IRS budget cuts cost $34.3B in lost revenue from big business(accountingtoday.com)
accountingtoday.com
IRS budget cuts cost $34.3B in lost revenue from big business
https://www.accountingtoday.com/news/irs-budget-cuts-mean-34-3b-in-lost-revenue-from-big-business
318 comments
The latest IRS changes prioritize low income over high income audit targets: https://www.google.com/amp/s/www.forbes.com/sites/rachelsand...
" IRS audited 6.66% of returns from filers with more than $10 million in adjusted gross income in fiscal year 2018, down from 14.52% in 2017 and even further down from 29.3% in 2011"
Wow, they used to audit 1/3rd of all filers in $10 mil/year bracket? I guess at that level, there aren't too many people with W2 form.
Wow, they used to audit 1/3rd of all filers in $10 mil/year bracket? I guess at that level, there aren't too many people with W2 form.
This seems absolutely insane.
> For those making less than $25,000, the audit rate fell 0.02% (to .69%) from 2017 to 2018.
Frankly, for it to be significantly above 0 seems grossly inefficient. I would assume that average rate of return for public money spent on auditing a millionaire is... a fair bit higher than that spent auditing someone earning 25k.
> For those making less than $25,000, the audit rate fell 0.02% (to .69%) from 2017 to 2018.
Frankly, for it to be significantly above 0 seems grossly inefficient. I would assume that average rate of return for public money spent on auditing a millionaire is... a fair bit higher than that spent auditing someone earning 25k.
It’s not insane at all. Note that’s AGI - adjusted gross income.
If we stopped auditing those with AGIs less than $25,000, then all I’d have to do is take enough deductions (retirement contributions, unreimbursed business expenses, medical expenses, loss from property sales, tuition, etc) to get my AGI below $25,000 and I’d never have to worry about being audited.
Ever.
One way to significantly reduce your taxes is to lower your AGI. So if anything, the lower AGIs would be a good place to start looking for tax cheats.
If we stopped auditing those with AGIs less than $25,000, then all I’d have to do is take enough deductions (retirement contributions, unreimbursed business expenses, medical expenses, loss from property sales, tuition, etc) to get my AGI below $25,000 and I’d never have to worry about being audited.
Ever.
One way to significantly reduce your taxes is to lower your AGI. So if anything, the lower AGIs would be a good place to start looking for tax cheats.
Or we could just NOT use AGI and just use total income or some other metric which doesnt allow this stupidity.
That's an alarming equation. The harder you lie, the less likely you'll be called out on it.
What else in life works that way?
What else in life works that way?
Politics ;-)
Except that auditing involves tax return in which the IRS has suspicion that there is more income than claimed, right? So of all the people who reported income of less than $25,000, the IRS apparently believed that 0.69% of them actually had income of much, much more. Maybe millions.
Is that the kind of thing that would show up in an audit? That is, if you're hiding millions of dollars, you're not just fudging the numbers. You've got a web of places to stash money that aren't directly connected to you. It would take a deep investigation of your finances, not just an audit.
I would be astonished if the IRS didn't use some sort of statistical analysis(AI) to trigger audits.
I hope they have third party data sources (banks, employers, stockbrokers, house/boat purchasers, etc.). By cross referencing the third party data with the contents of your return (automatically), they should be able to make a shortlist of people likely to be failing to declare something.
The reason for this is almost exclusively the Earned Income Tax Credit. A single filer claiming two children and earning $11,000 would be eligible for a (fully refundable) credit of $4,410. While this credit distributes a ton of needed benefit to low-income working families, I'm sure you can see where there's a strong incentive to defraud the system here. Both unscrupulous individuals and tax preparers can make a substantial amount of money quickly.
Since you can claim self-employment income without documentation, regular audits are necessary to prove actual income. It's also common for people to claim children who don't truly qualify; again, this would only be provable through actual audits.
In contrast, the average middle-class taxpayer tends to have both less built-in incentive to game the system and less flexibility (as most of their income will be documented to the IRS).
To defend the IRS a bit more: this program is in some ways an administrative model. Taxpayers don't need to prove any need to claim the credit. There aren't multiple rounds of paperwork, and, if you aren't audited, the only interfacing you have to do with the bureaucracy is in submitting your tax return, and you'll have money deposited in your bank account in a week. It may be the most effective welfare program, even accounting for audits (many of which are triggered by obvious red flags) in its ratio of benefits to "hoops needed to jump through."
Since you can claim self-employment income without documentation, regular audits are necessary to prove actual income. It's also common for people to claim children who don't truly qualify; again, this would only be provable through actual audits.
In contrast, the average middle-class taxpayer tends to have both less built-in incentive to game the system and less flexibility (as most of their income will be documented to the IRS).
To defend the IRS a bit more: this program is in some ways an administrative model. Taxpayers don't need to prove any need to claim the credit. There aren't multiple rounds of paperwork, and, if you aren't audited, the only interfacing you have to do with the bureaucracy is in submitting your tax return, and you'll have money deposited in your bank account in a week. It may be the most effective welfare program, even accounting for audits (many of which are triggered by obvious red flags) in its ratio of benefits to "hoops needed to jump through."
I wouldn't be so sure.
Millionaires have access to lawyers and tax accountants and are more difficult to pin down.
A poor person can easily be bullied to handing everything over to the IRS -- probably with just a few mean letters.
Millionaires have access to lawyers and tax accountants and are more difficult to pin down.
A poor person can easily be bullied to handing everything over to the IRS -- probably with just a few mean letters.
How do you know they’re actually making less than $25K without audits?
It's easier to audit low income folks. They have simple forms and simple evidence. Generally they can be done via machine [here is the source: https://www.marketplace.org/2019/04/15/study-where-irs-audit...]
Whereas rich people have complicated forms, requiring more man-hours and actual human eyeballs to get involved.
That's why it happens. Not sure why you disagree, these are facts.
Whereas rich people have complicated forms, requiring more man-hours and actual human eyeballs to get involved.
That's why it happens. Not sure why you disagree, these are facts.
As a high net worth business owner, I know a lot of wealthy people. They will simply follow prevailing trends on tax... If most of their peers are avoiding or just not paying tax, they will do the same. It is incredibly important that tax laws be strictly enforced or wealthy people will simply not pay.
Pretty much only form letters should be used for low income people.
Pretty much only form letters should be used for low income people.
At some point you can become wealthy enough that a good accountant is cheaper than paying a good proportion of the tax, in which case it’s not a case of ‘not paying tax’ any more, it’s a case of maximising profit.
The poor can’t afford to do anything but not pay tax, the rich can pay for all kinds of tricks to hide their money from the government while paying some paltry, but still seemingly legit, portion of tax.
The poor can’t afford to do anything but not pay tax, the rich can pay for all kinds of tricks to hide their money from the government while paying some paltry, but still seemingly legit, portion of tax.
I'm sure that strategy of "simply not paying" works great, right up until the day it doesn't and you find yourself facing huge fines and prison.
The trick is to die before that day comes.
Check the New York times reporting on Fred Trump and Donald Trump. It is clear to elites that just outright breaking tax law has no repercussions. More and more wealthy people are understanding this, and will not pay or will underpay taxes.
It's critical that taxes be enforced uniformly and in every case.
It's critical that taxes be enforced uniformly and in every case.
You can even break tax law and become President!
I feel that your second paragraph is disconnected from your first. This study is about the IRS audit process for publicly-traded corporation, not individual filers. We can easily fund more audits of publicly-traded corporations while decreasing the number of audits of individuals, even taking care to avoid targeting poor people.
> Also unmentioned is the very real negative externalities that IRS audits cause. Audits disproportionately affect poor people [2], who are also the least able to spend time dealing with them. The United States already has extremely low tax evasion rates [3]. Rather than spending money to catch more of the very few cheaters by audits, other country's tax authorities have found "nudge" letters were found to be similarly effective and vastly cheaper.
That's not a strong argument against audits. I'd just take that to mean the IRS should mainly audit people or businesses based by how large the underreporting was.
That's not a strong argument against audits. I'd just take that to mean the IRS should mainly audit people or businesses based by how large the underreporting was.
Audit based on size of underreporting? That's like saying only buy winning lottery tickets. You don't know how accurate a tax filing is up front; that's why there are audits.
