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about the IRS and U.S. tax law/policy →
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enforcement budget
Tax day has arrived, and with it the various news fluff pieces about lines at the post office.
But there are a few bits here and there about tax protests of various sorts, worth reviewing:
George Bush is continuing the long-standing Republican theme of lowering taxes, or wanting to, anyway.
More power to him.
Wait — can I take that back?
Chances are the Repubs will propose a bunch of tax breaks that’ll mostly benefit the people who share their income brackets, then the Demos will respond with some populist, feel-good, middle-class benefits like higher per-child deductibles and the like, then both parties will remember how much fun it is spending other people’s money and cut their proposals in half.
With any luck, though, things’ll drop a bit.
Some Libertarian Party chapters protest on tax day by handing out fake million-dollar bills at post offices, explaining that the government spends that much of our money every five seconds.
Some people are withholding something on the order of half of their income taxes, and then including a letter with their tax forms saying that they will not willingly pay the portion of their tax that goes to the military.
The IRS sometimes goes ahead and pulls the remainder from their bank accounts, but these protesters are satisfied with their symbolic protest and with not paying the taxes voluntarily.
There’s another idea in the form of a bill that gets floated from time to time in the U.S. Congress that would create a sort of “conscientious objector” tax that would be paid into a fund that is only spent on those parts of the federal budget that are non-military in nature.
Yeah, right.
(link: National Campaign for a Peace Tax Fund.)
Of course this, like the symbolic withholding above, doesn’t actually have any bottom-line effect.
It’s just an accounting shuffle.
In fact, I’d wager that it would have an overall negative effect, because it will encourage even more people to pay taxes by enhancing the illusion that it’s a morally neutral or morally acceptable act.
I’ve seen many news articles about how the IRS has been doing less and less enforcement, with fewer and fewer auditors over the last several years, so that it’s much easier to get away with being a tax cheat.
Even the most blatant and wacky phony tax dodges often work simply because the IRS doesn’t have the resources to go after most of ’em.
(, the IRS revealed that over the previous two years it had mistakenly paid out thirty million dollars to people who were claiming a “slavery tax credit”.)
A lot of these articles have a “but this year things will be tougher” spin, and seem to have been prompted by a preëmptive IRS press release, but the numbers seem to support the suspicion that people who pay their lawful share are either a willingly generous group or are being played for suckers.
A government survey found that 24 percent of taxpayers think it’s OK to cheat on their taxes — up from 13 percent in .
And the fiscal consequences are huge:
If all Americans had paid their taxes year, according to IRS estimates, an additional $207 billion would have poured into federal coffers — enough to pay the projected federal deficit for , and have $7 billion to spare…
“I think that people have come to see paying income tax as driving 55 m.p.h:
Only a fool would do it,” says Deborah Schenk, a law professor at New York University.
“If the attitude spreads, the whole system will collapse.”
Because of a series of recent budget cuts, the IRS’s number of full-time personnel declined by 16 percent .
The result: the average taxpayer’s chances of being audited dropped dramatically.
, the IRS audited 1 of every 78 tax filers.
, the fraction shrank to about 1 in 170.
That steep decline in audits, experts say, has emboldened brash millions to try to pay less.
“It’s not a secret that the IRS is understaffed and it can’t enforce as much as it would like,” says Perlman.
Every year around this time, the IRS floods the media with press releases, indictments and such designed to show that this time, for realsies they’re going to be cracking down seriously on people who try any sneaky stuff.
The report notes that President Bush’s proposed budget for represents “ in which the administration has called for I.R.S. staff increases while not covering pay raises or required expenses.”
“As a result,” it said, “the administration’s proposed increase” for “will erode before new employees can be hired, more taxpayer phone calls answered or new audits of possible tax cheats can be conducted.”
On average each year, 1,450 tax-law enforcement jobs were proposed but not created, the Oversight Board said, because of what it characterized as unrealistic budget proposals.
It estimated that the I.R.S. would have slightly fewer employees in than in despite growing numbers of taxpayers.
“Now is a critical time for our tax system to be strengthened, not merely maintained at current levels,” it said, adding that its research had found that growing numbers of Americans “believe it is acceptable to cheat on their taxes.”…
It is “highly unlikely,” the report said, that the additional 1,963 employees proposed in the president’s budget would be hired because the money will instead be spent on pay raises, rent increases and other costs.…
The board said that while the proposed 4.6 percent I.R.S. budget increase was far more than what departments other than the Pentagon and Homeland Security would receive, it was not enough because tax cheating continued to rise even faster.
Congress is again not planning to give the IRS much more in its stocking this year.
Which means their pretty spotty record of catching cheats will continue to get spottier.
No problem, says I. And no problem, says Tom DeLay, who seems eager to destroy the IRS even without anything to put in its place.
I think he’s stolen my platform.
The IRS Oversight Board complains that “the IRS is leaving billions of dollars on the table simply because it doesn’t have the resources to do its job”:
The omnibus appropriations bill funds the IRS at $10.233 billion for , a one-half percent increase from the funding level.
The IRS Oversight Board believes that it will leave the already strapped agency with fewer resources when inflation and the 3.5 percent federal civilian pay raise are factored in.
Every year, the Government Accountability Office puts out a “High Risk” list of those government activities that have “greater vulnerabilities to fraud, waste, abuse, and mismanagement.”
This year, the IRS makes the list twice — once for its doomed efforts to modernize its databases (I’ve blogged about this before, see and for instance), and once for its lagging ability to go after tax evaders and resisters:
In recent years, the resources IRS has been able to dedicate to enforcing the tax laws have declined, while IRS’s enforcement workload measured by the number of taxpayer returns filed has continually increased.
Accordingly, nearly every indicator of IRS’s coverage of its enforcement workload has declined in recent years.
Although in some cases workload coverage has increased, overall IRS’s coverage of known workload is considerably lower than it was just a few years ago.
Although many suspect that these trends have eroded taxpayers’ willingness to voluntarily comply and survey evidence suggests this may be true the cumulative effect of these trends is unknown because new research into the level of taxpayer compliance is only now being completed by IRS after a long hiatus.
Further, IRS’s workload has grown ever more complex as the tax code has grown more complex.
Complexity creates a fertile ground for those intentionally seeking to evade taxes and often trips others into inadvertent noncompliance.
IRS is challenged to administer and explain each new provision, thus absorbing resources that otherwise might be used to enforce the tax laws.
Concurrently, other areas of particularly serious noncompliance have gained the attention of IRS and the Congress such as abusive tax shelters and schemes employed by businesses and wealthy individuals that often involve complex transactions that may span national boundaries.
Given the broad declines in IRS’s enforcement workforce, IRS’s decreased ability to follow up on suspected noncompliance, the emergence of sophisticated evasion concerns, and the unknown effect of these trends on voluntary compliance, IRS is challenged on virtually all fronts in attempting to ensure that taxpayers fulfill their obligations.
IRS’s success in overcoming these challenges becomes ever more important in light of the nation’s large and growing fiscal pressures.
Accordingly, we believe the focus of concern on the enforcement of tax laws is not confined to any one segment of the taxpaying population or any single tax provision.
Our designation of the enforcement of tax laws as a high-risk area embodies this broad concern.
Furthermore…
The Commissioner of Internal Revenue has made strengthening enforcement a high priority, but IRS has not yet materially reversed enforcement declines, in large part because unbudgeted expenses and demands for improved taxpayer service have confounded IRS’s intentions.
Enforcement staffing decreased over 21 percent , and individual audit rates are below the levels of , even after recent increases.
IRS lacks current data on the effects of these declines on compliance.
For example, IRS’s estimate of the gross tax gap the difference between taxes owed and taxes paid (over $300 billion) was largely based on extrapolations from data.
Without current information on noncompliance, IRS cannot effectively target its enforcement resources, risks wasting resources by auditing compliant taxpayers, and is impeded in identifying changes to laws or regulations that could reduce noncompliance.
The IRS argues that with more money it can enforce the tax law better, shaking down more people, so that, as IRS Commissioner Mark Everson puts it, “Enforcement more than pays for itself.”
Which makes me wonder if people who work for the IRS are especially susceptible to myths about perpetual motion machines… Since the IRS is really planning on using money it takes from us to pay for its efforts to take even more money from us, “pays for itself” is not how I would have put it.
As far as I can see, we pay for it twice.
The folks who have been harping on the “tax gap” these last few years seem to have finally gotten the attention of Congress.
It’s easy to see why: the “tax gap” is being sold as free money — you don’t have to risk your political neck by supporting a tax increase, you just have to write a little legislation, give the IRS some more enforcement money, and, presto! there’s a bigger budget to play with (or to feed the military-industrial complex’s “strategic appetite”):
Aside from just giving more money to the IRS to spend on enforcement, the one gap-closing proposal that looks like it’s on the fast-track to enactment is one that would give the IRS more information about the basis of purchased stock by requiring brokerages to report this information:
The I.R.S. estimated that it lost about $11 billion in from people who understated their capital gains after selling stock.
According to the agency’s review of tax returns , a year when the stock market was plunging and losses were more common than gains, about 38 percent of all people underreported their capital gains.
The problem, I.R.S. officials said, is that brokerage firms report only how much money a person receives from the sale of stock, not how much the person paid for it.
Without an audit, the government has no way of verifying the profits that people report.
Nina Olson, the IRS’s independent taxpayer advocate, has proposed that Congress require brokerage firms to report a person’s purchase cost as well as sales proceeds to the government.
[Rep. Rahm] Emanuel has introduced a bill based on the idea.
Ron Jacobs reports on The Showdown at Port Tacoma where anti-war activists are using direct action techniques to try to impede the shipment of war materiel to U.S. forces in the Middle East.
