Gutting the IRS
April 5, 2019 2:48 PM   Subscribe

The IRS Tried to Take on the Ultrawealthy. It Didn’t Go Well. Ten years ago, the tax agency formed a special team to unravel the complex tax-lowering strategies of the nation’s wealthiest people. But with big money — and Congress — arrayed against the team, it never had a chance. (SLProPublica by Jesse Eisinger and Paul Kiel; previously in this series)
posted by crazy with stars (48 comments total) 66 users marked this as a favorite
 
We're just going to have to eat them.
posted by uberchet at 3:34 PM on April 5 [67 favorites]


Instead of auditing the rich the IRS spends a third of its time auditing Earned Income Tax Credit recipients, so, don't worry, they're still nailing people, it's just that it's poor people who, based on what you can assume from the demographics of the communities they live in, are mostly Black, Hispanic, and Native American.
posted by Copronymus at 3:54 PM on April 5 [45 favorites]


We could use a luxury tax on Veblen goods again.
posted by Brian B. at 3:55 PM on April 5 [17 favorites]


echos of how the IRS was relentlessly targeted and attacked by Scientology until it just relented and accepted it as tax exempt or how Brexit can be seen as a massive attempt to avoid EU tax law and keep London the center of global money laundering.

Any decent economic justice platform would include learning from this and beefing up the IRS’ ability to prosecute white collar crime and Huge Wealth Avoidance: It’s a Jobs program and a way to funf our social programs - there’s a reason the rich have been trying to get rid of it since it was created.

Unless some people end up in jail and or seriously finically damaged however, it’s never going to work. You can’t half measure this stuff cause it leaves the worst offeneders, with all the money and time and resources in the world, alone to fight another day.
posted by The Whelk at 3:59 PM on April 5 [54 favorites]


Jiminy Crickets, we're trying to have a civilization here.
posted by The Underpants Monster at 4:22 PM on April 5 [14 favorites]


I almost posted this. We're so fucked.

Seriously, is anyone ready for a general strike yet?
posted by loquacious at 4:25 PM on April 5 [20 favorites]


Earlier ProPublica article: How the IRS Was Gutted (by Republicans, mostly)
posted by RobotVoodooPower at 4:32 PM on April 5 [12 favorites]


If you take advantage of the current economic system and get rich you're obligated to pay back into supporting that system. And if you're rich and you don't want to give back the easy way, you're really not going to enjoy the hard way.
posted by Mr.Encyclopedia at 4:32 PM on April 5 [14 favorites]


Chris Hayes Why Is This Happening? podcast: Can we tax the rich?
In fact, as you'll hear this conversation has changed the focus of the IRS in who they go after and who they audit, from the very rich to the working poor. Over the last decade or more, kind of in front of our faces, but below our gaze, there has been an effective and concerted effort by Republican appropriators, industry lobbyists groups and the wealthy to basically break the legs of the IRS to make it an ineffective watchdog, and an ineffective agency at doing the one thing it exists to do, which is collect taxes to fund the United States government.

...

JESSE EISINGER: Like a $14 billion agency is now a $12 billion agency, and now-

CHRIS HAYES: People need to understand, in a world in which budget generally, both because of inflation and also because size and complexity tend to increase over time, a real cut of $2 billion from a $14 billion agency is a massive, massive, massive cut.

JESSE EISINGER: It's a massive cut, and it's significantly more than most of the other agencies. Most of the other agencies have slowly crept back in budget, and not the IRS. So they're continuing to starve, particularly the enforcement arm. There was a little bit of money that went to try to enforce the Trump tax overhaul, which is yet another enormous task that the IRS has been given that they don't have the manpower for, but no added money for enforcement. So now, today, there are fewer auditors. The number of auditors is fewer than 10,000 people. That's the lowest number since any time since 1953, the year Stalin died.
posted by T.D. Strange at 4:55 PM on April 5 [27 favorites]


Less people isn't necessarily a problem, if advances in technology or process allow those people to work more efficiently. However, it can be safely said that in the IRS reduced headcount means reduced enforcement. They have been pretty much the last to get systems upgrades and such since Reagan came to power.