That was worded a little badly. The size of the company, and the size of the tax return should impact the chance of an audit. Intentionally lying on your tax return and saving 5% is a lot different with 100 million than with 10,000. The IRS should also prioritize audits that look fraudulent.
The mandate of the IRS should not be to maximize tax collection, but to maximize economic gain to the United States.
I hope their internal models take into account the cost of an audit which finds nothing, both to the IRS themselves, but also to the audited and their family.
In fact, to make incentives align, maybe they should even pay those who are audited and end up owing nothing.
I hope their internal models take into account the cost of an audit which finds nothing, both to the IRS themselves, but also to the audited and their family.
In fact, to make incentives align, maybe they should even pay those who are audited and end up owing nothing.
The GOP direction has been to break the IRS since the 90s. None of the administrations were willing or able to take a stand against it, and this administration is actively trying to break the executive branch overall.
A good friend was a specialist in a few tax evasion schemes used by real estate developers and a few other more obscure areas with similar methods. Basically, there were about 50 people nationally doing this in the early 90s, but the program was defunded over time and when he retired, there were 4. He spent about 60% of his time flying all over the country to testifying in court. Today there is nobody, the last guy retired last year.
By my friend's reckoning, his direct work accounted for $100M in recovered revenue per year. Some big cases were multiples of that. They have models that show the deterrent effect that enforcement has -- that $100M in recovery may deter $1B in undetected fraud. That is money being stolen from the treasury.
A good friend was a specialist in a few tax evasion schemes used by real estate developers and a few other more obscure areas with similar methods. Basically, there were about 50 people nationally doing this in the early 90s, but the program was defunded over time and when he retired, there were 4. He spent about 60% of his time flying all over the country to testifying in court. Today there is nobody, the last guy retired last year.
By my friend's reckoning, his direct work accounted for $100M in recovered revenue per year. Some big cases were multiples of that. They have models that show the deterrent effect that enforcement has -- that $100M in recovery may deter $1B in undetected fraud. That is money being stolen from the treasury.
To be fair, large portions of the GOP (current presidents nothwithstanding) has also been advocating for simplified tax schemes that would make a smaller IRS more than capable enough for the job.
Show me the bills that they have brought to committee/the floor that actually simplify the tax code to make auditing & enforcement simpler. Don't confuse rhetoric with action.
> That is money being stolen from the treasury.
Actually, that is money being stolen by the treasury from the business owner.
Actually, that is money being stolen by the treasury from the business owner.
No. Taxes are not theft. Taxes are payment for services. Failure to pay is theft.
There is a big difference between the things your comment calls services and, e.g., Netflix's streaming service: namely, it is relatively easy to cancel Netflix's streaming service, and after I cancel, I no longer have to pay.
You can cancel your USA membership too - just renounce your citizenship and move to a service you find more appealing. Then you no longer have to pay.
Not so fast. You not only have to pay a fee to renounce, but your leaving is contingent upon approval by the state.
So, no, you can't "just leave" if you don't like it.
So, no, you can't "just leave" if you don't like it.
Hence the relatively easy in the comment you are replying to.
How do you propose basic services you use every day (i.e. infrastructure) are paid for if not through taxes?
pay as you go, like tolls
How would that work for something like the Hanford nuclear contamination zone[0], which threatens the water supply for millions of Americans? The cost to clean up the contamination has run into the billions, and yet there's no apparent private incentive to clean up this mess. If the market doesn't present a solution, are those millions of Americans just screwed?
How would you effectively pay for services that maintain the community behind the scenes, i.e. police and fire department? Swipe a card every time they show up?
How would we pay for the military without taxes? Just sell contracts to private security firms? How do we hold those firms accountable when they commit war crimes, as we recently saw from a former Blackwater contractor[1]? But then how do we pay for the justice system to hold those accountable if not through tax revenue? Make it so only those who can pay can participate?
0: https://www.latimes.com/nation/la-na-hanford-cost-20161216-s...
1: https://www.nytimes.com/2019/08/14/us/politics/blackwater-ni...
How would you effectively pay for services that maintain the community behind the scenes, i.e. police and fire department? Swipe a card every time they show up?
How would we pay for the military without taxes? Just sell contracts to private security firms? How do we hold those firms accountable when they commit war crimes, as we recently saw from a former Blackwater contractor[1]? But then how do we pay for the justice system to hold those accountable if not through tax revenue? Make it so only those who can pay can participate?
0: https://www.latimes.com/nation/la-na-hanford-cost-20161216-s...
1: https://www.nytimes.com/2019/08/14/us/politics/blackwater-ni...
Re. the nuclear thing: so you're saying you need govt funding to solve a problem created by the govt?
Also, you are overestimating my desire to pay for foreign military adventures. Your point about the police is actually great: the quality of customer service is so bad, racist and ineffective, that if they were a private enterprise, they'd have gone bankrupt.
Generally, I'm not saying the govt should have no role in things, I'm just in favor of reducing its current involvement by about 80%, along with the productivity it robs from workers and business.
Also, you are overestimating my desire to pay for foreign military adventures. Your point about the police is actually great: the quality of customer service is so bad, racist and ineffective, that if they were a private enterprise, they'd have gone bankrupt.
Generally, I'm not saying the govt should have no role in things, I'm just in favor of reducing its current involvement by about 80%, along with the productivity it robs from workers and business.
I never suggested eliminating taxes.
Your use or non-use of public services has no bearing on the amount you must pay in income tax.
Failure to pay taxes is illegal, not theft.
Theft is stealing the property of another. If income is the product of your physical labor, and the state owns your productive output (making tax avoidance theft, as you propose) then you are a slave.
Failure to pay taxes is illegal, not theft.
Theft is stealing the property of another. If income is the product of your physical labor, and the state owns your productive output (making tax avoidance theft, as you propose) then you are a slave.
And yet some people manage to whip themselves in to a righteous frenzy over someone collecting welfare or immigrants getting a microscopic bit of state aid.
Such people really need to get a sense of proportion.
The destitute, despised, downtrodden guy who slaves away to support their family by mowing your lawn, picking apples for you, driving you somewhere, or serving you your burger is not your enemy.
Such people really need to get a sense of proportion.
The destitute, despised, downtrodden guy who slaves away to support their family by mowing your lawn, picking apples for you, driving you somewhere, or serving you your burger is not your enemy.
Last week I saw a person on Facebook sharing an anecdote patterned after the "welfare queen" trope and arguing against food stamps.
I noticed from her Facebook page that she owned a ranching operation, so I searched her name in the EWG Farm Subsidy Database and saw that she and her husband had received $18k in subsidies in 2018, and nearly $250k since 1995.
I noticed from her Facebook page that she owned a ranching operation, so I searched her name in the EWG Farm Subsidy Database and saw that she and her husband had received $18k in subsidies in 2018, and nearly $250k since 1995.
Is your logic that a dollar is a dollar and it doesn't matter why the government gave it to them?
If so, I don't agree.
If so, I don't agree.
What are you trying to say? He is remarking on the ignorance / hypocrisy of the woman, who laments when other people receiving government subsidies as "welfare queens" disregarding the fact that she is also receiving government subsidies. Likely due to her own biases, that her subsidy is worthwhile while another person's isn't for whatever reason.
Not all government subsidies are the same. Someone could say farm subsidies are good while welfare is bad. That's not hypocritical.
I'm against people living off of food stamps also, and if there is a subsidy out there for the taking, then i'm going to take it. I agree that government should not be involved in either of those things, but promoting certain kinds of businesses might be worth the subsidy for some people.
Would you be against other people getting the subsidy?
I'm just trying to figure out if it's hypocrisy or selfishness.
I'm just trying to figure out if it's hypocrisy or selfishness.
Why not both?
Thanks for wanting to make sure I didn't have dinner on my table as a child while my mom took care of my brother with leukemia.
Not to mention most are paying taxes as well (via ITIN) and aren't qualified to receive certain benefits.
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IRS budget cuts seem to be thrown around a lot, but to me this is just a symptom of the real problem -- a tax code that is way too complex. Years of congress pandering to special interests, fixing minor issues with pages of new tax rules and no implementation accountability (implementation and enforcement is dumped on IRS) brought US tax code to a state that can overwhelm any staffing levels.
Simplifying tax code will go much further than trying to staff up IRS. My 2c.