WhatDoIDoWithThis.com looks like it’s trying to be an industrial-grade recycled goods swap meet with an emphasis on construction supplies — might be worth checking out if you’re building or refurbishing.
The Tax Foundation points out a study that seems to support the hypothesis that as a tax system becomes more efficient, the savings don’t get passed on to the taxpayer, but to the government. In other words, if the government can reduce the difficulty and annoyance involved in taxpaying, it can compensate by raising the tax rate!
The Senate Budget Committee has approved a federal budget that increases the IRS enforcement budget to $7.2 billion, well above the already-increased $4.93 billion Dubya requested. The budget would also change the rules about how that enforcement budget is accounted. The IRS has complained that increases to its enforcement budget are unfairly categorized as government expenditures even though they result in a positive “return on investment” to the government. Under the newly-proposed rules, the government could break its discretionary spending limit to provide more money for enforcement.
There’s a new war tax resistance blogger on-line. Welcome to the web, Paul Sheldon of Peaceful Ways.
Steven Landsburg, in Slate reports on the increase in leisure time among Americans over — particularly among people at the poorer end of the economic scale.
Forbes reports that the IRS is paying closer attention to “hobby losses” — that is, business losses that tax filers claim on their tax returns for activities that the agency believes are not related to a legitimate business pursued for profit, but a hobby pursued for amusement.
The agency has released a new manual for use by its agents to help them determine when a business is really a hobby or vice-versa.
If your business is a borderline case, you can use this manual to help you in making business decisions (and in deciding what sorts of documentation you need to maintain) that will help you substantiate its business-status in the event that you are audited.
Maybe I’m jumping the gun on this, as there’s still a little bit of Congressional back-and-forth due before Obama can put his name on the dotted line, but here’s what I’ve been able to discern about the impact of the recent health care industry legislation on tax resisters like you and me:
The plan gives a lot of enforcement responsibility to the Internal Revenue Service without actually budgeting the agency any more money or personnel.
Looking into the crystal ball, I see that there’ll be some effort in the future to beef up the agency so that it can better handle these new responsibilities.
Peering closer, I think I discern that the agency won’t get nearly enough to cover the expenses of the new mandates, and so agency service, and its ability to go after tax delinquents, will probably further decline.
The bill encourages the founding of new non-profit health insurance issuers.
These issuers will be exempt from federal income tax.
Such tax-exempt, non-profit health insurers exist today, but are fairly rare.
A good analogy here is the credit union: as credit unions are to banks, these new non-profit health insurance issuers will be to ordinary health insurance companies.
They will take the form of member-run cooperatives.
(This starts now.)
A new health coverage tax credit is part of the bill.
This is a refundable credit for 80% of the cost of health insurance coverage, but it is only available to a small subset of taxpayers (“individuals who receive a trade adjustment allowance (and individuals who would be eligible to receive such an allowance but for the fact that they have not exhausted their regular unemployment benefits), individuals eligible for the alternative trade adjustment assistance program, and individuals over age 55 who receive pension benefits from the Pension Benefit Guaranty Corporation” who are not covered by Medicare or employer-subsidized plans).
(This starts in .)
There is also a new “premium assistance credit” — also a refundable tax credit — for people who get their health insurance via an exchange (the “exchange” model is also created by this legislation).
This credit, oddly, goes straight from the government to the insurer as a way of subsidizing your purchase of health insurance.
The amount the insurance company will get is based on your tax return from two years back, but the actual credit you qualify for will be based on your financial circumstances in the year you get the credit, so you’ll have to rectify this one way or the other on your tax return.
The credit amount is based on your income, and is only available to households whose cumulative modified adjusted gross income puts them between 100% and 400% of the poverty line for their household type.
(This all starts in .)
There is also a new subsidy for households in the 100–400% of the poverty line range who purchase high-deductible health plans.
These are the sorts of plans that qualify for Health Savings Accounts, but I’m not entirely sure of all of the ways the new law affects the old Health Savings Accounts scheme.
Assuming such accounts are still a good tax shelter, the new law may make them more attractive to people with low-incomes who might otherwise have been frightened off by the high deductible.
(This starts now.)
Beginning in , all Americans will be required to carry some minimum amount of health insurance.
The way this will be enforced is through the tax code: there will be a federal excise tax on non-insured people, payable by those people.
As with the social security system, the Amish managed to finagle themselves a conscientious objection provision.
This tax will be 2.5% of income above the standard-deduction/personal-exemption filing threshold, or a fixed amount: $95 per uninsured person in , $325 per in , $695 per in , and then indexed for inflation thereafter (whichever is higher).
If the cheapest health insurance you can find still costs more than 8% of your household income, you’re off the hook for this excise tax; you are also off the hook if you make so little income that you aren’t required to file an income tax return, if your lapse of required coverage was less than three months long, or if you are a resident of a United States possession (e.g. Guam).
I’m not the first to notice that for many people the cost of this excise tax will be far less than the cost of the insurance.
Weirdly, although this excise tax will be figured on your income tax return and will be part of your total tax burden for the year, the law specifically forbids the IRS from using its ordinary tools of liens, seizures, criminal & civil penalties, or interest in pursuit of unpaid amounts.
This will probably confuse the hell out of them and make a lot of work for their CoBOL team.
Also, it makes tax refusal a profitable no-brainer, as without penalties and interest, the unpaid amount will be eroded by inflation from year to year.
Starting in , health insurers will have to submit information to the IRS about all the people who have health insurance coverage with them, including contact information, the taxpayer identification (usually social security) number, details on the coverage, and “such other information as the Secretary may require.”
This could be a snag for non-filers who are trying to stay off of the IRS radar.
There is a new tax attached to most health insurance plans.
It starts at $2 per covered person in , and then rises each year based on the rise in the cost of health expenses.
There is also a new tax on health insurance companies, starting in .
You won’t pay these taxes directly, but indirectly via the cost of your health insurance.
The same sorts of insurers that are exempt from federal income tax will also get a reduction, though not an exemption, in the tax they pay here.
So-called “cadillac” high-end health insurance and reimbursement plans are heavily taxed to the extent that their benefits exceed a threshold that is calculated according to a formula that caused my eyes to glaze over and made me want to do anything besides think about it.
This won’t kick in until , by which time some subsequent Congress will probably have mucked with it, so it’s not worth paying much attention to anyway.
If you’ve gotten used to being able to pay for over-the-counter drugs with your Health Savings Account, Health Reimbursement Account, or Health Flexible Savings Account (“cafeteria plan”), you’ll be disappointed to find that, starting next year, you can only purchase prescription drugs (or insulin) this way.
Furthermore, the penalty for taking withdrawals from your Health Savings Account for non-authorized purposes has been increased to 20% of the amount.
There’s a new tax on drug manufacturers and importers, with the proceeds designated for the Medicare trust fund.
This starts in .
There is also a tax on medical devices (though not things like eyeglasses and hearing aids that are generally purchased by ordinary schmoes like you and me).
If you are unfortunate enough to have medical expenses that exceed 7.5% of your adjusted gross income in any particular year, you have been able to take any amount over 7.5% as an itemized deduction.
Starting in , you’ll have to be even more unfortunate, as this threshold will increase to 10%, with some exceptions.
There’s a new 10% tax on the price of indoor tanning services, starting in the second half of this year.
Self-employed people have been able to take an above-the-line deduction for the cost of health insurance for themselves and their dependents.
Under the new law, a dependent can include a child as old as 26 (before, the child had to be under 19, or under 24 and a full-time student).
Those of you lucky enough to be living off of your investments rather than from earned income have been exempt from paying social security and medicare taxes on your income.
No longer.
As of , you have to pay a 3.8% medicare tax on such unearned income to the extent that you rake it in above a certain threshold amount.
There is something called the “economic substance doctrine” that says that if a business engages in some complex economic transaction whose only effect is to lower the amount of taxes due by qualifying for the literal provisions of the tax code, without there being any other good reason for doing the transaction, then the business shouldn’t be able to take advantage of those tax benefits.
This doctrine, though, is more a matter of custom than of law, and plenty of folks think that the letter of the law, and not its less-discernible spirit, ought to apply.
This new bill tries to codify this doctrine and make it explicit and more uniformly-enforceable.
I expect that this will make a lot of lawyers very busy.
Since Congress deliberately uses the tax code as a prod to try to influence people and businesses to make certain decisions that they would otherwise not make for ordinary economic reasons (indeed this very bill is full of such provisions), this is weirdly schizophrenic.
Some bits and pieces from here and there:
Tax Day action reports are starting to trickle in.
This year, the TEA Party presence seemed way down, or at least the news media has gotten tired of covering it.
There were many reports of liberals engaged in various creative protests designed to shine some light on profitable corporations who somehow manage to rake in government subsidies and get away without paying taxes, and a couple of reports of anti-war activists trying to inform the public about the bloated military budget.
Some folks have taken to submitting an affidavit along with their tax returns declaring that they are only filing “under threat, duress and coercion… because I fear retaliation by the IRS… to avoid going to jail, not because I believe there’s a legitimate obligation; I am terrified of the IRS… and being attacked by them if I don’t comply with them.”
They hope to make explicit the threat of government violence that is largely implicit at tax time and to preempt silly people like Senate Majority Leader Harry Reid who insist we have a “voluntary” tax system.
One of my vices is a thing called Fail Blog, which highlights pictures and videos of people doing it wrong, whatever it is, in amusing or cringe-inducing ways.
The videos now often come with several seconds of advertising in front of them, and the most regular of these, lately, is an ad for the U.S. Marine Corps.
There’s not much to it.
It starts with text that says “our title is earned, never given,” then shows short clips of young men exerting themselves to the utmost, presumably in basic training, then “and what’s earned is yours forever,” followed by some stern men in Marine Corps dress uniforms standing in rows doing fancy drum major style baton twirling moves with their rifles.
