The Taxman Is (Not) Coming After You

https://www.nytimes.com/2019/03/28/opinion/irs-taxes.html

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According to federal prosecutors, the California lawyer Michael Avenatti has not filed a federal income tax return since 2010, and he has not paid federal income taxes since 2008.

This may seem astonishing to the millions of Americans who dutifully file tax returns each year, under the assumption that the government would notice if they didn’t.

But it should not come as a surprise. Congressional Republicans led the charge to sharply reduce funding for the Internal Revenue Service over the past decade, and the agency has warned repeatedly that it has been deprived of the resources necessary to catch tax cheats.

The government has been operating on the honor system — and hoping that no one noticed.

At a congressional hearing in 2015, Representative Mike Kelly, a Pennsylvania Republican, scolded the head of the I.R.S. for talking publicly about the agency’s lack of resources.

“I don’t think that I would want to be a cheerleader, telling those people that don’t want to pay their taxes: ‘Hey, you know what? We are not going to be able to come after you because I don’t have enough money,’ ” Mr. Kelly said, later adding, “Those comments are better kept internally.”

This see-no-evil approach to tax collection is especially frustrating, given the significant gap between federal spending and federal revenue. The government’s most recent estimate, which dates from 2010, is that Americans fail to pay more than $400 billion in taxes each year. That is enough money to reduce the annual federal deficit almost by half. It is more than enough money to maintain the current levels of funding for each and every government program that the Trump administration proposed to cut in its 2020 federal budget.

And there is every reason to think that the underpayment of taxes has increased since 2010, as enforcement has declined.

ProPublica reported last year that I.R.S. audits declined by 42 percent between 2010 and 2017. The I.R.S. has especially pulled back from scrutinizing people who do not file tax returns; new investigations of cases like Mr. Avenatti’s fell from 2.4 million in 2011 to just 362,000 in 2017.

The agency’s critics say it wastes money and uses personnel inefficiently. Probably I.R.S. employees, like many of us, could work a little harder and do a little more. But the sobering reality is that the number of I.R.S. auditors has been reduced by one-third since 2010. The government employs fewer people to chase deadbeats than at any time since the 1950s.

In the intervening decades, the population has increased, the rich have grown richer and the schemes used to hide wealth from the government have become more sophisticated.

The I.R.S. is trying to do its job, and some people still get caught. Last year the agency filed a $75,328.80 tax lien against the economics commentator Stephen Moore, whom President Trump is considering for a seat on the Federal Reserve Board.

But Congress is setting up the I.R.S. to fail, and the wealthiest Americans are the biggest beneficiaries. The government says Mr. Avenatti “lived lavishly” during the years he allegedly was choosing not to contribute to the public coffers: luxury homes, cars, vacations. The dereliction of tax enforcement amounts to yet another tax cut for the people who need it least.

The I.R.S. has estimated that each additional dollar spent on tax enforcement would yield $4 in federal revenue. That is a very good investment — the kind of investment that should be a no-brainer for a party that insists the government should be run like a business.

The Trump administration has acknowledged the problem, and opportunity. Treasury Secretary Steven Mnuchin has described the I.R.S. as “under-resourced,” and Mr. Trump’s proposed federal budget for 2020 would increase enforcement funding by $362 million, or 5 percent, partly making up for the decline over the last decade. The proposal is also a welcome reversal of Mr. Trump’s own stand — the administration had previously proposed fresh funding cuts.

So far, however, there is little sign that Congress wants to crack down on tax cheats.

Lawmakers face many difficult issues and thorny choices. But this is not one of them. People should pay what they owe in taxes, and the government should spend what is necessary to make sure that they do. That is simply good government.

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