Simplifying tax code will go much further than trying to staff up IRS. My 2c.
Simplifying would be great, but it's not really possible to do because you won't get the exactly same tax distribution with a simplified set of rules. So politicians will frame it as "why do you want to raise taxes on single moms?" and "why are you taking away the deduction for teachers?" and "this bill hurts vulnerable people who have been hit by natural disasters." So any suggestion to simplify the tax code is a no go.
It feels like voters are voting for pouring lighter fuel on the wood and throwing lit matches at the wood but vote strongly against having a bonfire. They want politicians to fix problems that they wanted the politicians to create and then don't want the actual fixes to the problems they want fixed.
Everyone is selfish
Everyone wants to lower their own taxes by raising everyone else's taxes.
100 people in a room will have 100 different way to change the tax system, and every proposal will have 99 votes against it.
Everyone wants to lower their own taxes by raising everyone else's taxes.
100 people in a room will have 100 different way to change the tax system, and every proposal will have 99 votes against it.
There's a reason business owners fear unions: They understand fully well that the wide majority of people have a different interest than them and if that majority are allowed to come together and realize that they will ask for things benefiting the majority to the detriment of the minority. Same with elections. Hence the age old strategy of divide and conquer.
Seems like it should be possible to make a credible disparate impact case in response.
It would probably work in a time where the marginal rates are too high to begin with. If we get a Democrat in the white house in 2020, then 2024 or 2028 may be the year of tax code simplification. ;- )
The reason the IRS's budget is being slashed is the same as why the tax code is complex. Political elites, corporations and those who truly call the shots want less transparency of their finances, not more. Complicated tax codes and no one to audit them greatly benefit the wealthy. There's clearly a strong vested interest in this country of using the government as tool to enrich oneself as the expense of society.
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The act of reducing the manpower of the IRS needed to enforce the laws may have a greater effect than all the tax cuts combined. If a business is fairly certain an audit isn't coming, their effective tax rate is whatever they want it to be.
Also important is what happens to a business that gets caught. If the punishment is 'pay back taxes plus a moderate penalty, and here we'll even set up a convenient payment plan for you', then cheating on taxes is effectively a free roll. You have a 95% chance of saving a ton of money, and 5% chance of paying only a bit more than you would have paid anyway if you followed the laws.
That said, the absurd complexity of the tax code is also a problem here, since you don't want the government doling out bankruptcy-inducing penalties on businesses that might just be making an honest mistake. The whole system clearly needs an overhaul. It should be simple enough that when a business severely underpays, it will be very likely that they did so on purpose, and therefore a large, deterrent-worthy penalty can be justified.
That said, the absurd complexity of the tax code is also a problem here, since you don't want the government doling out bankruptcy-inducing penalties on businesses that might just be making an honest mistake. The whole system clearly needs an overhaul. It should be simple enough that when a business severely underpays, it will be very likely that they did so on purpose, and therefore a large, deterrent-worthy penalty can be justified.
The complexity is by design to make it harder to audit and easier to hide cheating.
Given clear and straightforward code/laws, it becomes hard to cheat.
Given clear and straightforward code/laws, it becomes hard to cheat.
The complexity is by design because congress for over 100 years has been creating laws one by one to give preferential treatment to various groups that they want to favor at the expense of others.
The consequence is that for anything moderately or more complex there is actually no correct answer on what your tax liability is. What is the value of an intangible asset? How do you define novelty for the R&D tax credit? There are thousands of intersecting rules that change your liability and many of those are up to interpretation.
The consequence is that for anything moderately or more complex there is actually no correct answer on what your tax liability is. What is the value of an intangible asset? How do you define novelty for the R&D tax credit? There are thousands of intersecting rules that change your liability and many of those are up to interpretation.
That is absolutely not true. Much of the complexity of the tax code is present in order to clearly prescribe rules in edge case situations in order to reduce judgement calls that would inevitably tilt in favor of the filer.
The complexity isn't driven by the IRS, they've been pushing for simplification but lobbyist for businesses push for rules changes, and lobbyists for the tax filing industry push for rules to solidify the need for their industry.
Just like Healthcare and Gun control, there are industries and 3rd parties with vested interests in keeping the system complicated and hard to track or enforce so they can profit.
Just like Healthcare and Gun control, there are industries and 3rd parties with vested interests in keeping the system complicated and hard to track or enforce so they can profit.
> The complexity is by design to make it harder to audit and easier to hide cheating.
You ascribe too much to malice, when it is typically just plain old politics. Representative will only vote to tax X if his/her constituent Y is excluded somehow. Add these types of items over many bills/years and you get what we have today.
You ascribe too much to malice, when it is typically just plain old politics. Representative will only vote to tax X if his/her constituent Y is excluded somehow. Add these types of items over many bills/years and you get what we have today.
The tax industry lobbies heavily to influence tax code and laws to maintain their relevance. The IRS has tried many times to either simplify the tax code or offer services to tax payers to simplify reconciling obligations.
Remember in 2016 when the IRS wanted to mail out prefilled tax forms that tax payers would just sign and send back for or with a check? Remember how the tax industry lobbied Congress to pass the Free File Act of 2016 which permanently bars the IRS from providing free filing services?
I suppose that wasn't malice.
What about when big corporations lobby Congress to not close loop holes?
http://www.citizen.org/documents/corporate-tax-lobbying-repo...
Call it "plain old politics" or call it "malice" but either way it's intentional.
Remember in 2016 when the IRS wanted to mail out prefilled tax forms that tax payers would just sign and send back for or with a check? Remember how the tax industry lobbied Congress to pass the Free File Act of 2016 which permanently bars the IRS from providing free filing services?
I suppose that wasn't malice.
What about when big corporations lobby Congress to not close loop holes?
http://www.citizen.org/documents/corporate-tax-lobbying-repo...
Call it "plain old politics" or call it "malice" but either way it's intentional.
If your mistake is large enough that the penalty puts you out of business it was probably a pretty serious mistake. Or your business wasn't healthy enough to survive in the first place.
And I'd imagine that auditing high net-worth individuals and large companies takes a lot more people than smaller businesses. Larger companies will be able spend more on expensive legal advice fighting audits, and it will make business sense.
Oh, but it is worse. It teaches members of the class that exploit it that taxes are for everyone else. They spend time on efforts to avoid taxes, which not only "starve the beast", but are frankly non-productive while shifting the burden on to others.
It breeds sociopathy among the executive class that doesn't need any help in that department while encouraging nonproductive "investment".
It breeds sociopathy among the executive class that doesn't need any help in that department while encouraging nonproductive "investment".
Exactly, considering the penalties are just paying whatever is owed anyway, perhaps plus a few minor interest penalties. They make more the fines and interest combined by a long shot just by deploying the saved funds elsewhere.
From reading the comments, I really wonder how many HN Users are tax evaders. I see the top two comments are “the tax code is too complicated, we shouldn’t be going after tax evaders” and “this isn’t actually a big problem.” If the government is getting more money collecting unreported taxes than it costs to fund the collecting of said taxes, what’s the problem?
The tax code is too complicated, which, so NPR tells me, is mostly Intuit’s fault
Just one of the many sectors where budget cuts are going turn into huge losses down the line. The consequences of cutting healthcare and education are (going) to be much worse.
Exactly as designed, makes it that much harder for the next government to fix this up so you can shove all the blame on them when it starts going down the drain.
This is not something you can fix quickly either, as with State the loss of institutional memory and all the things which should have been tracked but weren't and got lost are going to be a huge supplementary shock.
This is not something you can fix quickly either, as with State the loss of institutional memory and all the things which should have been tracked but weren't and got lost are going to be a huge supplementary shock.
The consequences of not exposing healthcare and education to cost pressure have already been catastrophic for consumers of both, so I'm not quite sure where you're going with this one.
When have healthcare or education ever been cut?
Edit: A lot of downvotes, but no examples. Such cuts are always talked about as if though they have factually happened. To my knowledge, I’ve never actually seen such a cut in the United States at the federal, state, or local level. Sometimes, there have been attempts to limit the rate of spending growth, but those seem to always fail too.
