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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On "not influencing a particular investigation"

So I just went took a break from work to go into my local Starbucks and order an iced venti soy vanilla latte. While I'm waiting, I pick up a copy of the L.A. Times, where I see an article about Gonzales' impending testimony--which he has pre-released--and in that article, I find the following cited from the testimony in question:

"I know that I did not, and would not, ask for a resignation of any individual in order to interfere with or influence a particular prosecution for partisan political gain. I also have no basis to believe that anyone involved in this process sought the removal of a U.S. attorney for an improper reason."


My first thought was: what a load of crap! But on retrospect, I began to think--hey, wait a minute...the slimy weasel could be telling the truth and not perjuring himself...just, not the whole truth.

See, Gonzales may be telling the truth here: The attorneys weren't fired to influence a particular investigation--but they were fired in retaliation for not fanatically pursuing things the Badministration wanted pursued. But the statement "they weren't fired in retaliation for not applying the scales of justice evenly and engaging in partisan witch-hunts" isn't in Gonzales' testimony, is it?

First off, let's take one of the most egregious cases in the US Attorney firing scandal: David Iglesias, former US Attorney for New Mexico. As I'm sure most of you know, David Iglesias was a loyal Republican. Why was he put on the list by Rove at the behest of Senator Domenici? Because he wouldn't issue indictments of Democrats in time to be able to influence Heather Wilson's election in NM-01.

So he was fired. But was he fired to influence those investigations? NO. He was fired in retaliation for the fact that he refused to comply with previous tampering efforts. So when it comes to David Iglesias, Gonzales' testimony is technically correct.

Next up, we can take the case of John McKay, US Attorney for Western Washington. John McKay was fired because he did not bow to pressure to pursue indictments based on voter fraud claims involving the 2004 gubernatorial race for which there was absolutely no evidence. So, after repeated pressure from Republican operatives, he was fired. But he wasn't fired to influence those investigations--he was fired in retaliation for the fact that he dispensed justice even-handedly rather than pursue a witch-hunt.

Other Attorneys, such as Bud Cummins or Margaret Chiara, were apparently fired simply to make way for Bush or Rove loyalists. That doesn't count as influencing particular investigations either!

It is with Carol Lam, however, that AGAG stands the greatest chance of perjuring himself. After all, given Kyle Sampson's explicit emails about "the problem we have with Carol Lam" and other similar statements regarding an explicit denial of an extension for her specifically to continue in her office, it would seem that her firing was done precisely to impede her corruption investigations into the Dukester, Dusty Foggo and Rep. Jerry Lewis.

Now, given the explicitly political nature of the circumstances surrounding the firing of Carol Lam, there are only a select few ways that AGAG could avoid perjuring himself conclusively:

1) AGAG did not order the firing of Carol Lam; or
2) The discussions around the firing of Carol Lam centered not around removing her to influence a particular investigation, but rather to intimidate anyone who prioritized investigating corrupt politicians (i.e., Republicans) to begin with.

Kyle Sampson's emails make this argument more difficult, but still, most likely, plausible enough to avoid a perjury conviction.

And the other part of Gonzales' testimony: that whole "improper reason" bit? Well, it all depends on who you ask! Jeffrey Dahmer didn't consider skin suits improper, after all. "Improper" is all up to who you ask, especially when you're dealing with people who openly believe that politically-motivated firings are fair game.

Still--it seems that the "not fired to influence a particular investigation" gambit will likely become the new talking point for the right-wing noise machine about the firings. And for the most part, it's actually true. We'll need to fight it with our own talking point--which, in my opinion, is:

Refusal to participate in partisan witch-hunts against Democrats.

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