might be worth considering if tariffs make up a large amount of military income include:
Smuggling: if tariffs are high, smuggling will become highly profitable and will certainly emerge. We can help nourish that and can redirect our own consumption to smuggled goods.
Domestic manufacture: try to produce and market goods that deliberately and carefully avoid tariffs. Spread awareness about tariff-free goods.
Promote avoidance strategies: there will certainly be loopholes that can be exploited to reduce or eliminate tariffs; we can help importers learn about and use them.
Disrupt the tariff-collection bureaucracy: anything we can do to make the tax collectors’ work more difficult and less efficient will give the Pentagon less to play with.
These tactics (or similar ones) apply also to other consumption taxes that might be in the cards (e.g. a sales tax or use tax).