Edit: A lot of downvotes, but no examples. Such cuts are always talked about as if though they have factually happened. To my knowledge, I’ve never actually seen such a cut in the United States at the federal, state, or local level. Sometimes, there have been attempts to limit the rate of spending growth, but those seem to always fail too.
https://the1a.org/shows/2019-05-06/draft-4-day-school-week
Oklahoma and a number of other states moved to a 4 day school week to cut costs. Do you include cutting teacher pensions as an education cut? I can provide significant examples of education cuts.
Oklahoma and a number of other states moved to a 4 day school week to cut costs. Do you include cutting teacher pensions as an education cut? I can provide significant examples of education cuts.
The governor of Alaska just signed a bill that cut 41% off the state budget for higher education.
Thank you for the example. However, it appears that the governor reversed course just yesterday: https://news.yahoo.com/alaska-governor-reverses-course-contr...
I've noticed this is a frequent occurance--one faction will try to score political points by appearing to take an action, only to capitulate at the end when fewer people are looking.
I've noticed this is a frequent occurance--one faction will try to score political points by appearing to take an action, only to capitulate at the end when fewer people are looking.
I don't get why countries always under-invest in tax collection... as long as it's ROI positive, shouldn't budgets be getting increased?
When the executive branch doesn't agree with the law, one tool they have as a separate branch of government is to not enforce the law. In U.S. political history, President Andrew Jackson reportedly responded: "John Marshall has made his decision; now let him enforce it!" referring to the Supreme Court ruling in https://en.wikipedia.org/wiki/Worcester_v._Georgia.
Governments aren't 'rational actors' trying to maximize revenue. In US, 'starve the beast' [1] comes highly into play
https://en.m.wikipedia.org/wiki/Starve_the_beast
https://en.m.wikipedia.org/wiki/Starve_the_beast
There's a faction of US politicians that are philosophically against (most) government and taxes. It's not about ROI, it's about their goals.
Interesting. A faction you say? You mean like the faction that drafted the Articles of Confederation?
No, the contemporary one that learned nothing from that folly.
Oh! The one that found success with the Laffer Curve. Right.
Freedom isn't an idea. It's an actual place. In terms of kingdoms a free peoples kingdom is a Freedom; and you don't have to pay someone for the right to exist.
Oddly enough we agree, there is a faction in the US pursuing its own agenda.
Freedom isn't an idea. It's an actual place. In terms of kingdoms a free peoples kingdom is a Freedom; and you don't have to pay someone for the right to exist.
Oddly enough we agree, there is a faction in the US pursuing its own agenda.
> The one that found success with the Laffer Curve
Care to explain? The most recent tax cuts that were supposed to pay for themselves haven't. So where are we on the Laffer Curve right now?
Care to explain? The most recent tax cuts that were supposed to pay for themselves haven't. So where are we on the Laffer Curve right now?
Hard to measure both over long and short timescales, since so many factors affect the willingness of people to invest personal effort and risk toward earning.
You might have more success looking at the amounts while attempting to control for more factors; but of course, you could make it worse, because statistics is hard!
You might have more success looking at the amounts while attempting to control for more factors; but of course, you could make it worse, because statistics is hard!
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Ah, yes. The failed constitution.
This faction of the US is unique, which is why the US has some of the lowest tax rates in the world and in consequences has one of the most positive balances in net immigration, specially considering it has one of the harshest immigration policies in the world.
The US has some of the lowest tax rates in the world, IFF you are making a large amount of money.
If you are earning a median wage a lot of other countries have comparable tax rates. If you are earning minimum wage a lot of other countries have lower tax rates.
If you are earning a median wage a lot of other countries have comparable tax rates. If you are earning minimum wage a lot of other countries have lower tax rates.
Yup, not a great country to be poor. Also tax-pressure is still considerable (33% of GDP). This implies the US has lots of regressive expenditures and taxes.
On the whole, I think the tax rate is the main difference between the US and most of industrialized countries, and net immigration is hugely positive for the US.
On the whole, I think the tax rate is the main difference between the US and most of industrialized countries, and net immigration is hugely positive for the US.
The U.S. is by any good measure somewhere between #1 and #3 in median individual income net of taxes and other mandatory transfers; and always #1 in the mean.
I think a lot of people look at the gap between the mean and median, and think that something must be going wrong; but to me, the inequality of outcome this measures is more a sign that America is a welcome home of extremely productive people and the smarter of their direct offspring, who inevitably earn ridiculous sums of money when and where doing so is not itself reviled.
I think a lot of people look at the gap between the mean and median, and think that something must be going wrong; but to me, the inequality of outcome this measures is more a sign that America is a welcome home of extremely productive people and the smarter of their direct offspring, who inevitably earn ridiculous sums of money when and where doing so is not itself reviled.
"Give me your tired, your poor,
Your huddled masses yearning to breathe free,
Those sick of a 35% income tax on earnings over $45,000".
I'm literally upset at the US for being so closed for immigration. If it were just a little more lax it would have a lot more than what it has now.
I think it’s because it’s a stealth tax cut. It might be able to win the political argument for lowering taxes, but by cutting funding for enforcement, you’re encouraging scofflaws and thus get the unpopular outcome you desired without having to go on television and defend it.
A similar thing plays out when politicians want to cut popular social programs. They manufacture a budget crisis (typically through instituting a popular tax cut) and then solve the crisis by cutting the funding to the thing they already decided they didn’t like.
A similar thing plays out when politicians want to cut popular social programs. They manufacture a budget crisis (typically through instituting a popular tax cut) and then solve the crisis by cutting the funding to the thing they already decided they didn’t like.
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George: Still don't know how you can call lunch with me a business expense?
Elaine: What do you think of the catalog?
George: I think it stinks.
Elaine: There, we just talked business.
* Imagine the IRS debating grey area scenarios like this against financial teams trained to argue deductions. The ROI quickly becomes a sewer drain.
Elaine: What do you think of the catalog?
George: I think it stinks.
Elaine: There, we just talked business.
* Imagine the IRS debating grey area scenarios like this against financial teams trained to argue deductions. The ROI quickly becomes a sewer drain.
If 99.9% of the national income were used to gather 100% of the national income, you would have positive ROI.
Exactly, which should illustrate just how pointless this calculation is. Obviously spending 99.9% of national resources on tax collection would be a colossal waste from the public's point of view despite the "positive ROI". The IRS supposedly exists to benefit the public; maximizing the amount transferred from private citizens to the government is not the end goal here. The benefit to the public from having that money spent by the government rather than by those individual members of the public who earned it is at best a small fraction of the total amount of tax collected, and may even be negative.
Where does the remaining 0.1% go then 0.o?
> IRS is auditing fewer tax returns from corporations because it has fewer people and resources available to identify potential errors and follow up on questionable tax returns
On one hand I do want businesses to pay their fair share. On the other hand I don't want to encourage massive tax agencies which must justify their numbers by auditing and harassing as many people as possible. Often small businesses that don't have to resources to defend themselves like large corporations. Very similar to police departments who justify their existence by writing tickets and have quotas set up to encourage cops to harass people. Does not seem much more than a shakedown.
On one hand I do want businesses to pay their fair share. On the other hand I don't want to encourage massive tax agencies which must justify their numbers by auditing and harassing as many people as possible. Often small businesses that don't have to resources to defend themselves like large corporations. Very similar to police departments who justify their existence by writing tickets and have quotas set up to encourage cops to harass people. Does not seem much more than a shakedown.
I don't think the IRS has ever been well funded enough to run out of the innumerable corporations with legitimate tax issues
Generally they don't harass people unless something seems amiss and there is a large enough discrepancy to justify it.
And there's eventually a marginal tipping point where more money spent in audits won't net more recovered revenue. Generally the smaller the fry, the less you can recover from them.
And there's eventually a marginal tipping point where more money spent in audits won't net more recovered revenue. Generally the smaller the fry, the less you can recover from them.
I was much younger and not involved in the finances, but my family's business was audited 4(ish?) times in under a decade, which is essentially a "guilty under proven innocent" scenario where we had to prove we didn't owe the money ($50k+) that the IRS claimed we did or we had to pay it. Each audit was easily a hundred hours which we would always end up paying nothing or having the IRS owe us money in the end for.
Though, since I wasn't aware of our financials, for all I know my parents could have just been poorly keeping track of the numbers which led to these issues.
Though, since I wasn't aware of our financials, for all I know my parents could have just been poorly keeping track of the numbers which led to these issues.