The thing is, the hatred of the IRS doesn't come from nowhere. 30-40 years ago and before, they were really really shitty and anti-taxpayer. Even for people who were legitimately trying to pay what they owed, attachment of bank accounts and seizure of property was their opening gambit.

Thankfully, that has changed. Perception has not, partly because most people have never spoken to the IRS in their lives and partly because the wealthy have continued to attack the IRS as if it is the same as it ever was. This, of course, makes it a lot easier to evade or inappropriately avoid (depending on intent) paying all of the tax they owe.
posted by wierdo at 5:14 PM on April 5 [6 favorites]


This is why we need a wealth tax now.
posted by M-x shell at 5:41 PM on April 5 [4 favorites]


What good would a wealth tax be if the agency can't collect it?
posted by Caduceus at 5:45 PM on April 5 [15 favorites]


First replace the Wall Street bull with a nice, big guillotine, just to make sure they understand the choices, pay your fucking taxes or have all your wealth confiscated.
posted by nofundy at 5:52 PM on April 5 [17 favorites]


First replace the Wall Street bull with a nice, big guillotine, just to make sure they understand the choices, pay your fucking taxes or have all your wealth confiscated.

This, abstracted over decades of labor organizing and actions, including massive, violent strikes that required the use of federal troops to suppress, with the accelerant of the Depression, is arguably how we got what passes for social welfare in the US now.

Until working people are a highly organized, credible threat to the rich, and for a good long time, we aren't likely to see them give up much of anything, and they'll keep taking more until that happens.

I was at a rent strike support demonstration in DC this evening - several landlords, within blocks of one another, have been letting their buildings deteriorate, including making tenants go without heat in winter and live w/black mold, so they can force them out of a gentrified neighborhood. There were maybe 75 people there. We have a lot of work to do.
posted by ryanshepard at 6:02 PM on April 5 [30 favorites]


It is not clear to me why a consortium of banks would loan Schaeffler billions of euros and then essentially forgive 40% of the loan. Especially since the dude's fortune regrew in short order.
posted by jabah at 6:20 PM on April 5 [2 favorites]


I just assume that the elite don't have to pay any taxes because they have a wall of lawyers insulating them from any revenue collecting agency.
posted by ovvl at 6:32 PM on April 5 [1 favorite]


We're just going to have to eat them.

In a country where weaponry is cheap and available, I'm surprised there aren't more murders of the super rich.
posted by Going To Maine at 6:35 PM on April 5 [8 favorites]


Presumably it's because the super rich are isolated from the most damaged people, but I don't know.
posted by Going To Maine at 6:35 PM on April 5 [2 favorites]


make sure they understand the choices, pay your fucking taxes or have all your wealth confiscated.

You forgot the third option: own everything and chuckle quietly when "the people" make ineffectual noises about justice. Then maybe they'll kick back and have nice $750 steak, while you get soy gruel, an almost-new pair of cardboard shoes ("sponsored by Koch Industries!") and an omnipresent sense of dread.
posted by aramaic at 6:47 PM on April 5 [3 favorites]


The lumpenproletariat includes people who get their income from the upper classes and are thus a counter-revolutionary force.
posted by Space Coyote at 6:49 PM on April 5 [9 favorites]


In America the venn diagram for gun culture and "I'm gonna be rich someday" culture is almost a perfect circle. Why would you shoot the people you look up to?
posted by Mr.Encyclopedia at 6:49 PM on April 5 [16 favorites]


And besides, the super rich hate immigrants too! See, they're just like you!, Joe Plumber, the plumber who has to work a second job at Walmart!
posted by T.D. Strange at 7:09 PM on April 5 [2 favorites]


It still amazes me that the Republican party managed to forget the lessons of the early 20th century. The mainstream Democrats, for all their faults, have not. That is precisely why they are reticent to escalate into open "warfare" and constantly talk about the value of bipartisanship.

There is significant value in stability. Unfortunately, the right has decided that no price is too high as long as they are the ones in power. I get why Democrats in Congress are wary of going there, but we've been forced into it and the opposition accuses even the most milquetoast Democratic party members of extremism anyway, so they need to get the fuck over it. They would rather not have been thrown back into open class warfare. I share that preference. The fact of the matter is that we are now in that place and denial of that fact only allows the right wingers to flourish.