Seeing this, I’m surprised at how much of the Marine Corps sale involves the look: the white gloves of a waiter in an exclusive club, the brass buttons of an elevator operator in a nice hotel, and the well-creased cap of a chauffeur; then standing quietly waiting for orders like a good servant, and looking proud of yourself about it all like an idiot.
All of these emblems of servility and somehow they sell it as “pride” — goes to show, I suppose.
But there are budget cuts expected at the IRS.
Douglas H. Shulman, commissioner of the IRS, says that these cuts will
“lead to noticeable degradation of both service and enforcement and would have a serious detrimental impact on voluntary compliance for years to come” and will cause “a measurable decrease of approximately $4 billion in revenue annually…
In other words, these budget cuts will result in a direct increase to the nation’s deficit.
We currently estimate that IRS examinations of individuals and businesses, and collection actions taken to recover known unpaid taxes would be down 5–8 percent.”
Has the U.S. Defense Department killed a million Americans since 2001? asks John Quiggin at Crooked Timber.
For some definitions of “killed,” maybe.
Apparently the government attempts to justify many of its policies by using a cost/benefit analysis wherein a policy that saves one human life can thereby justify $5 million in expenses; a policy that leads to one human death can only be justified if it saves at least $5 million.
This analysis, allegedly, governs decisions made by the Environmental Protection Administration and the Department of Transportation, for instance (not the Department of Defense, though).
Quiggin’s argument is that if you took the money the government has been spending on its “various wars of choice” and spent it instead on those policies that would have saved the lives (or prevented the deaths) of those people who fell on the wrong side of this five million dollar boundary, that would amount to 1.5 million people who would be alive today who are dead instead.
Just another reminder that in addition to those directly killed by the military’s actions, there are also real opportunity cost harms from how we could have been directing the resources that have been funding them.
Some bits and pieces from here and there:
The U.S. Congress’s Joint Committee on Taxation has released its annual Overview of the Federal Tax System that gives you some idea of how the federal government gets its hands on our money.
Tim Huber at Mennonite Weekly Review writes of “taxing conscience one war at a time” in the wake of the kerfluffle over government-mandated health insurance coverage.
The IRS doesn’t seem to be anticipating any sudden boost to its enforcement budget, judging from this news about the agency offering early retirement packages to the employees in their enforcement division.
Surely you’ve noticed that the IRS has a lot more on its plate than it used to: and that trend will continue as the recent health care industry legislation phases in over the coming years.
And if you’ve been following the news around here, you’ll know that tax fraud is rampant — almost a hula-hoop-like craze in some parts of the country — and that the backlog of tax enforcement cases the IRS has been unable to deal with is growing each year.
The IRS is among the agencies being hit by the budget “sequester” everyone’s been gabbing about.
If Congress doesn’t pass yet another piece of misguided legislation further on down the road (big if, that), the agency will need to lop about $600 million out of its budget.
They’re hoping to make some of these cuts not to their operational budget but to the payouts it makes to people in the form of refundable tax credits and informer payoffs (which at least one commentator thinks the agency has no authority to do).
The Obama administration and the various government agencies and government-funded programs that are facing sequester-related budget cuts are making shameless use of “The Washington Monument Ploy” in which they claim the cuts will necessitate threats to the most popular, picturesque, and sentimental parts of their spending.
The military-industrial complex has been particularly shameful about this ploy, with Obama as its spokesman.
“Already, the threat of these cuts has forced the Navy to delay an aircraft carrier that was supposed to deploy to the Persian Gulf,” he claimed, which would be delightful if it weren’t bullshit.
Turns out, though, that it actually is easier for the Pentagon to make abrupt cuts to mission-critical operations (things the military just happens to do for historical reasons, like fight wars) than to cut corporate welfare political pork projects (the real meat & potatoes).
Marijuana has been decriminalized, at least to some extent, in many
jurisdictions in America. This has brought the industry above-board, and
has exposed it to taxation. Under federal law, businesses involved in the
marijuana trade cannot deduct their business expenses from their gross
profits when figuring their income tax. This is a result of the great
piling-on of the Just Say No era, when politicians were falling all over
themselves to come up with new ways to stick it to dope smokers. This puts
above-ground marijuana vendors in a bind, as
“it
is conceivable that [this law] could require [such] a business to pay more
in tax than its total profits for the year.” Tax professor Benjamin M.
Leff has a possible solution: organize as a 501(c)(4) social welfare organization.
Meanwhile, marijuana purchasers should be aware that the federal
government is making a big profit on anything they purchase in the
above-ground market, and should for that reason prefer to purchase from
the same underground dealers they’ve trusted for years.
A number of American churches want to keep their tax-exempt nonprofit
status without heeding the legal ban on political endorsements that
accompanies it. 1,600 of them backed up this opinion with civil
disobedience — defiantly making overtly political stands from the pulpit,
and sometimes even recording them and turning the recordings over to the
IRS.
So far the agency has done nothing in response, and many are speculating
that it feels that in a churches
vs.
IRS
battle, the
IRS
is most likely to end up with a black eye, no matter what the law says.
But now the Freedom From Religion Foundation is forcing the issue.
The Foundation has filed a lawsuit asserting that the
IRS
is illegally permitting religious non-profit groups to engage in political
activity it forbids to non-religious non-profits.
The
IRS
commissioner sent a memo to agency employees about the expected impact of
“sequester” budget cuts. Excerpt:
We will continue operating under a hiring freeze, reduce funding for
grants and other expenditures and cut costs in areas such as travel,
training, facilities and supplies. In addition, we will need to review
contract spending to ensure only the most critical and mandatory
requirements are fully funded.
Despite current and planned efforts to cut expenses, our greatest
expense, by far, is employee pay. As our budget is reduced for the
remainder of the fiscal year, it appears a number [5–7 per employee this
year] of furlough days will be necessary given the size of the
anticipated budget cut to the IRS.
Colleen M. Kelley, president of the National Treasury Employees Union,
noted that “the
IRS
is operating this filing season with 5,000 fewer employees than just two
years ago. Now,
IRS
employees face potential furloughs and the loss of pay for a week or more;
and all federal workers are continuing to function under the threat of at
least a partial government shutdown when the current continuing resolution
expires on .” In addition, she
says, “IRS employees… have had their pay frozen for over two years.”
Some bits and pieces from here and there:
There’s “something fishy” in the latest economic statistics.
Paychecks are down (thanks to a boost in the payroll tax), incomes haven’t been rising in other ways to make up for it, bank account savings aren’t rising, and people aren’t charging more on their credit cards or taking out more loans… and yet, consumer spending is doing just fine, as if somehow the money was materializing anyway.
What’s the trick?
Bernard Baumohl of the Economic Outlook Group thinks it’s the underground economy:
While the IRS tries in vain to convince Congress not to cut its budget (after all, they whine, we’re the part of the government that brings in money for y’all to spend!), members of Congress are enjoying one of their favorite sports: pretending they’re on the side of the little guy against the wasteful government bureaucrats in the tax office.
Lately this has taken the form of House Ways and Means Oversight Subcommittee chairman Charles Boustany, Jr., demanding that the IRS turn over for the subcommittee’s investigation copies of training videos the agency produced in its own presumably extravagant production studio — “a Star Trek parody and a skit based on the television sitcom Gilligan’s Island.”
Hostility towards the IRS can provoke auto-immune complications that are as disruptive as overt threats.
Case in point: In Bloomington, Illinois, an IRS distribution center was cordoned off while a bomb squad of state and Department of Homeland Security specialists navigated a robot through the parking lot to retrieve and inspect two suspicious packages.
The process took five hours, and eventually revealed that the suspicious packages contained… tax forms.
You may have heard that the island nation of Cyprus is the latest nation whose government has resorted to drastic measures to try to raise money from a reluctant population to pay off international creditors.
That government took the odd step of proposing the simple and arbitrary step of shaving a percentage off of every bank account in the nation and using that money to pay for the bailout.
Cypriots reacted by storming the ATMs to try to withdraw their money.
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.
The Chief Counsel of the IRS Criminal Tax Division issued something called a Search Warrant Handbook to give its Criminal Investigation personnel with guidance about when they need search warrants to do their investigations.
The Handbook stated:
[E]mails and other transmissions generally lose their reasonable expectation of privacy and thus their Fourth Amendment protection once they have been sent from an individual’s computer.
A copy of the Internal Revenue Manual issued that year also says that “the government may obtain the contents of electronic communication that has been in storage for more than 180 days” without going through the hassle of obtaining a search warrant.
Other agency memos, dating as recently as restate the position.
When the ACLU exposed these policies, there was a bit of an uproar.
The agency didn’t help matters much by issuing a non-denial denial:
Respecting taxpayer rights and taxpayer privacy are cornerstone principles for the IRS.
Our job is to administer the nation’s tax laws, and we do so in a way that follows the law and treats taxpayers with respect.
Contrary to some suggestions, the IRS does not use emails to target taxpayers.
Any suggestion to the contrary is wrong.
But the acting head of the IRS appeared before a Senate committee and seemed to indicate that the agency would back down, at least somewhat, and at least until the fuss dies down.
The IRS is also catching flak for its ineptitude in dealing with identity theft.
The USA Today editorial board concluded that “the crooks appear to be one step ahead of the IRS” as the IRS has responded to the growing problem by expanding its bureaucracy in a way that made things more complicated without making it more effective.
In one example, a study of 17 people who had filed identity theft complaints with the IRS showed that the agency had responded by opening 58 distinct and uncoordinated cases in its myriad subunits in response.