Unless you were a conservative group a few years back.
'The controversy began in 2013 when an IRS official admitted the agency had been aggressively scrutinizing groups with names such as "Tea Party" and "Patriots."'
https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-...
'The controversy began in 2013 when an IRS official admitted the agency had been aggressively scrutinizing groups with names such as "Tea Party" and "Patriots."'
https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-...
> the agency had been aggressively scrutinizing groups with names such as "Tea Party" and "Patriots."
So the IRS was profiling pro-profiling groups based on their extensive association with anti-tax and anti-government political currents, expecting that people who don't think they should pay taxes may well be trying to avoid paying taxes less than honestly?
According to KOS at the time, literally the only group which got their 501(c)(4) application reviewed and rejected during that "scandal" was a progressive one. Meanwhile a bunch of "tea party" associates got their 501(c)(4) (or worse 501(c)(4)) despite historical and ongoing partisan political work.
Sounds like "conservatives v twitter", where conservatives cry foul every time they get on a blocklist, and twitter replies that they can't autoban white supremacists the way they did ISIS because it'd throw out half the republican conference and a significant fraction of their followers.
All in all, just more and more examples of Wilhoit's hypothesis
> Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.
[0] https://www.dailykos.com/stories/2013/5/19/1210132/-The-Only...
So the IRS was profiling pro-profiling groups based on their extensive association with anti-tax and anti-government political currents, expecting that people who don't think they should pay taxes may well be trying to avoid paying taxes less than honestly?
According to KOS at the time, literally the only group which got their 501(c)(4) application reviewed and rejected during that "scandal" was a progressive one. Meanwhile a bunch of "tea party" associates got their 501(c)(4) (or worse 501(c)(4)) despite historical and ongoing partisan political work.
Sounds like "conservatives v twitter", where conservatives cry foul every time they get on a blocklist, and twitter replies that they can't autoban white supremacists the way they did ISIS because it'd throw out half the republican conference and a significant fraction of their followers.
All in all, just more and more examples of Wilhoit's hypothesis
> Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.
[0] https://www.dailykos.com/stories/2013/5/19/1210132/-The-Only...
The article linked in the margin on that article says that they targeted progressive groups too, though.
>Generally they don't harass people unless something seems amiss and there is a large enough discrepancy to justify it.
There are lots of anecdotal reports to the contrary of what you just stated. Do you have anything more than anecdotal evidence to support your statement?
There are lots of anecdotal reports to the contrary of what you just stated. Do you have anything more than anecdotal evidence to support your statement?
I remember reading in Australia they specifically went after small businesses because as I said they had little ability to defend themselves.
> Two Australian Taxation Office whistleblowers have told a joint Four Corners and Fairfax investigation about a toxic internal culture where vulnerable small businesses and individuals are deliberately targeted to help meet revenue goals.
Perverse incentives.
https://www.abc.net.au/news/2018-04-09/whistleblower-exposes...
> Two Australian Taxation Office whistleblowers have told a joint Four Corners and Fairfax investigation about a toxic internal culture where vulnerable small businesses and individuals are deliberately targeted to help meet revenue goals.
Perverse incentives.
https://www.abc.net.au/news/2018-04-09/whistleblower-exposes...
Can't we structure incentives to avoid that problem? Eg. If you audit a large corporation and expose major fraud you get a large bonus. If you audit a small business and find only only a minor infraction, then your bonus pool is reduced.
Biggest ROI the government can get, invest in the fucking IRS. Something like a 1:15 or 1:20 return if I remember correctly.
The article is rather misleading. Here is the underlying article, which will be published this year but was actually received in September 2016: https://www.ntanet.org/wp-content/uploads/proceedings/2016/1... (follow the link in the article, which lists the receive date as September 30, 2016).
The article mentions the Tax Cuts and Jobs Act of 2017 (Trump's tax cuts). But the IRS budget cuts discussed in the article are actually from 2015, stemming from the kerfuffle over the IRS allegedly targeting conservative groups for increased scrutiny.
Separately, the article fails to address the nature of the additional revenue that could hypothetically have been collected. Pages 26-27 of the article address the study's finding that "the IRS collects a larger portion of proposed deficiencies when it has fewer resources." In the authors' view, that could be because "the IRS focuses on weaker taxpayer positions when its resources are limited." In other words, a larger enforcement budget leads the IRS to go after cases where the IRS is less certain it will win because the facts are more debatable. The authors do not assess the merits of those cases or whether it would be socially desirable to pursue them.
The article mentions the Tax Cuts and Jobs Act of 2017 (Trump's tax cuts). But the IRS budget cuts discussed in the article are actually from 2015, stemming from the kerfuffle over the IRS allegedly targeting conservative groups for increased scrutiny.
Separately, the article fails to address the nature of the additional revenue that could hypothetically have been collected. Pages 26-27 of the article address the study's finding that "the IRS collects a larger portion of proposed deficiencies when it has fewer resources." In the authors' view, that could be because "the IRS focuses on weaker taxpayer positions when its resources are limited." In other words, a larger enforcement budget leads the IRS to go after cases where the IRS is less certain it will win because the facts are more debatable. The authors do not assess the merits of those cases or whether it would be socially desirable to pursue them.
What does the last sentence mean exactly? "The IRS is fundamental in preventing businesses from engaging in transactions that aggressively reduce their tax liability."
It's not clear to me what is actually being said here because engaging in transactions that reduce tax liability is legal.
It's not clear to me what is actually being said here because engaging in transactions that reduce tax liability is legal.
There was an excellent podcast interview with Jesse Eisinger from ProPublica on this subject back in February. It goes into quite a bit of detail on the problem: https://www.nbcnews.com/think/opinion/can-we-tax-rich-jesse-...
Taxpayer service defunding is another problem:
https://www.treasury.gov/about/budget-performance/budget-in-...
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I'd like to see better treatment of those who fill in tax forms mistakenly wrongly, but still end up paying the right amount of tax.
We currently punish those people badly, which is wrong IMO
We currently punish those people badly, which is wrong IMO
You call it revenue, I call it inflation reduction.
Amazon doesn't pay taxes despite being worth $793 billion. How can I do this?
Amazon pays taxes, not sure how anybody still believes this piece of misinformation. You do realize it is Congress who creates the tax rules to begin with, so if anyone is at fault for the tax 'loop holes' these companies leverage, it's corrupt legislators.
"In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount jumped to $1.18 billion, accounting for local, state, and international taxes."
https://www.forbes.com/sites/stephaniedenning/2019/02/22/why...
"In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount jumped to $1.18 billion, accounting for local, state, and international taxes."
https://www.forbes.com/sites/stephaniedenning/2019/02/22/why...
> "In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount jumped to $1.18 billion, accounting for local, state, and international taxes."
Your quote glaringly leaves out federal....
Your quote glaringly leaves out federal....
It leaves it out because it isn't relevant. Amazon pays no federal tax (or close to none anyway) but it pays a shitload in other taxes.
Amazon reinvests revenue into the business which is discussed tons on this site. It also has the effect of eliminating certain types of taxes... and massively increasing taxes in other areas (like sales, use, B&O, payroll, etc...). Somehow I don't see discussion of how payroll tax at Amazon is exploding, though.
Amazon reinvests revenue into the business which is discussed tons on this site. It also has the effect of eliminating certain types of taxes... and massively increasing taxes in other areas (like sales, use, B&O, payroll, etc...). Somehow I don't see discussion of how payroll tax at Amazon is exploding, though.
The market cap of a company has nothing to do with how much tax they pay. Can we please quit spreading misinformation about Amazon?
Survive through years of losing money, then use the saved tax credits over the course of the first few profitable years.
One of the reasons (among many) is the expense treatment of stock based compensation was changed I believe as part of Sarbanes-Oxley. Companies are now required to expense stock given as compensation since it will have a dilutive effect on existing shareholders. Amazon issue billions of dollars in stock each year to its employees. Amazon also operates high cashflow but low margin businesses which make its net income very small. The company has emphasized free cash flow to investors for at least 20 years.
https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-...
https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-...
Aquire $793 billion and then do nothing with it. You will not be taxed at all.
There are a lot of companies which completely avoid paying any taxes through multiple sources of side stepping taxes. Immoral but not illegal.