The thing that depresses me most is that it would be easy enough for the Republicans' paymasters to rein them in if they weren't being so goddamned short sighted. They could easily be as rich or even richer than they are now and have entirely avoided all this unpleasantness if only they hadn't pushed so fucking hard and left some scraps for everyone else instead of kneecapping the economy and fomenting civil unrest thanks to most people being financially worse off than their parents.

Sadly, it's not about the money, though. It's about winning. It's about teabagging everybody who doesn't have fuck you money. It's emotional and irrational. Anyone with sense would have claimed victory 20 years ago and quit fucking pushing before it caused such a serious backlash. It's the rank stupidity that leaves me feeling hopeless more than anything.
posted by wierdo at 7:14 PM on April 5 [34 favorites]


It is not clear to me why a consortium of banks would loan Schaeffler billions of euros and then essentially forgive 40% of the loan. Especially since the dude's fortune regrew in short order.

The “contingent upside instrument” provision of the refinancing deal sets up a scheme where schaeffler pays the banks if the company does well, very much like stock dividends would. The banks are forgiving the loan in exchange for what looks and acts and smells just like equity in schaeffler, but is called something else so they don’t have to pay taxes on it.
posted by Jon_Evil at 9:00 PM on April 5 [5 favorites]


It's the rank stupidity that leaves me feeling hopeless more than anything.

Except that it works; they've got more than before, we're all more downtrodden than before, we all hate each other more than we hate them -- why should they change strategies? It's been working! It's going to continue working! It's a winning strategy, ergo it's not really stupid -- yes, maybe theoretically it's stupid, but who gives a fuck about theory when the same damn people win, all the goddamn time, and will continue to win?
posted by aramaic at 10:27 PM on April 5 [6 favorites]


corruption works and works... until it doesnt. the french revolution happened. the russian revolution happened. it can happen, and it wont be good. we dont have a model yet for how it plays out in a modern society, but my guess is a low grade civil unrest with thousands of casualties that sends the western world into an economic depression for decades through 2100.
posted by wibari at 11:31 PM on April 5 [5 favorites]


or how Brexit can be seen as a massive attempt to avoid EU tax law and keep London the center of global money laundering.

*cosmic brain* MY GOD...IT FINALLY MAKES some small amount of SENSE.
posted by CheesesOfBrazil at 3:09 AM on April 6 [10 favorites]


or how Brexit can be seen as a massive attempt to avoid EU tax law and keep London the center of global money laundering.

*cosmic brain* MY GOD...IT FINALLY MAKES some small amount of SENSE.


Specifically this one: EU Financial Transaction Tax
posted by amil at 3:45 AM on April 6 [4 favorites]


Except that it works; they've got more than before, we're all more downtrodden than before, we all hate each other more than we hate them -- why should they change strategies?

Because their score (and that is all their net worth is to them) would be higher had they been only slightly less rapacious. And they wouldn't be losing "defenders" who value stability. We haven't quite gotten there yet, but we are getting closer and closer to ending their party regardless of their opinion on the matter, which was entirely unthinkable 20 years ago. That's why it's short sighted and stupid.
posted by wierdo at 6:07 AM on April 6 [1 favorite]


Years ago I read an article about a white show law firm's tax lawyer. It described him as a jovial man who read the tax code for pleasure, pleasure for him being finding the weirdo anomalies put in by senators and congressmen (republican and democrat, mind you) for the particular benefit of unknown favorites. The wordings could be strange indeed, highly specific, but of necessity, anonymous as to author and beneficiary.

Solution - insist that every special addendum to the tax code be footnoted to the politico who engineered the insertion. We can leave it to the journoes to figure out cui bono.
posted by BWA at 7:28 AM on April 6 [10 favorites]


Except that it works; they've got more than before, we're all more downtrodden than before, we all hate each other more than we hate them -- why should they change strategies? It's been working!

I really don't think it does work even for them. If poor and middle class people had more money, they would have more money to spend on the services and goods rich people provide. Rich people could be even richer. Their society would be richer.