Here’s a bit more about the tax resistance campaign that activists for
Catalan independence are engaged in:
mayors of several Catalan municipalities posing with their tax
documents in front of the Tax Agency of Catalonia
“Spain is robbing us,” a number of impatient Catalan municipalities are
saying, and in response several have begun depositing their taxes with the regional Catalan tax agency rather than forwarding them to the
federal government as the law demands. The tax resistance campaign is
being organized by Catalunya Diu Prou (“Catalonia Says ‘Enough’ ”),
which says that some freelancers and independent businesses, which are
responsible for their own tax withholding, will follow suit.
About twenty resisters gathered in the Plaza de Catalunya in Barcelona to launch a symbolic tax resistance action in which they will withhold a token amount (such as €50) from
their tax payments in protest against government corruption. They plan
to pay this money into an escrow account and not turn it over to the
government until their demands are met, which demands include legal
changes that they hope would bring transparency to the actions of the
government and of politicians.
The “Google” brand has earned a lot of warm fuzzy associations in my
heart, with all of the generous contributions the company has made to the
project of expanding the availability of knowledge and information. But
those who find its size, ubiquitousness, and growing intrusiveness
somewhat ominous have a point, and that point got a lot more pointed to me
recently when someone pointed me to a page touting a new book, due to be
released tomorrow I think, by Google executive chairman (and former
CEO
Eric Schmidt and Google Ideas director Jared Cohen (“a former adviser to
secretaries of state Condoleezza Rice and Hillary Clinton”).
The description of the book’s content isn’t what caught my attention
(it was pretty vague anyway). What grabbed me was the list of people who have provided blurbs, which includes:
Tony Blair
Bill Clinton
Henry Kissinger
Michael Hayden (former CIA director)
Madeleine Albright (former U.S. Secretary of State)
Robert Zoellick (former World Bank president and U.S. Deputy Secretary of State)
Michael Bloomberg (notoriously nanny-stateish New York City mayor)
Brent Scowcroft (former U.S. National Security Advisor and Foreign Intelligence Advisory Board chairman)
This, apparently, is the audience Schmidt & Cohen feel like enthusing when they are talking about “the new digital age” to come, and that gives me a bit of a chill.
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”:
A couple of bits and pieces from here and there:
The Internal Revenue Service Advisory Council (IRSAC) released its annual report .
It begins by confirming one of my cherished hopes:
The National Taxpayer Advocate released its 2013 Annual Report to Congress today, in a flashier and more public-facing package than I remember it using in the past.
The report identifies how funding cuts, increased responsibility, and Congressional hostility to the agency have put the IRS in something of a crisis state:
Throughout the Most Serious Problems section of this report, we recount the ways in which chronic underfunding drives the agency to develop short-term solutions that merely patch over problems and impose unnecessary burden and even harm on taxpayers.
These short-term solutions also create more work for the IRS in the end…
Agency budget woes are a theme that runs through the document, and this is highlighted as its own “Most Serious Problem” — “The IRS Desperately Needs More Funding to Serve [sic] Taxpayers and Increase Voluntary [sic] Compliance.”
That problem statement describes the funding crunch this way: “Since , the IRS budget has been cut by nearly eight percent.
Over the same period, inflation has risen by about six percent, further eroding the IRS’s resources.”
Meanwhile: “the workload of the IRS has increased significantly.”
This has led the agency to cut way back in what it calls taxpayer service (responding to phone calls and letters, providing walk-in consultation, answering questions about tax laws and regulations).
It has reduced its staff by 8% in recent years (including 12% and 21% reductions in its number of Revenue Agents and Revenue Officers respectively), and slashed its training budget by 87%.
The Taxpayer Advocate notes that this is likely to lead to reduced tax collection, and that this will largely be not because a lack of enforcement personnel means that more tax evaders will get through the net, but because poor “customer service” and increasing IRS clumsiness will make the mass of compliant taxpayers more cynical about taxpaying and more likely to try to get away with something.
Some preliminary numbers on liens and levies are embedded in the report, so I can update my charts:
The U.S. Congress recently agreed on a new federal budget.
I’ll spare you the recitation of all of the corrupt, wasteful, evil rottenness predictably found within, and take you straight to the good news.
The IRS budget not only did not get the increase that the agency has been pleading for in increasingly desperate tones, but indeed was decreased by half a billion dollars.
In what has now become an expected routine, the
IRS has
responded to my failure to include a check with my last tax return by sending
me one of their “Notice of intent to seize (‘levy’) your state tax refund [I
should be so lucky] or other property.” With $59.32 in penalties and $16.60 in
interest, the grand total for is
a little north of $6,000.
This came along with some explanations of how they calculate penalties &
interest, some pleas to pay up, and a couple of additional inserts: “Notice of
Potential Third Party Contact” — which is as far as I can tell mostly designed
to try to intimidate you into paying by suggesting that the
IRS will
send agents around to “your neighbor, bank, employer, or employees” to spread
the word that you’re behind on your taxes — and “The
IRS
Collection Process (Publication 594).”
His thesis, in short, is that the IRS is being chronically underfunded by Congress, that this may be at the behest of Congresspersons who want the IRS to become a failed agency, that they are on the cusp of succeeding in this quest, and that this will be a cataclysm.
His book takes the form of a letter “to Patriotic Americans Concerned with the Federal Tax System,” in which he begs them “to take immediate action to stop Congress from cutting the IRS budget.”
Here are some exciting excerpts:
This may come as news to some Americans, but some of our elected officials want the wheels to come off the IRS.
Some members of Congress are unscrewing the lug nuts off the wheels of the IRS so that the agency will fail in its core functions.
Some members of Congress want the wheels of the IRS to fail and for the IRS to be destroyed.
If the under-funding continues, the result will be cataclysmic.
As funding of the IRS declines, its ability to perform its functions declines.
With under-funding, the IRS will be less able to keep up with enforcement and taxpayer support, among other activities, and its diminishment will lead to further spoiling of the IRS’s reputation for fairness and integrity.
…Once this happens, the reputation of the IRS will have been diminished beyond repair, and neither the Congress nor the agency will be able to make the IRS credible again.
…The net effect long-term is a loss in the public trust that government is fair and its systems work.
When faith in government is broken, voluntary compliance with the tax laws goes away, and it becomes clear that no one pays their fair share any more.
Scofflaws become the rule rather than the exception.
Taxpayers as a whole are not being served at present and my perspective as a retired manager of the IRS is that the IRS is beginning to break apart.
If you wish to destroy the American system, the first step would be to de-fund the IRS.
One way to convince Americans that the government needs to downsize is to make the government dysfunctional.
And the quickest way to make the government dysfunctional is to under-fund its operations.
Whether by accident or design, underfunding the IRS will impact our national security and society as we know it.
Budget cuts bring distrust in government which in turn will bring a call for even more budget cuts.
Starving the beast at the IRS does not make the IRS more productive or efficient, but only less functional.
Making the IRS look increasingly incompetent, outdated and inefficient may have unintended consequences.
Following this are some dull rambles through the history of the income tax in the United States, and the history and structure of the IRS, that might have made useful appendices in David Foster Wallace’s The Pale King but didn’t add much to Gregory’s argument (which he repeats, in various ways, again and again, as though he can feel he’s not quite getting through to us).
He also presents some statistics about the agency’s inability to keep up with audits, with delinquent tax payments, and with customer service, and reproduces some testimony from various oversight boards and ombudspersons in which they too complain about the IRS not having enough budget to do its job.
As someone who knows a thing or two about publishing books that are difficult to market and have a tiny-at-best audience, I do not envy Michael Gregory in his hopes of finding readers eager to hear why they should lobby Congress to increase the IRS budget.
I found it something of an entertaining skim, however.
I’ll spare you the avalanche of bad news in the spending bill recently passed
by the U.S. Congress
and just skip right to the good news. The
IRS
budget was cut again, to $10.9 billion, the lowest annual budget since
in nominal dollars, and I think you have to
go back about 15 years to find a lower budget in inflation-adjusted dollars.
The agency has been complaining that with the many new responsibilities
Congress has saddled them with, with the increase in population, and with the
emergence of industrial-scale identity theft and other criminal schemes that
fleece the taxpayers before the
IRS can
get to them (or that fleece the
IRS more
directly), and with the aging of the
IRS
workforce and computer infrastructure, these budget cuts will lead to disaster.
We’ve cut all the fat, the agency complains, and now we’re left with bone &
muscle.
Well, I for one am at the edge of my seat, hoping they’re not just whistlin’
Dixie.
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.”
According to a Government Accountability Office report, people filing phony tax refund claims by using appropriated identities stole $5.2 billion from the IRS during the .
(An additional $24.2 billion in such refund claims were detected before the IRS sent any money.)
To put that into perspective, $5 billion is roughly the amount of money that was in the entire IRS enforcement budget (before recent cuts, anyway).
Which is to say that nowadays the government pays more to organized tax cheats than it pays to combat tax cheats.
The identity theft industry is a significant (and growing) part of the federal budget.
When the Syriza coalition looked like it was on track for a shocking victory in the Greek elections, people across Greece stopped paying their taxes.
After all, Syriza had campaigned in part on the abolition of some new taxes, and had hitched its wagon to the “won’t pay” tax resistance movement.
Well, now that they’re in power, they’re more apt to be caught talking about tax-paying as a “patriotic duty,” but the Greeks don’t seem to agree: tax collection is down by 23% from expectations.
An Italian priest, Don Marino Ruggero, has been making waves by promoting tax resistance to his flock.
In his parish bulletin he wrote: “Catholic doctrine notes that there are fair taxes that are to be paid under pain of mortal sin and of the penal law, unfair taxes that you may evade without sin and without offense, and even perverse taxes that are contrary to the divine law and that should not be paid even if you have to risk your life.”
He says he feels that the tax burden has become so grotesque in Italy that the taxes are no longer fair enough to be obligatory to Christians: “I wonder if it is better to pay utility bills and taxes and then have to go begging for charity.