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"budget cuts"
How much was made up from the tariffs? I suspect it was the roughly the lost revenue.
Zero. The lost revenue is still lost. It can only be made up by funding and staffing the IRS. The existence of new taxes does not negate this outcome.
Are those tariffs being used to fund the government? Or are they just going to the treasury? Genuine question.
Greed is winning in America. Any person or political party that is trying to reduce staffing for a tax collection agency is trying to get away with tax fraud or they are working for somebody who is. It is far past the time to recognise this.
Elizabeth Warren has set this up as the core paradigm in her campaign.
She posits that greed and corruption have overtaken the American government's purpose, especially in the last 25 years. Money, through lobbying and other forms of influence, now dictates who the government works for. It works for large corporations, pharmaceuticals and the oil industry (for example) rather than America's citizens and workers--specifically with access to healthcare, a living wage and a clean planet.
She posits that greed and corruption have overtaken the American government's purpose, especially in the last 25 years. Money, through lobbying and other forms of influence, now dictates who the government works for. It works for large corporations, pharmaceuticals and the oil industry (for example) rather than America's citizens and workers--specifically with access to healthcare, a living wage and a clean planet.
I read her plan to tax businesses with $100m in profit is easily sidestepped by spinning off child-subsidiaries of your businesses right around that $100m mark and report back "womp womp, no over $100m profits here".
I for one look forward to finding out which of the 595 Apple subsidiaries I'll be doing business with moving forward. I guess what I'm saying is that yes, it's possible that some companies will put in the legwork to restructure into a few subsidiaries, but this tax wouldn't have applied to them in the current regime anyways. The biggest ones, on the other hand, are unlikely to do the leg-work.
Either way the plan can be adjusted, as my sibling says, to include the revenue from subsidiaries so let's not be defeatist :)
Either way the plan can be adjusted, as my sibling says, to include the revenue from subsidiaries so let's not be defeatist :)
> I for one look forward to finding out which of the 595 Apple subsidiaries I'll be doing business with moving forward.
None of them. You'll be doing business with Apple CustomerCare or whatever it's called, and they're going to pay license fees for some logo, software or what have you to those 595 companies. It's how Amazon & Co funnel their money out of Europe without hardly paying any taxes, too.
None of them. You'll be doing business with Apple CustomerCare or whatever it's called, and they're going to pay license fees for some logo, software or what have you to those 595 companies. It's how Amazon & Co funnel their money out of Europe without hardly paying any taxes, too.
I think you have it backwards. The biggest companies that are already avoiding taxes can justify the lawyer costs to do it again.
Besides, they typically already have dozens of subsidiaries that are largely invisible to most employees and business partners. This is just adding more reasons to do so.
(Source: have worked on subsidiary taxonomy of large companies before, not for tax purposes, and from the outside there is often little information, at face value, why these subsidiaries exist. Even if you asked them, it wouldn't be hard to come up with legal reasons.)
Besides, they typically already have dozens of subsidiaries that are largely invisible to most employees and business partners. This is just adding more reasons to do so.
(Source: have worked on subsidiary taxonomy of large companies before, not for tax purposes, and from the outside there is often little information, at face value, why these subsidiaries exist. Even if you asked them, it wouldn't be hard to come up with legal reasons.)
You know how your bank is required to report any transaction to FinCEN in excess of $10,000 on what's called a CTR, or currency transaction report? Some enterprising criminals decided to break up their deposits into two $5000 transactions to avoid this. So naturally, they made that a crime called structuring [1]. I don't see why it wouldn't be illegal to break up your company into a thousand subsidiaries to evade taxes. My point is, this is solve-able, but we have to make the first move.
[1] https://en.wikipedia.org/wiki/Structuring
[1] https://en.wikipedia.org/wiki/Structuring
> I don't see why it wouldn't be illegal to break up your company into a thousand subsidiaries to evade taxes
It could be illegal, but this isn't the same as comparing a few timestamps. You'd need to dive into WHY the subsidiaries exist to determine that they weren't "legal" structures.
> Even if you asked them, it wouldn't be hard to come up with legal reasons
And as I said, they might be! There are probably many reasons to split up an organization that aren't CURRENTLY worth the effort. But this suddenly makes it worth the effort and they already have the justification.
The details of what these justifications are can be interesting, but are largely specific to each entity. Here is one general example: if you have a business presence in every state, boom, 50 subsidiaries already there. Come up with a few other bogus reasons and you can easily rack up entirely legal subsidiaries that on the surface, seem like intelligent organizational choices.
It could be illegal, but this isn't the same as comparing a few timestamps. You'd need to dive into WHY the subsidiaries exist to determine that they weren't "legal" structures.
> Even if you asked them, it wouldn't be hard to come up with legal reasons
And as I said, they might be! There are probably many reasons to split up an organization that aren't CURRENTLY worth the effort. But this suddenly makes it worth the effort and they already have the justification.
The details of what these justifications are can be interesting, but are largely specific to each entity. Here is one general example: if you have a business presence in every state, boom, 50 subsidiaries already there. Come up with a few other bogus reasons and you can easily rack up entirely legal subsidiaries that on the surface, seem like intelligent organizational choices.
The front end company would be the same for everyone. They money would get funneled to the 4847373 shell companies on the back end. Then through Bermuda->Netherlands->Ireland a bit, same as usual. If it saves the company $.002, they will do it no matter how large and excessive their profits already are.
And that's easily countered by saying "total profits, including subsidiaries."
Even she wouldn't be stupid enough to try that.
Indeed, we should all cower in fear to avoid offending the lobbyists.
And that's easily countered by having franchises and not subsidiaries
And that's easily countered by saying, "total profits, including subsidiaries and franchises."
See, we can play this game all day.
The fundamental point is this: just because people might break a law (directly or in spirit) is not an argument against having said law.
See, we can play this game all day.
The fundamental point is this: just because people might break a law (directly or in spirit) is not an argument against having said law.
Public corporations in the US have to provided consolidated financial statements including all majority-owned subsidiaries.
One would think there'd be a way to combat that ala structuring, like they do with reporting cash transfers of $10k and over.
In other words, if you try to do multiple $9999.00 transfers in an attempt to "fly under the radar" - you will be caught out.
In other words, if you try to do multiple $9999.00 transfers in an attempt to "fly under the radar" - you will be caught out.
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Always strange to me they tax corporate profit instead of corporate revenue. "We spent all our money so we don't pay any taxes."
Because there are a number of thin-profit margin industries that wouldn't exist if you taxed revenue. You'd see more dollar marts and less grocery stores, for example.
More realistically, the price of everything in grocery stores would go up by the amount of the tax, as would the price of everything everywhere else. It's not clear that this would change much for most grocery stores: their own profit margins would remain the same. It would make things harder for the poorest customers, but many of them are already stuck with less-than-ideal higher-margin options for groceries.
No, it would not. Consumers are price sensitive for food, and profit margins are not the same across different types of substitute goods.
It's precisely how Dollar Trees and Dollar Generals have been pushing out grocery stores in the US right now, by not offering fresh produce, meat, or other traditional loss items. Planet Money even has a podcast on it: https://www.npr.org/sections/money/2019/04/26/717665452/epis...
Imagine the grocery store in your area carrying only frozen and canned meat and produce, because that is what it would push.
It's precisely how Dollar Trees and Dollar Generals have been pushing out grocery stores in the US right now, by not offering fresh produce, meat, or other traditional loss items. Planet Money even has a podcast on it: https://www.npr.org/sections/money/2019/04/26/717665452/epis...
Imagine the grocery store in your area carrying only frozen and canned meat and produce, because that is what it would push.
How would you propose to do this fairly in very high revenue but very high expense businesses like grocery stores?
Not OP, but: it becomes a cost of doing business. If you know that 10% of every dollar of revenue goes to the tax collector, you set prices and budgets accordingly. Grocery stores prices all jump by 10%, and things carry on as normal otherwise.
I'm not saying that there would be no effect, but it's not a complicated one.
I'm not saying that there would be no effect, but it's not a complicated one.
Uh...
>> and things carry on as normal otherwise
I don't think consumers will agree with you.
>> and things carry on as normal otherwise
I don't think consumers will agree with you.
You asked the question as if the answer were complicated. It's not complicated: Prices would rise across the board. It would suck, and suck most for the most financially vulnerable, but the answer is still the answer.
