Tuesday, April 17, 2007

IRS audits of middle class have TRIPLED since 2000

was hopping mad enough when I read theKK's diary from this January about IRS officials pushing auditors to prematurely close audits of big corporations, despite the potential to collect additional billions of dollars of revenue in taxes legally owed to the United States.

Typical, I thought. The Bush administration using enforcement policies to enahnce the effect of its pro-big business tax legislation. Not surprising.

But now it's worse. Not only is the IRS treating big companies with absurd laissez-faire, they're making up for it by tripling the audits of middle class taxpayers.

Why is it happening? Well, the IRS says it's part of a strategy to deal with having fewer agents with an increasing population.

The increased focus on the middle class is part of a broad I.R.S. strategy to deal with a major reduction in the ranks of the tax police as the population continues to grow and Congress has made the tax system ever more complex.

The I.R.S. has fewer than 13,000 revenue agents, down from more than 17,000 at the peak in 1988.

The core of the new strategy is to audit more individuals and businesses, even if the examinations are more cursory. Without more audits, I.R.S. executive say, people may behave as if no one is watching.


Oooookay. I'm curious about something. Why is the number of revenue agents decreasing?? It seems to me that if you have agents conducting audits, they can more than pay their own salaries by collecting additional tax revenues owed to the federal government. Furthermore, it's not just that there are more people and fewer agents--the tax code has become more complicated too. And guess who's to blame for that:

Chris Edwards, director of tax policy at the Cato Institute, a libertarian research and advocacy group in Washington, said that Congress is driving the need for more audits. Since 1995, he said, “the Republicans greatly complexified the tax code, contributing to tax evasion and making the I.R.S.’s job more difficult.”


Fine. I'll ignore all that and just go along with the point: The IRS has fewer auditors for more people with a more complex tax code, so they have to increase cursory audits to catch more cheaters.

Ok. So let's see who's cheating.

Critics have said the increased revenue from enforcement actions shows only how widespread tax evasion has become and how easy it is to find tax cheating. The I.R.S.’s most recent estimate is that $290 billion in taxes due were not reported and paid. But studies have suggested the figure is higher, mostly from hidden investment gains, multinational businesses and entrepreneurs.


Right. So let's see how that shapes up in terms of enforcement. Here are some snippets from the article:

Audits of these middle-class taxpayers rose to nearly 436,000 last year, up from about 147,000 returns in 2000. For these 61 million individuals and married couples, who make up nearly half of all taxpayers, the odds of being audited rose from 1 in 377 to 1 in 140.


Right. Audits for middle class taxpayers tripled. Ok. What about for those who made more?

Audits of those making more than $100,000, the 11 percent or so of Americans who pay about 80 percent of individual income taxes, rose to more than 256,000 from just fewer than 100,000, a jump of 163 percent. The odds went from 1 in 104 to 1 in 59.


The increase in auditing percentage of those making over $100,000 is about half of the increase in auditing percentage for middle-class taxpayers. But what about the super-rich?

At the very top, those making more than $1 million a year, the data showed that from 2004 to 2006 the number of audits rose 77 percent, from almost 9,600 to 17,000. But more than half of those audits were only letters asking for documentation.


From 2004-2006, the increase percentage was only 77%. And even at that, most of the audits were just letters, instead of actual auditors! It's not just the corporations that theKK wrote about earlier--here's another example of the Bush administration using enforcement to further the class war against middle America--because the legislation itself apparently wasn't enough.

Sick, disgusting malfeasance.

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