When a family sinks into despair because they have nothing to eat, one has to decide.
I call for a tax strike.
Yes, a peaceful revolution, in which it would be enough that everyone fearlessly stop paying any tax, with a single purpose: to undermine an out-of-control ‘meat grinder’ tax system.
Gandhi said: ‘Withholding payment of taxes is one of the quickest methods of overthrowing a government.’
He and his people, they got it.”
The report begins, like so many of these
IRS
oversight reports from the strangely many
IRS
oversight bodies, with a yet-more-strident plea that Congress stop slashing the
IRS
budget, and with yet-more-dire predictions of how such cuts, by degrading the
ability of the agency to do its job competently, will cause taxpayers to turn
away in disgust. For example:
[W]hile much of the lower collections 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 into noncompliance.
More broadly, any reduction in voluntary compliance and the
VCR will increase the cost of
enforcing the tax law. Whatever the costs of running the current system, those
costs are orders of magnitude less than what would be necessary if taxes were
in fact forcibly exacted rather than paid by honest citizens striving to
voluntarily comply with their obligations, and who would want to live in such
a system.
Some news of interest to tax resisters in the U.S.:
The on-again/off-again boondoggle of the federal government contracting out to private debt collection agencies to pursue people behind on their taxes is apparently back on again.
By including the program in a new transportation bill, its proponents could use the income they hope to see from the program to offset other spending.
It would probably be more efficient for the government just to hire more IRS agents to go after the money, but there are few things a Republican Congress would be less likely to do than give the IRS more money to increase the ranks of the National Treasury Employees Union.
My guess is that these private debt collectors are going to have a hell of a time.
Since the last time this sort of plan was floated, a massive, years-long, ongoing, coast-to-coast scam has been in progress in which callers impersonating tax collectors have been getting victims to pony up money.
News reports follow in the wake of the heists, all saying that if someone calls you up about a supposed tax debt, it’s a scam.
The private agencies are gonna have a hell of a time distinguishing themselves from the scammers.
If the program is like the last one (and I haven’t seen the details yet, so I’m not sure), the agencies will be able to keep 25% of what they collect for themselves.
It’s small consolation, but some consolation, to know that at least some of the money won’t be going directly to the government.
In more troubling news, another part of the same Transportation bill would revoke passports from people who are behind on their taxes by more than $50,000.
I’ll probably hit the $50k mark in a couple of years, so I take this very personally.
The bill hasn’t become law just yet.
They’re still ironing out the differences between the House and Senate versions.
But both houses’ versions had both of these proposals, so they seem likely to survive (though it’s not unheard of for parts of legislation that are passed by each house to wind up on the cutting room floor regardless, whatever you may have heard on Schoolhouse Rock).
Obama is expected to sign the bill into law either way.
When the final bill is passed and signed I’ll take another look and investigate what the process of passport denial/revocation might actually look like in practice.
And I’ll of course post something here if my own passport gets yanked.
I may even accept that as a challenge and see if I can row a boat to Cuba or wade across the Rio Grande.
The Boston Review takes a closer look at the Boston Tea Party, and how American perspectives on who did it and what it meant have changed over time.
James Ferguson looks at the new ability of the government to revoke passports from people with tax debts in the light of the long-standing international legal norm concerning freedom to travel.
Bucking recent downward trends, the IRS actually picked up a budget increase from a hostile Congress.
The increase restores part of what was cut from the agency budget last year and reportedly earmarks it for taxpayer service, fraud detection, and cybersecurity.
Along with the money came a set of new restrictions on the agency and its employees, most of which seem to be in the category of “appearing to put the screws to the IRS for the benefit of any constituents in the Tea Party who may be watching.”
With Congressional hostility and budget-slashing added to the mix, the jobs of IRS workers are even more miserable than usual lately.
It doesn’t help recruitment when your facilities are infested with bedbugs.
The bed bugs were so bad at her new job with the Covington IRS office that some people covered their seats with plastic bags, Kelly Anderson said.
After two days, she quit.
“It’s important to have a second income in our home, but it’s not worth the risk of bringing those home.
So, I will not be returning back.”
And that’s not the only kind of bug the IRS is plagued with.
A computer glitch caused the agency to emit tens of millions of dollars in refunds that its software had identified as likely to be fraudulent and that should have been held up.
Another IRS office closed abruptly recently, posting a sign in its window reading “This office is closed due to local weather conditions.”
This on a sunny day in California’s central valley, leaving frustrated taxpayers, who had driven in from as far as three hours away, fuming.
Some interesting links that have tabbed their way across my browser in recent days:
At the New Republic, Cale Guthrie Weissman reflects on having grown up in Colrain, Massachusetts at the time when the IRS was seizing the home of their tax-resisting neighbors Randy Kehler and Betsy Corner: Growing Up With the War Tax Resisters.
Although Trump’s new Treasury Secretary, Steven Mnuchin, told Congress he’d be trying to boost the IRS budget and hire more agents, it seems more likely that Trump’s budget will further slash IRS funding, and Congress isn’t likely to go out of its way to resist.
Here’s a revenue resistance tactic I haven’t seen before:
In Sweden, people deliberately overpay their federal taxes.
Why? In Sweden, interest rates have fallen below 0%, but the government is pledged to pay 0.56% interest on tax overpayments.
So if you overpay the government, the government ends up poorer.
I noted that a chapter of one of the largest political parties in the Democratic Republic of the Congo had called for a tax strike against the Kabila autocracy.
That call has now been joined by organization Lucha, based in North Kivu, which is asking citizens to stop paying taxes, utility bills, fees, royalties, and licenses until Kabila steps down.
Departing IRS chief John Koskinen, in his final news conference, warned that continuous budget cuts have pushed the agency to the breaking-point.
A catastrophic malfunction of the agency’s decrepit information technology “is not a question of whether, simply a question of when,” he said.
In addition, budget cuts and personnel losses have reduced the agency’s ability to credibly deter tax evasion.
“If people think that many others are not paying their fair share or that they’re not going to get caught if they cheat… our voluntary compliance system will be put at risk,” Koskinen said.
“A 1% drop in the compliance rate translates into a revenue loss of over $30 billion every year.”
Howard Waitzkin, in Monthly Review looks at some of the prospects for would-be revolutionaries in “the Global North,” including the potential for tax resistance as a revolutionary activity.
Excerpt:
Besides direct action, revolutionaries can change what we do with our money,
especially in the realms of taxes, investments, and local economic activities.
Such changes can disrupt, undermine, and create space for further
revolutionary actions. We in the 99 percent persist as the main funders of the
capitalist state, which passes our money on to corporations that exploit
workers, destroy nature, raise the earth’s temperature, and keep us in
permanent war and perpetual inequality. We need to change our habits of giving
up our money, and if enough of us do so, the capitalist state no longer will
be able to prop up the capitalist economy for the benefit of the ultra-rich.
Tax resistance can take several forms. For more than a century, pacifists in
the United States have resisted taxes that pay for war, some eventually going
to prison but the vast majority, like me, suffering no substantial harm as a
result. As a card-carrying conscientious objector, I openly resisted half of
my income taxes for more than a decade during and after the Vietnam War. If
one honestly declares one’s income, there is nothing illegal about claiming a
war deduction of 50 percent, which is the approximate percentage of the
federal budget that pays for past, present, and future wars. Later, with a
young daughter, I was starting to feel inconvenienced and a little bored by
appeal procedures inside and outside the Internal Revenue Service because of
open tax resistance. So I reluctantly made the same decision that Trump and
his ilk make, to avoid taxes through loopholes rather than resistance of
conscience.
The problem with either explicit or implicit tax resistance is that we number
in the thousands rather than millions. “Death and taxes,” the two
inevitabilities, as we are taught, seem hard to resist, but corporations and
rich individuals understand very well that at least taxes actually are not
inevitable. In Latin America, tax resistance usually proceeds according to the
Trump model for corporations and the rich, but ordinary people can succeed in
massive tax resistance through non-reporting or under-reporting of income.
During the dictatorships in the Southern Cone, the autocratic governments had
trouble raising sufficient tax revenues, despite extensive attempts through
bureaucratic and police surveillance, and tax resistance became one of many
tactics to bring down those regimes. Ironically, a major motivation in Cuba
for allowing expansion of private small businesses involves a perception that
private-sector business activities were expanding anyway, along with rampant
tax evasion; if permitted officially, small businesses could generate
substantial taxes for social programs. Even in Cuba, tax resistance has
interacted with political organizing in Poder Popular and community-based
organizations to enhance popular participation. As a revolutionary strategy in
the United States, tax resistance must flourish, so millions of us stop
functioning as the main financiers for the capitalist state.
John Stoner, at Mennonite World Review, invites Mennonite taxpayers to find the courage to be a conscientious objector.
Excerpt: “In the United States, conscription has ended and we as persons are not conscripted for war.
But war goes on unobstructed, because our money is conscripted.
We could be conscientious objectors to war by being conscientious objectors to taxation for war.
So, why aren’t we conscientious objectors to taxation for war?”
Businesses in Tunisia have responded to surprise tax hikes by vowing not to pay.
I’m going to try to wait to comment on the tax bill oozing through Congress until something actually becomes law, but Calvin H. Johnson couldn’t wait.
He says that the proposed tax cuts will push the U.S. federal debt past the point where it threatens the stability of the fisc.
And not a moment too soon.
Using smartphone-tracking data and precinct-level voting, we show that
politically divided families shortened Thanksgiving dinners by 20–30 minutes
following the divisive 2016 election. This decline survives comparisons with
2015 and extensive demographic and spatial controls, and more than doubles in
media markets with heavy political advertising. These effects appear
asymmetric: while Democratic voters traveled less in 2016, political
differences shortened Thanksgiving dinners more among Republican voters,
especially where political advertising was heaviest. Partisan polarization may
degrade close family ties with large aggregate implications; we estimate 27
million person-hours of cross-partisan Thanksgiving discourse were lost in
2016 to ad-fueled partisan effects.