VAT is corporate revenue tax, but between businesses you can claim it back in the EU.
No, VAT is a tax paid by consumers.
The tax is levied on the businesses who collect it on behalf of the government, it is a direct function of the amount of the invoice. So if you charge your customer less for your goods or services the tax paid goes down. VAT is short for 'Value Added Tax', in other words that which a business produces. But if your business provides no value then magically you still have to charge VAT, so clearly there is a relationship with turnover.
By your logic you could reason that eventually all tax is paid by consumers because they pay the companies for the products and that includes corporate income tax and so on but whenever sales tax is low you will find that companies are more than happy to absorb the surplus as profits.
VAT is the closest governments get to taxing businesses directly on their revenue streams.
By your logic you could reason that eventually all tax is paid by consumers because they pay the companies for the products and that includes corporate income tax and so on but whenever sales tax is low you will find that companies are more than happy to absorb the surplus as profits.
VAT is the closest governments get to taxing businesses directly on their revenue streams.
Businesses collect it, but it's not levied on businesses.
How do you explain the fact that businesses can reclaim VAT they've paid, but consumers can't?
The only explanation is that VAT is a tax paid by consumers, not by businesses.
How do you explain the fact that businesses can reclaim VAT they've paid, but consumers can't?
The only explanation is that VAT is a tax paid by consumers, not by businesses.
Because if they could not reclaim it you would get VAT on VAT on VAT for every step in the value chain. The idea is to only impose it on the last step when the total value is known.
If businesses started creating child companies (for any reason) it would result in substantial job creation.. so this sounds like a win-win to me.
Presumably you’ve never heard of shell corporations. Child companies do not imply jobs.
Can you elaborate? It seems to me that if a single corporation just split their operations into multiple separate child corps, it wouldn't necessarily result in job creation. (Duplicated positions could just be contracted to a single company in the group, for instance.)
I don't see any guarantee here that splitting a business will create jobs.
1) Business A has 1B in profits with X number of employees, gets taxed.
2) Business B splits into 10 businesses with 100M in profits and X/10 number of employees per business unit, and doesn't get taxes.
1) Business A has 1B in profits with X number of employees, gets taxed.
2) Business B splits into 10 businesses with 100M in profits and X/10 number of employees per business unit, and doesn't get taxes.
Sounds like Business B is going to need 9 new buildings. Are they built already?
Maybe we should require that everyone break at least one window on their house once a year. This would create a lot of great window repair jobs.
Substantial job creation of ceo and accountant positions, that is. Shell companies do not really employ people.
This is the broken window fallacy. If our goal is to increase employment rates then we should support policies that do so where human productivity is most efficient.
I think you mis-understand just how easy it is to create a corporation with no employees...
Jimmy Carter told people the truth. (And he got promptly voted out, and so subsequent politicians have hidden the ball with the truth.) With respect to the environment, for example, he told people to put on a sweater. Because the truth is that almost all GHGs result from consumer-facing industries where consumers are the primary beneficiaries of pollution being artificially cheap.
Concrete example, since you mention the oil industry: Exxon makes about 22.5 cents when you buy a gallon of gas at $3.00. Meanwhile, an analysis has found that gas should be taxed an extra $4.36-7.62 per gallon to fully reflect the environmental and other harms of driving: https://www.citylab.com/transportation/2015/01/the-real-reas.... So when the government doesn't impose that tax, who benefits? Exxon benefits a little because it sells more gas and collects the $0.22 of profit on each gallon. But the consumer saves $4.36-7.62 by avoiding those taxes. Exxon's profits, about $20 billion last year, are a rounding error compared to the trillion+ dollars that consumers would pay in extra taxes to address the negative externalities of driving.
Transportation, heating, agriculture, consumer products--these are the industries responsible for the fast majority of GHGs. And these are also highly competitive, commoditized industries where most cost savings get passed onto consumers. (Facebook makes more profit than Exxon, even though Exxon's revenues are more than five times as much.) That means the savings of making pollution cheap also accrues mostly to consumers. The industries where lack of competition allows corporations to command huge margins--banking, tech, advertising, etc.--are not the ones that are primarily responsible for GHGs.
"Access to healthcare" is similar. Why do people in Sweden have universal healthcare while people in America do not? Is it corporations? No, Sweden's corporate tax rate is quite a bit lower than ours. (It's similar to the current federal rate, but in the U.S. most corporations also pay a state rate. In Delaware, for example, it's an additional 8.7%.) So who benefits by Americans not having universal healthcare? It's middle-class Americans who don't pay the high middle-class taxes that middle-class Europeans pay.
Warren's focus on corporations is a total red herring, intended to make people falsely believe that you can have universal healthcare and a cleaner planet without decreasing your material quality of life. As Jimmy Carter told us, that's not in the cards. How do we know that? Because we can look at other countries who do better on these measures, and see what they do! France has much lower GHG emissions than the U.S. and universal healthcare. How do they do it? They live in houses that are half the size; they drive tiny fuel efficient cars, and have fewer of them per household; they deal with the challenges of nuclear power; their payroll taxes on the middle class are double ours; they take public transmit more often and therefore have significantly longer commutes. But their corporate taxes are even lower than ours!
Concrete example, since you mention the oil industry: Exxon makes about 22.5 cents when you buy a gallon of gas at $3.00. Meanwhile, an analysis has found that gas should be taxed an extra $4.36-7.62 per gallon to fully reflect the environmental and other harms of driving: https://www.citylab.com/transportation/2015/01/the-real-reas.... So when the government doesn't impose that tax, who benefits? Exxon benefits a little because it sells more gas and collects the $0.22 of profit on each gallon. But the consumer saves $4.36-7.62 by avoiding those taxes. Exxon's profits, about $20 billion last year, are a rounding error compared to the trillion+ dollars that consumers would pay in extra taxes to address the negative externalities of driving.
Transportation, heating, agriculture, consumer products--these are the industries responsible for the fast majority of GHGs. And these are also highly competitive, commoditized industries where most cost savings get passed onto consumers. (Facebook makes more profit than Exxon, even though Exxon's revenues are more than five times as much.) That means the savings of making pollution cheap also accrues mostly to consumers. The industries where lack of competition allows corporations to command huge margins--banking, tech, advertising, etc.--are not the ones that are primarily responsible for GHGs.
"Access to healthcare" is similar. Why do people in Sweden have universal healthcare while people in America do not? Is it corporations? No, Sweden's corporate tax rate is quite a bit lower than ours. (It's similar to the current federal rate, but in the U.S. most corporations also pay a state rate. In Delaware, for example, it's an additional 8.7%.) So who benefits by Americans not having universal healthcare? It's middle-class Americans who don't pay the high middle-class taxes that middle-class Europeans pay.
Warren's focus on corporations is a total red herring, intended to make people falsely believe that you can have universal healthcare and a cleaner planet without decreasing your material quality of life. As Jimmy Carter told us, that's not in the cards. How do we know that? Because we can look at other countries who do better on these measures, and see what they do! France has much lower GHG emissions than the U.S. and universal healthcare. How do they do it? They live in houses that are half the size; they drive tiny fuel efficient cars, and have fewer of them per household; they deal with the challenges of nuclear power; their payroll taxes on the middle class are double ours; they take public transmit more often and therefore have significantly longer commutes. But their corporate taxes are even lower than ours!
I really like this and agree with virtually all of it. To add, however, there's no absolute need to raise taxes or expenses depending on what Americans feel they prioritize. Countries can also have lower personal income taxes in addition to corporate taxes by reducing other expenses, for example by choosing a partially privatized universal health insurance system instead of single-payer health insurance, or a smaller military that might be slightly less up-to-date.
> "Access to healthcare" is similar. Why do people in Sweden have universal healthcare while people in America do not? Is it corporations? No, Sweden's corporate tax rate is quite a bit lower than ours. (It's similar to the current federal rate, but in the U.S. most corporations also pay a state rate. In Delaware, for example, it's an additional 8.7%.) So who benefits by Americans not having universal healthcare? It's middle-class Americans who don't pay the high middle-class taxes that middle-class Europeans pay.