And where does it all lead? We see what banana republic societies with even more inequity look like. They look like hell, even for rich people, who are forced to live in gated communities that resemble prisons. They can't go outside without security. They live in fear of being kidnapped or brutalized. Some life.

It wasn't all that long ago you could work a regular job and still have a house, kids, car, no debt, save for retirement, send your kids to college, go on vacations, etc. And the sad thing is, the United States is richer than it was back then.

Also, how much wealth do you need? Seriously, how much better is your quality of life if you're worth only $100 million versus $1 billion? What good is the extra money? It seems like it's just spent on acquiring more power and prestige.
posted by xammerboy at 8:29 AM on April 6 [17 favorites]


insist that every special addendum to the tax code be footnoted to the politico who engineered the insertion. We can leave it to the journoes to figure out cui bono.

While we're at it, I'm also still in favor of forcing the elected to wear jerseys decorated with the corporate logos of their sponsors. Yours seems more doable - it's a similar problem in that the information is already possessed by a number of people, but many of those same people would rather not make it super-public.

More possible with footnotes because it doesn't require anyone to wear anything beyond those dumpy off-the-rack suits that pass for a uniform on the hill.

Realizing my own ignorance here. Are these bits of attribution buried in tax code? I don't want to be one of these people who assumes something's being hidden when it's in fact just not easy to parse. Like if you look at any section of US tax code it's massively footnoted - AFAICT that's just standard legal citation, but doesn't that let you track it back to the Congress that implemented it, and from there to specific Congresscritters who lobbied for specific things?

My guess is that that's probably the real problem; it's not that difficult to find the information for a researcher with resources, but the chain of attribution should be made more apparent and easier to follow.

Also, how much wealth do you need?
Having too much money apparently cauterizes this vein of introspection, because otherwise . . . no one would.
posted by aspersioncast at 8:34 AM on April 6 [4 favorites]


The Helmsley Doctrine (“only the little people pay taxes”) is now settled law.
posted by acb at 8:55 AM on April 6 [3 favorites]


First replace the Wall Street bull with a nice, big guillotine, just to make sure they understand the choices, pay your fucking taxes or have all your wealth confiscated.

Social democracy (progressive income taxes, state-funded healthcare/schools/welfare, statutory rights to paid leisure time, and such) were sometimes jokingly referred to as “guillotine insurance”. (This was particularly palpable when there was still a Soviet Union whose doctrine involved exporting Communist revolution; keeping the pool of desperately disaffected workers from reaching critical mass was a matter of some urgency.) Then the USSR collapsed and the immediate threat of Communist revolution went away, and so did the trappings of social democracy. Now, it seems, social media and algorithmic mass surveillance may be a cheaper and more efficient form of guillotine insurance than cutting into profits to bribe the masses.
posted by acb at 9:01 AM on April 6 [16 favorites]


Also, austerity regimes where the way the capital class figured out how to loot social democratic states by splitting people into deserving and undeserving and pretty much forcing everyone to discipline themselves into deserving (and whip up right wing sentiment against the undeserving and other)
posted by The Whelk at 9:07 AM on April 6 [7 favorites]


They look like hell, even for rich people, who are forced to live in gated communities that resemble prisons.

I've long thought that someone who earns €250,000 (gross) a year almost anywhere in Europe is far better off than someone who earns $2,500,000 (gross) in the US for reasons a lot like this. That's how much value tax adds.
posted by ambrosen at 9:18 AM on April 6 [3 favorites]


I'm in the UK and the tax authority tried it on with me.
They rang wanting to know about a £40,000 lump sum that was paid into my personal account from a matured endowment policy, and why I had not declared it. I was in hospital at the time and my wife knew little about it and managed to sound suspicious to them (quite innocently). They chased me for the tax on it and I told them to go jump as the premiums on the policy were paid after tax. They insisted that I still had to declare it as income and pay tax on it.

I refused to give in and told them I was quite happy to take the case to the high court and inform both the papers and the news media.
They kept pushing until I got my solicitor to write to them and tell them that I was going to take them to court for fraud under the double tax rules, at which point they obviously checked their own rules and gave up. No apology though!!
posted by Burn_IT at 9:40 AM on April 6


Also, how much wealth do you need? Seriously, how much better is your quality of life if you're worth only $100 million versus $1 billion?