Some war tax resisters are very public with their resistance, and consider protest and confrontation with the powers that be to be crucial parts of how they make their stand.
Others are more private and understated, refusing to pay but not making a lot of hullabaloo about it. On the NWTRCC blog, Erica Leigh examines public vs. quiet resistance.
War tax resister Larry Bassett looks at “the power of war tax resistance in 2018” — trying to measure the effects of his own resistance and that of the war tax resistance movement.
(As found on Facebook and at Citizen Truth.)
A flash from the past in the Lewis Center, Ohio, ThisWeek Community News gives us a glimpse of a war tax resistance tactic used in the United States during World War Ⅰ.
The government had put a war tax on rail travel, but apparently the tax only applied on tickets above a certain threshold value.
So some travelers split tickets, buying tickets from point A to point B and then point B to point C to avoid paying the war tax that would have applied on a ticket from point A to point C.
Tax Resistance Internationally
Nicaragua’s Blue & White National Unity group has called for a consumer strike and energy strike.
The consumer strike is meant to last three days and aims particularly at those consumer goods like fuel, alcoholic beverages, sodas, and tobacco that are most taxed.
People are also encouraged to not use any utility power from 7 a.m. to 8 p.m., indefinitely.
The group seeks the release of 400 political prisoners.
The Zimbabwe Congress for Trade Union went ahead with an anti-tax demonstration, which the government had banned under the pretense that public gatherings would contribute to a cholera outbreak.
The government of Zimbabwe is trying to impose a 2% tax on all electronic funds transfers and is attempting to force citizens who hold their savings in foreign currency to convert that money into the notoriously hyperinflating Zimbabwean currency.
Police raided the headquarters of the group and arrested 35 of its leaders in advance of the protests.
A report on
migrants from Central America reminds us that fleeing ruinous and
immoral taxation is among the motives causing people to flee. The case
of Guillermo, who as a Central American teenager became the head of his
family, is one example:
Criminal organizations targeted and killed Guillermo’s cousin. The
relative had failed to pay a gang’s “war tax” — money the gang extorts
from people through threats of violence.
They then turned their attention to Guillermo for payment.
In , he was kidnapped and beaten by two
uniformed police officers carrying out the gang’s orders. Their message
was clear: Pay the war tax or face the murder and rape of his siblings.
He realized that as long as they stayed in the region, they would never
be free from gang violence — or the gangs’ attempts to pull them into a
life of crime.
Instead, he fled with his siblings on a 1,500-mile journey to the United
States where he crossed the border, legally, as an asylum-seeker. But here
he faces the threats of yet more criminal government gangs, this time in
Trump’s ICE,
the farcical court system set up to deny refuge in asylum cases, and the
for-profit prison systems that exploit and abuse immigrant detainees.
Drivers’ war on speed cameras and other traffic-ticket-generating robots
continues:
The economy has been chugging along pretty well for a while now, the job
market is tight, and individual income tax receipts are up in the United
States. So why has the budget deficit jumped up 17%?
Two reasons, mainly: the recently passed tax law has led to a sharp
reduction in receipts from corporate income tax, and Congress has been
spending up a storm. Also, interest on the national debt continues to balloon, rising 24% just .
Some links that have bobbed up in my browser in recent days:
How does what was once seen as morally insignificant come to be seen as monstrous, and how does what was once seen as morally repulsive come to be just one of those things?
Cass R. Sunstein has a theory. The spectrum of what behavior we observe becomes the “normal” against which we contrast outliers.
As we become exposed to more aberrant behavior, that behavior shifts into the normal; as more conduct shifts into an unacceptable category, other things nearby to that category can get sucked into the objectionable void.
This has implications for “outrage culture” and how we share on social media.
The gilets jaunes movement in France has turned out to be more of a threat to the established order than anyone anticipated.
It started as a protest against fuel tax increases, but when its increasingly threatening demonstrations finally forced the government to delay, then drop those increases, rather than stopping, they continued, more emboldened than before.
I don’t have much to add to what is now being decently covered in the English-language press, but here are a few links I found interesting:
Amnesty International issued a statement against police brutality towards gilets jaunes demonstrators, including “rubber bullets, sting-ball grenades and tear gas against largely peaceful protesters who did not threaten public order and… numerous instances of excessive use of force by police.”
Consciousness of the cruelty and tyranny of the House of Saud is finally starting to enter the conversation in the United States.
Who is paying for the barbaric war on Yemen? U.S. taxpayers are.
In Luján, Argentina, a local tax on farmers went up 1200%. So an assembly of farmers voted to stop paying.
The National Network of Independent Producers backed the tax strike.
They are asking for a reduction in the rate and a guarantee that the proceeds will be used for rural road improvements.
335 Spanish war tax resisters documented their resistance for Antimilitarist Alternative / Conscientious Objectors’ Movement this year. Collectively they refused and redirected €35,882.34 (a little over €100 each, on average). The report lists dozens of organizations that received the redirected funds.
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 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.
The heartening human rebellion against traffic ticket issuing robots continues.
In recent weeks, speed cameras have been disabled by human rebels in Canada, Italy, and France, yet more in England, Italy, France, Canada, and Belgium, and several more in France, where, in spite of the hundreds of speed cameras destroyed and the government’s warning that this would make the roads more dangerous, traffic fatalities have fallen during the rebellion.
A “men’s magazine” I’d never heard of before called MEL has published “The Case for an American Tax Strike” with the delightful subhead: “Nice oligarchy you’ve got there. Be a shame if we quit paying for it…”
The Democratic Republic of the Congo doesn’t make it into my news feed very often for other reasons, but the provinces of North and South Kivu seem to throw tax strikes every other week.
The tactic seems to be well-established there as a way for the people to regulate and check the political power of the government.
In the latest example, residents of the city of Kamituga met and decided to refuse to pay taxes until the government repairs the road that connects that city to the rest of the province.
They have been joined by Baraka and Fizi.
Latest estimates from the Cost of Wars project put the price tag of the War on Iraq to U.S. taxpayers at some $2,000,000,000,000 so far, “roughly $8,000 per U.S. taxpayer, representing 9 percent of the national debt.”
Now that Democrats have more power in Washington, will the long decline of the IRS budget slow or reverse?
Could be.
Increasing collections could give the new administration more money to work with.
Unionized government employees are usually reliable Democratic voters.
It’s become the fashion to run more social programs out of the IRS via tax incentives (e.g. Obamacare).
The Democratic base is peeved about wealthy people and companies not paying their “fair share.”
All of this suggests the new administration has motives to increase the agency budget.
And the Wall Street Journal says there are already plans in the works to slip an IRS budget boost into a bill that boosts the per-child tax credit.
On the other hand, the Democratic majority in Congress is razor-thin, and making the IRS bigger and more powerful isn’t all that popular among the marginal voters.
Let’s wait and see.
Some recent links of note:
The Mennonite Church USA is holding a Cost ☮f War webinar .
Mennonite war tax resisters will be among the presenters.
The war tax resistance movement in Spain does a periodic census of war tax resisters there, asking them how much they resisted and, if they redirected the taxes, where they redirected.
I don’t know how representative census-responders are of the war tax resistance movement there.
I have a feeling that if we tried the same thing in the United States, we’d get a pretty small percentage of resisters responding.
We’re not very good survey people.
But anyway, according to their census the 258 people who responded to the Spanish survey redirected €18,088 to 92 different projects.
The average resister redirected €70.
Follow the link for more details.
Peter J. Reilly, at his Forbes tax blog, writes about the “hey hey just don’t pay” tax strategy.
He writes about war tax resisters who see their tax debts erased by the statute of limitations and notes:
I find this situation demoralizing.
I believe that making an effort to be reasonably tax compliant (Perfection is impossible unless your situation is pretty simple) is one of the duties of good citizenship.
I also used to believe that it was prudent even for people who are of the “taxation is theft” school of thought.
I am doubtful of the latter now.
It is still too risky for my taste, but I can’t make the argument that scofflaws are being reckless.
And moreevidence that the Democratic party is gunning to use its new power to try to give the IRS a bigger budget and a more aggressive mandate.
Some recent tax resistance links of note:
Long-time war tax resisters Arcadi Oliveres and David Zarembka have died.
Oliveres was one of the founders of the modern war tax resistance movement in Spain, while Zarembka was one of those who helped NWTRCC get off the ground in the United States, serving as its first treasurer.
More info:
Chuck Faber’s tribute to David Zarembka on A Friendly Letter, including autobiographical writings from Zarembka himself that go into his five decades of war tax resistance in detail
In my last update I noted that the city government of Vic had decided to stop remitting its taxes to the Spanish federal government, instead sending those taxes to the independence-minded Catalan government.
Vic has now been joined by Girona, capital of Girona province, as well as some other medium-sized towns.
The U.S. State Department can refuse to give you a passport or can revoke your existing passport if the IRS tells them you’re way behind on your taxes and aren’t doing anything about it.
And the IRS can make this happen just by notifying the State Department.
Is that unconstitutional? To take away your fundamental right to travel without due process of law?
Paul L. Caron, at TaxProf Blog, investigates the issue and a recent test case that did a poor job of trying to test it in Tax Court.
Caron doesn’t think the constitutionality argument will work, even if it is raised more competently in a more receptive legal forum.
For one thing, the right of an American citizen to travel internationally is not very well protected by American law: the courts do not consider it to be all that important.
For that reason, the courts’ threshold for what they consider sufficient “due process” to deprive you of such a right is pretty low.
