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The Government Just Admitted It Doesn’t Really Try to Collect Rich People’s Taxes

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“The IRS is effectively the accounts receivable department for the United States government,” wrote the National Taxpayer Advocate, an independent watchdog inside the agency. “However, the IRS’s budget does not reflect the critical role the agency plays and, as a result, its shrinking workforce and need to upgrade its IT capabilities continue to hamstring the agency’s work.”

Progressive Democratic lawmakers push for a crackdown

Following the passage of the $1.9 trillion stimulus bill, the drumbeat for budget cuts and austerity is already getting louder among lawmakers and Washington think tanks trying to sound the alarm about the national deficit. It might seem like that could complicate any attempt to boost the IRS budget, but it’s actually the other way around: Boosting the agency’s resources would likely reduce the deficit.

A July 2020 report from the nonpartisan Congressional Budget Office found that increasing funding for IRS enforcement by $40 billion would boost revenues by more than $100 billion over the next decade. New York University tax law professor Chye-Ching Huang has noted that in 2013, the Treasury Department estimated “that each additional dollar dedicated to IRS enforcement results in directly recouping about $6 in taxes owed.”

To that end, Reps. Ro Khanna (D-Calif.) and Peter DeFazio (D-Ore.)—both Congressional Progressive Caucus members—have recently introduced separate bills that would boost the IRS’s enforcement budget and audit rates.

Khanna’s legislation is the more aggressive of the two. The bill would increase IRS enforcement funding by $70 billion and require the agency to audit 95 percent of large corporations, 50 percent of individuals reporting more than $10 million of annual income, and 20 percent of individuals reporting more than $1 million of income.

“After years of Republican budget cuts and skewed priorities, the IRS now audits those who make $20,000 at about the same rate as the top 1 percent, even though the vast majority of unpaid taxes are attributable to wealthy tax cheats,” said Frank Clemente of Americans for Tax Fairness, which advocates for higher taxes on the wealthy. “Rep. Khanna’s bill would go a long way towards making things right. It mandates minimum audit levels for the wealthy and large corporations and gives the IRS the funding it needs to help make sure that those at the top are paying their fair share of taxes.”

This story is co-published with The Daily Poster

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