At some point we started selecting for only paranoid, pathologically greedy people who drifted towards fields where they could set up rental monopolies and arbitrage schemes. Very few of these people are Lex Luthors; most are people who once upon a time would have been shot for grifting their neighbors in a small village. Assuming their behavior is logical in any long term planning way is a mistake; Ayn Rand wrote the perfect fairy tales which sum up the zero sum us vs. them mindset.
posted by benzenedream at 9:48 AM on April 6 [3 favorites]


The key is to criminalize excessive wealth for the right reasons. We tend to blame money hoarders from a sociopathology that leads us to communism against capitalism, but this critique is ultimately based on religious, traditional or cultural grounds. And this was even before they invented token money, and well before some theorists tried to ban it for the same reasons. However, we should limit money hoarders based the modern notion that they have too much publicly printed and insured money, and it is publicly controlled to allow free commerce and fluid opportunities. Any claims they can control it beyond a reasonable limit is against the purpose of public money, which hurts the economy and a thousand other dependent freedoms. The same logic goes for regressive taxes on those least able to afford them, and we don't need to look to abstract class determination to inform us of the indignation, which misses the point. Taxing wealth is the cost of doing business with stabilized federal currency.
posted by Brian B. at 10:30 AM on April 6 [12 favorites]




I really don't think it does work even for them. If poor and middle class people had more money, they would have more money to spend on the services and goods rich people provide. Rich people could be even richer. Their society would be richer.

They want the high score a hell of a lot less than they want a world full of desperate people that they can exploit for profit and pleasure. It's not really about the bank account, it's about the control and dominance over the rest of society that bank account enables.
posted by Pope Guilty at 12:09 PM on April 6 [13 favorites]


Oligarchies don't make themselves.

More good reporting from ProPublica.
posted by doctornemo at 12:24 PM on April 6 [1 favorite]


When you add up all the mortality and morbidity, reduced life expectancy, and lost productivity, etc., due to unfunded social services, what the average impact, in number of on American lives lost per each $1M stolen from America due to cheating on taxes? Because I would like to (a) provide that information to the American people and (b) start charging tax cheats with manslaughter. Because cheating on taxes kills Americans.
posted by M-x shell at 12:44 PM on April 6 [3 favorites]


Of course, reducing the life expectancy for the Lower Classes may actually provide a net saving to the economy, but that gets complicated.

But when I learned that people in the poorest county in America are audited twice as often as people in the wealthiest, I thought that the old cliche about believing the IRS is out to get you is truer today for more people than it used to be, even with its budget cuts.

And then, with a certain notorious Donald claiming that investigators can't get his tax records because they're constantly under audit, that kind of backs up the suspicion that he is a LOT less wealthy than he claims... Or he's the only billionaire who tries to take the Earned Income Credit.
posted by oneswellfoop at 2:02 PM on April 6 [2 favorites]


It wasn't all that long ago you could work a regular job and still have a house, kids, car, no debt, save for retirement, send your kids to college, go on vacations

Historically, that lifestyle was only attainable by a privileged few.
posted by Stu-Pendous at 7:51 PM on April 8 [2 favorites]


Yes, it was very few when one considers the entire world. More like 60-70% of US households back in the 50s and 60s, though. Granted, houses were smaller and a vacation was most likely a drive to the nearest national park or similar.

I'm constantly amazed that in my lifetime our nation has declined so much economically that people literally don't believe how good we had it, much less remember it, and I'm still pretty young.

My grandparents worried about money in retirement, but that was because they were children of the depression, not because they were ever in any actual danger of running out. Would that current retirees be so fortunate.
posted by wierdo at 5:31 AM on April 9 [1 favorite]


The key is to criminalize excessive wealth for the right reasons.

Beyond this, there needs to be a culture shift around wealth and the ends it serves.
posted by ZeusHumms at 6:47 AM on April 9 [2 favorites]


Congress is about to ban the government from offering free online tax filing (Justin Elliott, ProPublica.org via Ars Technica)
posted by ZeusHumms at 6:50 AM on April 9 [1 favorite]


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