President Biden has now come out and said explicitly what had been suspected: that he hopes to help fund his spending spree by increasing IRS enforcement spending, as part of a sock-it-to-big-business plan that also includes increasing corporate tax rates, broadening the corporate tax base, and eliminating big business loopholes.
We’ll have to keep an eye on this as it burbles through the legislative tract.
Some more details have emerged about the Biden administration plan to beef up the IRS enforcement budget.
Treasury Secretary Janet Yellen says the administration is seeking a $1.2 billion / 10.4% total increase in the agency budget, most of which would go to tax enforcement.
Every once in a while, the IRS crunches the numbers and tries to figure out the size of the “tax gap” — the difference between what Americans owe and what they actually cough up.
The problem is that there are a lot of unknowns — unpaid taxes that the government currently has no way of knowing that it is owed.
So it has to make guesses and extrapolations.
Now, in testimony to a Congressional committee, IRS Commissioner Charles Rettig has admitted what I’ve long suspected: the agency’s estimates of the “tax gap” have been far too low and the real number is more than double what has been reported.
Meanwhile, the IRS is still struggling to get through its backlog of tax year income tax return filings as this year’s tax filing season hits its peak.
This is further complicated this year by the agency’s role in administering a new stimulus check dispersal, and last-minute retroactive changes to the tax laws that made some already-filed returns incorrect and that gave the agency responsibility for rolling out a new tax credit.
The “tax gap” is defined as the difference between what the tax laws say people ought to be paying in taxes to the federal government and what they actually cough up when all is said and done.
To put the $1 trillion figure in perspective, the IRS collects about $2 trillion in individual federal income tax each year.
That’s a lot of tax evading.
But it’s also kind of phony, in that nobody expects that any amount of tax enforcement is going to bring in an extra $1 trillion or anywhere near it.
The voting public wouldn’t tolerate being suddenly milked for an extra tril’, nor for the more invasive IRS that would be required to find it.
However, the Biden administration is hoping they can get their hands on at least some of that yearly trillion by boosting the IRS enforcement budget.
That way, if things go according to plan, they can have more revenue to play with without taking the political hit of raising tax rates or expanding the tax base.
(Though they want to do all that, too, but hope you’ll believe it’ll only tap people richer than you.)
, honoring those who refuse to participate in their governments’ war-making institutions.
It comes a couple of days before in the United States, and so conscientious objectors to military taxation are appropriately in the news:
“I want to live my values, which includes nonviolence,” said Lindsey Britt of Brattleboro. “Paying for destruction at home and abroad doesn’t fit into that, so I live more simply and refuse to pay a portion of my taxes.”
War tax resister Sue Barnhart has a letter-to-the-editor in the Eugene Weekly. Excerpt:
I have been a war tax resister since the 1970s since I do not want my money supporting murder.
The money I resist to the military I give to local groups that actually help people and the environment.
Now I am also a war tax resister because I don’t want my money supporting the biggest contributor to the burning of our planet: the U.S. military.
War tax resisters Lincoln Rice and Robin Brookes are hosting a discussion group at the upcoming World Beyond War #NoWar2021 conference on :
“War Tax Resistance:
Tax resistance to paying for the military began hundreds of years ago and continues to this day.
Let’s talk about the practicality and efficacy of refusing to pay for war.”
“I’ve decided I won’t pay any tax to the dictators, and that includes electricity.
If police and soldiers ask me, I’ll just tell them I don’t have any money.
I don’t care if they cut off the power to my house,” the resident of Yangon’s North Dagon Township told Frontier. “Most people in my ward who I’ve spoken to say they’re not going to pay either.”
The Civil Disobedience Movement in Myanmar apparently has a lot of support from within the Ministry of Electricity and Energy, which may make things easier on resisters.
Ko Aung Thu, who lives in the Shwe Lin Ban area of the highly industrialised township, said he had received a bill for but had no intention of paying.
“They killed people right here, in this township,” he said, referring to the security forces’ massacre of more than 50 people on .
“Why should I pay money to a bunch of murderers? I won’t pay any taxes.
If we pay taxes, we’re just supporting murderers.”
A hotel owner in nearby Bagan said he wouldn’t pay either and he expected many others would also refuse.
“I just heard today about how the state lottery isn’t able to run because so few people bought tickets.
I think most people won’t pay their electricity bills, either,” he said.
“We won’t support the dictator… the income from electricity charges is huge and they won’t be able to survive without that money.”
U.S. Senator Elizabeth Warren is spearheading a Democratic Party effort to expand and further empower the IRS.
“I have proposed nearly doubling the funding for the IRS but also making a chunk of their funding mandatory and targeted toward high-income individuals and corporations.”
During site visits to two processing centers, management estimated that 42 percent of 164 devices used by the submission processing functions are unusable and others are broken but still functioning. “IRS employees stated that the only reason they could not use many of these devices is because they are out of ink or because the waste cartridge container is full,” it said.
The report added: “The lack of working printers and copiers affects many different areas of the IRS but has an especially significant effect on the return and income verification services functions” where employees must make copies of tax returns to fulfill requests for tax documents from taxpayers and other institutions.
At one center, though, only three of the 10 devices were working.
The human war on traffic ticket robot cameras continues, with the robots taking casualties in Guadeloupe and France and in Italy in recent weeks.
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.
You may donate to that SBE [State Board of Equalization] member who will vote against you.
This may sound counterintuitive, but the idea is that both you and the SBE member must then disclose that contribution.
Any contribution of $250 or more must be disclosed.
Your contribution will disqualify that SBE member from considering your case.
The only exception is if the SBE member returns the contribution within 30 days from the time he or she knows, or has reason to know, of the contribution.
Often, though, a contribution will not be returned.
With a five-member board, if you identify two members who will vote against your client and make contributions to them, they will likely be disqualified.
Your board is now three members.
If you can garner two positive votes out of the three remaining, you have won.
Non-Californians may find this kind of playing field strange or even untoward.
It is certainly different, and not for the untutored, but until they change the rules, that is our system.
The Niskanen Center is a U.S. “state capacity libertarian” think-tank.
They are of the opinion that a strong, capable, competent, central government can be the bedrock foundation of a libertarianish political order.
Strikes me as far-fetched, but let a thousand flowers bloom and all that.
Anyway, as part of their investigation of where the current central government falls short, they’ve published
a useful overview of how the IRS got into its current sorry state.
The Biden Administration has released what it calls The American Families Plan Tax Compliance Agenda.
They hope to boost IRS enforcement funding, increase the amount of financial information that gets reported to the government, finally update the IRS’s comically-archaic computer systems, and crack down on professional tax preparers who help people evade taxes.
Senator Elizabeth Warren has decided to carry the ball for some of this, in a bill she has proposed to boost IRS funding and force banks to report how much money comes into and goes out of their customers’ bank accounts.
Republicans hope to capitalize on public suspicion about a bigger and more-empowered tax agency with ads targeting vulnerable Democratic representatives that tie them to these plans.
However, the budget does include a planned
$44 billion increase (over the next decade) in the IRS budget.
That’s about half of what the Democrats were hoping for, but it will reverse the budget cuts of the past decade that have helped to make the IRS the pathetic, flailing, gutted bureaucracy we know and love.
The Democrats hope (or claim to believe) that the increase in IRS funding will lead to a big boost in tax collection.
I think they’ll probably be disappointed.
I expect a lot of the money will end up spent on deferred maintenance (e.g. “A 60-year-old IRS IT system won’t finish modernizing until ”) and on hiring and training new workers to replace rapidly-retiring agency veterans, in a challenging labor market.
The IRS has a lot more on its plate than it did ten years ago, too.
It has to paddle harder just to stay in place.
The budget and infrastructure bills aren’t final final yet.
Things could still change a bit.
But the paint is beginning to dry.
Some recent tax resistance news of note:
Jane Rogers & Alex Pension from Extinction Rebellion’s “Money Rebellion” tax resistance campaign in the U.K. and José “Cuti” Cutillas from Spain’s Antimilitarista Tortuga war tax resistance movement spoke at the recent NWTRCC national gathering about how tax resistance plays out in their work:
The “Build Back Better Act” as currently proposed includes among its many provisions $498 million for the Department of Justice specifically to prosecute tax evasion, and $80 billion for the IRS (both figures are spread out over ten years).
Both Democrats and Republicans have reason to exaggerate the practical effect of this.
Democrats will insist that this new funding will mean the government can finally pursue fat cat tax evaders, close the tax gap, and result in lots of new tax revenue that will pay for the rest of the spending in the bill.
Republicans will paint a picture of vast swarms of jack-booted thugs running rampant over innocent families and small businesses across the land.
The purportedly nonpartisan Congressional Budget Office analyzed the bill and said that according to their calculations, the new IRS funding would lead to less than a third of the increased revenue that the Democrats were trumpeting.
As a result, the bill as a whole will put the government yet further in the red.
I have seen no signs that the IRS bank-account-monitoring proposal will sneak its way back into the bill, despite some Democrats’ hopes.
Democrats in Congress are having more trouble than expected getting everyone in and out of the clown car.
The upshot is that the painstakingly-negotiated “Build Back Better Act” is in jeopardy — along with the $80 billion in new IRS funding that was part of the bill.
was surely the most challenging year taxpayers and tax professionals have ever experienced — long processing and refund delays, difficulty reaching the IRS by phone, correspondence that went unprocessed for many months, collection notices issued while taxpayer correspondence was awaiting processing, limited or no information on the Where’s My Refund? tool for delayed returns, and — for full disclosure — difficulty obtaining timely assistance from TAS.
, examination coverage has decreased, enforcement efforts have been negatively impacted, and the Level of Service has continued to drop as the IRS’s workforce and budget have declined.
On the resources side, the IRS’s baseline budget has been reduced by about 20 percent on an inflation-adjusted basis , and its workforce has shrunk by about 17 percent.
