Decades of budget cuts have left the agency with old computer systems and far too few employees. The House Budgets Committee acknowledged these issues with the IRS in a report last fall. “The Internal Revenue Service (IRS) has faced severe budget cuts over the past decade that have hampered its ability to serve the American people in a fundamental way,” the committee said. “Even before the pandemic, the underfunded IRS was struggling to perform its core tax collection and enforcement functions.”
That means many tax evaders – the big ones who could owe hundreds of thousands or even millions – got away with it. “According to a recent report by the Inspector General of Tax Administration (TIGTA), due to a lack of resources, the IRS has not audited more than 897,000 high net worth individuals who have not filed tax returns in a three-year period – and those individuals owed nearly $ 46 billion Taxes, “reported the committee. It does so after decades of Republicans vilifying, attacking, and starving the agency.
Treasury Secretary Janet Yellen outlined the IRS’s plan for over $ 700 billion in new revenue with the potential increase in the budget. She said the IRS will include the crypto market in the new enforcement measures and serve high-income individuals and businesses. New reporting rules would require banks and other financial institutions to provide information that would help the IRS identify unreported income. These new reporting rules would also apply to cryptocurrencies, exchanges of crypto assets, as well as custodians and crypto payment services.
“Although cryptocurrency transactions make up a relatively small part of business income today, they are likely to grow in importance over the next decade, especially given a widespread financial account reporting system,” the finance department said in a report released this week. “The president’s compliance proposals are designed to ameliorate existing inequalities by focusing on high-end circumvention,” the report said. “These unpaid taxes come at the expense of American households and compliant taxpayers as policymakers choose rising deficits, lower spending on necessary priorities, or further tax hikes to make up for lost revenue.”
In June last year, the IRS released a data book for Fiscal Year 2019 detailing its processes over the past decade. In fiscal 2010, the IRS employed 13,879 revenue agents and received approximately 230 million returns. In 2019, the agency received 253 million returns, an increase of almost 10%. However, they only had 8,526 revenue agents to investigate. The returns that are increasingly being studied are the low hanging fruits that are easy for overworked agents to verify. Over the past decade, exam rates for those earning more than $ 1 million have decreased 81%, while exams for regular working people, especially the working poor, have not decreased significantly. This means that the IRS is foregoing billions in revenue for the treasury.
Amara Enyia is a public policy advisor and policy and research coordinator for The Movement for Black Lives, a national coalition of 300 organizations working for racial justice nationwide. She writes in the Grio that the problem is not just that people with low and middle incomes have borne the brunt of the audits. The fact is that the tax code itself is fundamentally unfair. “The tax code favors wealth – things like investments, homes and other assets that have accumulated over a lifetime,” writes Enyia.
“Systemic racism and discrimination have actively prevented blacks and other people of color from getting things like home and business loans, or from benefiting from programs like the GI Act, which helped whites get homes, businesses and land – all vital to building wealth. ” A white taxpayer earning the same income as a black taxpayer would be much more likely to benefit from the tax laws, as they would be far more likely to benefit from a protected inheritance, tax-privileged retirement plan, and mortgage deduction from their own home, as well as one massively higher value placed on this house.
This is the other part of the tax system that needs to be revised. An IRS that focuses back on the people who can definitely afford to pay their taxes, rather than the people who are easier to squeeze, is a good place to start, as is a finally properly funded IRS that does the job done. Also at the top of the list? A new IRS commissioner – one who is not a Trump holdover and is unable to sabotage Biden’s efforts.