There is no way to sugarcoat in tax administration: From the perspective of tens of millions of taxpayers, it was horrendous.
[T]he number of individual income tax returns the IRS receives — a reasonable approximation of its workload — has increased by 19 percent , while its baseline appropriation on an inflation-adjusted basis has decreased by nearly 20 percent.
This imbalance has left the IRS without enough resources to meet taxpayer needs, let alone to invest in additional personnel and technology.
The IRS has not finished processing millions of original and amended returns from , even though returns will soon arrive for processing.
According to the Department of the Treasury, the gross tax gap — the difference between taxes paid and taxes owed — is estimated to have totaled about $580 billion in , up from an estimated amount of nearly $440 billion in , and is expected to rise to about $7 trillion by if left unaddressed.
Processing a paper-filed return is significantly more expensive for the IRS than processing an e-filed return due to the costs associated with training, recruiting, and staffing for manual data transcription.
In fact, the cost to process a paper-filed Form 1040 in was $15.21, which is substantially higher than the $0.36 cost to process an e-filed return.
The report also included some totals for levies, liens, and seizures, so I can update these graphs:
More excitement from the human war on traffic ticket robot cameras, as fire, spray paint, and other sorts of sabotage knocked cameras out of commission in France, Germany, and Italy in recent weeks.
Anabaptist World features a letter from Harold A. Penner urging Mennonites to redirect their war taxes to the Mennonite Church USA Peace Tax Fund.
And here is some more news about the ongoing troubles at the IRS.
This CNN Business story goes in some depth into how a loose coalition of activists forced the IRS into an embarrassing and costly retreat from its plan to use facial recognition technology to verify the identity of taxpayers using its online account portal.
This note from the National Taxpayer Advocate gives more details about the IRS plan to stop issuing certain enforcement action notices while it tries to deal with the enormous backlog of unprocessed returns and other correspondence.
For example: “If a taxpayer’s account has been assigned to one of the IRS’s automated levy programs (ALPs), the IRS is also suspending the levies made by those programs…”
The agency will also not be able to pursue many new levies because in order to do so, it must first send the taxpayer a letter informing them of their right to request a Collection Due Process hearing, and they’ve temporarily stopped the automatic sending of those letters.
Some 53,000 IRS employees are still on remote work — about two-thirds of the agency’s workforce, which an IRS spokesperson characterized as “a maximized telework posture.”
But privacy rules prevent remote processing of the millions of paper tax returns mailed to the IRS, as well as the examination of returns with discrepancies from IRS records, the issuance of refunds and dealing with other taxpayer mail.
The Transactional Records Access Clearinghouse at Syracuse University issued a report showing that the IRS audits the poorest American households at five times the rate as the rest.
This seems to be an effect of the agency’s plummeting rate of audits of the well-to-do combined with its increasing use of cheap-and-easy “correspondence audits” against low-income taxpayers who apply for the Earned Income Tax Credit.
As the National Taxpayer Advocate puts it:
The IRS correspondence audit process is structured to expend the least amount of resources to conduct the largest number of examinations — resulting in the lowest level of customer service to taxpayers having the greatest need for assistance.
Last Summer, the U.S. House of Representatives passed a spending bill that would have boosted the IRS budget.
That bill got bogged down in Congress before anything could come of it.
A recent appropriations bill resurrected the IRS budget boost, but pared it way back, so now the agency budget will only rise by 6%.
These days that’s hardly enough to keep up with inflation.
And the appropriations bill restricts how various parts of the increase can be spent, so some parts of the agency budget — tax enforcement for example — will see even smaller increases.
Senate Democrats have broken their internal log-jam and have come up with a new budget reconciliation bill they can agree on.
It still has to navigate through the congressional tract a bit before it comes to life, and it could change during that process.
That said, it’s beginning to look like something that can be taken seriously.
Of most interest to us at The Picket Line are the sections of the bill that provide additional funding to the IRS.
As regular readers know, the agency has suffered from reduced budgets and a diminished workforce at the same time as it has been coping with increasing numbers of taxpayers, additional Congressionally-mandated responsibilities, an evolving and sophisticated threat from identity theft and tax refund fraud, and the disruption that the covid pandemic caused to their offices.
As a result, the agency has become pitifully ineffective at enforcement, and struggles to do even the bare minimum of tax return processing.
The new bill hopes to address this with a new appropriation of $78,911,000,000 for the agency which is meant to be spent .
That $7.9 billion per year would be in addition to the regular IRS budget, which is currently about $12.6 billion.
So that’s a pretty significant increase!
(Though a future Republican Congress might well chop the yearly IRS budget appropriation to compensate for this.)
About 58% of this money is to be dedicated to tax enforcement.
The agency hopes to use the money in part to go on a hiring spree to replace the 33,000 employees it has lost over and the nearly two-thirds of its current workforce that will be eligible to retire in the next six years.
The government hopes that this new spending will more than “pay for itself” in that it will result in additional tax collection, such that the Congressional Budget Office projects that the result of this $80 billion in spending will be a return to the government of $124 billion in revenue above and beyond that.
The bill has a clause that says: “Nothing in this subsection [that gives more money to the IRS] is intended to increase taxes on any taxpayer with a taxable income below $400,000.”
That is meant to provide cover for President Biden’s campaign promise along those lines, though I doubt it will be very meaningful from a legal standpoint.
The additional enforcement revenue and personnel will most likely increase enforcement pressure on the rich and poor alike.
President Biden has signed into law the new bill that, among other things, gives a large budget boost to the IRS.
The law gives almost $80 billion to the agency, which it is instructed to spend over the next ten years, in addition to its annual budgets.
This amounts to an over 60% increase in the budget for the agency, assuming the annual budget numbers stay the same over that ten-year span.
It remains possible that a future Congress, particularly a Republican-dominated one, will slash the IRS budget to compensate for this extra spending.
But if I had to guess, I’d guess that such a Congress would prefer to spend the extra money that a beefed-up IRS brings in while complaining about how the Democrats have unleashed the IRS, than to actually cut its budget.
My expectation is that we’re stuck with a better-funded IRS for the near future.
The IRS recently released its Strategic Plan for .
I assume that most of it is now obsolete, but it gives some idea of what the agency sees as its priorities.
Treasury Secretary Yellen was anticipating the bill’s passage, and has fired off a memo instructing the agency to quickly (by bureaucratic standards) develop a new plan for spending the additional money.
The agency hopes to use some of the money to hire about 87,000 new employees.
Since the agency currently has something like 83,000 employees, that sounds at first like a pretty big deal.
But about 52,000 of the agency’s current employees will be eligible to retire within the next six years.
So a lot of this new hiring will just be replacements.
Also, I think that “87,000” number comes from a Treasury Department estimate published before inflation and a tight labor market combined to change salary expectations significantly.
My guess is that the actual number of new hires will come in well below that number.
(Republican hyperbole suggests that these 87,000 will be “an army of 87,000 armed IRS agents” doing enforcement and audits, but I see no reason to believe that is the case.
Rather the hires will likely be in a variety of roles throughout the agency.)
The IRS has been tightening its belt for a decade or so now, so much so that it can barely function.
There’s a boatload of deferred maintenance it will have to undergo just to get seaworthy.
Onboarding new employees is a lengthy and cumbersome process for the agency.
So I do not expect much rapid improvement in the agency’s abilities, particularly in enforcement.
We’ll probably begin to soon see evidence that the capabilities collapse of the agency has slowed and halted (there may be somewhat quicker improvements in data entry and what they call “customer service”).
it took the agency to process my tax return, for example, and I’d be surprised if it takes them any longer than that .
Treasury Secretary Yellen has vowed that none of the new spending will be used to increase audits on households making less than $400,000 per year — “relative to historical levels” anyway, which seems to me like it leaves enough wiggle room for a substantial increase, given how audits in all income levels have been falling in the recent “historical” epoch.
(Hint for rich people: If you’re going to cheat on your taxes, make sure you cheat enough to get your declared income under $400,000!)
But for many of us tax resisters, audits aren’t really the sort of enforcement we’re most concerned about anyway.
In my case, for example, the IRS seems to have thrown in the towel, and has been letting my years of unpaid taxes expire due to the statute of limitations without taking any but the most half-hearted measures to collect.
It may be that in a few years, when some of these new hires come up to speed, they’ll begin to take some of these cold cases like mine off the back burner and start trying to collect more earnestly.
I’ve been mostly concentrating on the IRS funding aspects of the new legislation, but there are a few other elements that may be of interest to those of us who use legal tax deductions and tax credits to lower or eliminate our income tax bills.
The legislation extends the more-generous health insurance subsidies of the Affordable Care Act (Obamacare), which were otherwise scheduled to expire, and which are partially-implemented in the form of a tax credit.
There are also new tax credits available to people who spend money on making their homes more energy-efficient or who purchase certain types of clean-fuel vehicles.
Some tabs that have slid across my browser in recent days:
NWTRCC has a new newsletter out. It includes some news on new U.S. tax policies and official actions and their implications for war tax resisters, and some recaps of the recent 40th anniversary gathering of the organization.
One reason is because my protest was not wrong or a mistake in any sense, whereas paying the fine implies I’m guilty of some sort of offense or misconduct. Further, agreeing to pay has the appearance of an apology or remorse on my part when none is warranted. I believe any nonviolent action against preparations to commit mass destruction with nuclear weapons is in the public interest. Further, my so-called “trespass” was an attempt at crime prevention, or interference with ongoing government criminality, and as such was a civic duty.
When the IRS won a big one-time budget bonus recently, there was some speculation that Congress would claw some of it back by cutting the agency’s annual budget. Sure enough, the recently passed omnibus package cut the IRS allocation by about 2.2%. Expect more of this when the Republicans take over the House of Representatives .