I believe that the argument here is that insurance companies are the unnecessary middleman gumming up American healthcare. Making $21b in 2018, insurance companies exist to make as much money as possible--by denying coverage when they can and paying out as little as possible. They complicate the process by requiring both the providers and consumers to get tangled up in paperwork, also slowing the process (and quality) down. Her argument there is that we could provide a better experience for all and invest that $21b of profit being leeched out back into actual coverage by going to Medicare for All.
> intended to make people falsely believe that you can have universal healthcare and a cleaner planet without decreasing your material quality of life
I don't think that's what she's intending. Her plan for cleaning up the planet involves scientific investment in clean/green industries and becoming a leader in providing those services commercially throughout the world. The US is only 20% of the problem, which is why we need an industry to really push this throughout the rest of the world--something that other countries are currently leading in.
In case your curious about Warren's approach here: https://medium.com/@teamwarren/my-green-manufacturing-plan-f...
I believe that the argument here is that insurance companies are the unnecessary middleman gumming up American healthcare. Making $21b in 2018, insurance companies exist to make as much money as possible--by denying coverage when they can and paying out as little as possible. They complicate the process by requiring both the providers and consumers to get tangled up in paperwork, also slowing the process (and quality) down. Her argument there is that we could provide a better experience for all and invest that $21b of profit being leeched out back into actual coverage by going to Medicare for All.
> intended to make people falsely believe that you can have universal healthcare and a cleaner planet without decreasing your material quality of life
I don't think that's what she's intending. Her plan for cleaning up the planet involves scientific investment in clean/green industries and becoming a leader in providing those services commercially throughout the world. The US is only 20% of the problem, which is why we need an industry to really push this throughout the rest of the world--something that other countries are currently leading in.
In case your curious about Warren's approach here: https://medium.com/@teamwarren/my-green-manufacturing-plan-f...
People are fond of blaming health insurance companies for our (demonstrable) health economics woes, but the evidence suggests that they --- in fact, the payer and benefits management side of the equation in general! --- aren't nearly as big a contributor to costs as the provider side. We pay more than Europeans do for health care administration, but we get walloped on costs for outpatient and hospital procedures.
It doesn't help that there are lots of circulating analyses about insurers and management overhead that are probably just false; for instance, a popular chart depicting a 4x increase in admin costs starting in the 1990s was debunked by Kevin Drum and others, who observed that it was probably accounting for people like MRI operators on the payer rather than the provider side.
Two things pundits say that are red flags for me that they haven't really studied health economics:
1. Blaming pharmaceutical companies and prescription drug costs, which are one of the smaller overall drivers of health care expenses in the US.
2. Blaming health insurance companies for taking an outsized and material chunk of health spending.
You could $0 out pharma and insurance companies, indenturing everyone who worked for them, and we might not be meaningfully better off. We'd be paying less, but not, like, a huge amount less; people who can't afford silver-class health insurance for a family of four today still couldn't afford it in that alternate reality.
It doesn't help that there are lots of circulating analyses about insurers and management overhead that are probably just false; for instance, a popular chart depicting a 4x increase in admin costs starting in the 1990s was debunked by Kevin Drum and others, who observed that it was probably accounting for people like MRI operators on the payer rather than the provider side.
Two things pundits say that are red flags for me that they haven't really studied health economics:
1. Blaming pharmaceutical companies and prescription drug costs, which are one of the smaller overall drivers of health care expenses in the US.
2. Blaming health insurance companies for taking an outsized and material chunk of health spending.
You could $0 out pharma and insurance companies, indenturing everyone who worked for them, and we might not be meaningfully better off. We'd be paying less, but not, like, a huge amount less; people who can't afford silver-class health insurance for a family of four today still couldn't afford it in that alternate reality.
“Anyone opposing more police officers and equipment is looking to break the law.”
Just as I don’t want a bored cop on every street corner, I also don’t want the IRS to be staffed to maximize revenue.
It’s a balance.
Just as I don’t want a bored cop on every street corner, I also don’t want the IRS to be staffed to maximize revenue.
It’s a balance.
Yeah, the people "getting away with it" in this case aren't those paying withholding or even mostly individuals... they're corporations bilking the government and every other taxpayer. It's more like cutting back on the FBI when there's an outbreak of organized crime...
The problem is Congress, not the IRS.
Most corporations pay the amount of tax they owe under the law, but the law is written to allow tax evasion. The IRS can’t do anything about this.
The fix is to close several well known loopholes.
Most corporations pay the amount of tax they owe under the law, but the law is written to allow tax evasion. The IRS can’t do anything about this.
The fix is to close several well known loopholes.
The IRS can't go after people using legal loopholes, but that has little to do with what's being discussed here.
The enforcement arm, which goes after people who aren't using loopholes, but committing actual tax fraud (and stuff like non-filers), has a ROI of something like $5 for every $1 spent. Cutting its budget is like burning piles of taxpayer dollars in a barrel.
The enforcement arm, which goes after people who aren't using loopholes, but committing actual tax fraud (and stuff like non-filers), has a ROI of something like $5 for every $1 spent. Cutting its budget is like burning piles of taxpayer dollars in a barrel.
Honestly I'd just like to see a minimum VAT lifetime tax, when a product reaches the USA it should be charged on value equal to a sane minimum VAT (as value added inside the country is charged) less VAT applied on a per-segment basis in supplier countries. If Bermuda has a 0% VAT and apple is adding 90% of sale value in that country by affixing a sticker... then the US should collect the money Bermuda is leaving on the table - it may not directly benefit US tax payers (since those countries with low VATs may then choose to raise them) but that should help even out the benefit of shipping a bunch of commodities to a random island to slap a sticker on - it'll encourage less globalized supply networks by removing some perverse incentives to ship the item off to every corner of the globe and... we might just help the environment while doing it.
"Most corporations pay the amount of tax they owe under the law" <- That's what the IRS is there to ensure. Legal tax evasion is not a problem in discussion here.
And yet, we've been in a state for decades where a $1 increase in IRS budget results in more than $1 in income, yet their budget has continued to be cut.
I'm all for closing down those well-known loopholes, but that doesn't mean there won't be loopholes, or just people/companies not paying what they owe.
At this stage, those of us that ARE paying our taxes are the ones being taken advantage of.
I'm all for closing down those well-known loopholes, but that doesn't mean there won't be loopholes, or just people/companies not paying what they owe.
At this stage, those of us that ARE paying our taxes are the ones being taken advantage of.
> And yet, we've been in a state for decades where a $1 increase in IRS budget results in more than $1 in income, yet their budget has continued to be cut.
That's because the point where $1 in IRS spending brings in $1 in government revenue is well past the optimal level.
First, it's not just government spending that matters. If you have the IRS spend $.60 and the taxpayer spend $.60 to recover $1, you're spending a total of $1.20 to get $1, not $.60. (And the burden doesn't inherently fall on people doing something wrong; it costs people money to get audited even when the audit reveals no malfeasance.)
Then you have to consider that IRS spending is unproductive. If the IRS spends $.50 and the taxpayer spends $.50 in order to recover $1, you haven't generated $1 for government programs, it's only $.50, but it costs the taxpayer $1. The collection efficiency of doing that is astoundingly bad -- in normal cases the collection overhead is <1%.
Meanwhile the amount of actual tax evasion in the US is quite low, so more audits don't result in a lot more compliance. (Tax avoidance is something else entirely, but IRS spending does nothing there.)
That's because the point where $1 in IRS spending brings in $1 in government revenue is well past the optimal level.
First, it's not just government spending that matters. If you have the IRS spend $.60 and the taxpayer spend $.60 to recover $1, you're spending a total of $1.20 to get $1, not $.60. (And the burden doesn't inherently fall on people doing something wrong; it costs people money to get audited even when the audit reveals no malfeasance.)
Then you have to consider that IRS spending is unproductive. If the IRS spends $.50 and the taxpayer spends $.50 in order to recover $1, you haven't generated $1 for government programs, it's only $.50, but it costs the taxpayer $1. The collection efficiency of doing that is astoundingly bad -- in normal cases the collection overhead is <1%.
Meanwhile the amount of actual tax evasion in the US is quite low, so more audits don't result in a lot more compliance. (Tax avoidance is something else entirely, but IRS spending does nothing there.)
I'd be more receptive to this argument if the IRS was giving normal taxpayers some sort of easy file card. Since when is the IRS supposed to care what taxpayers pay to comply?
So we shouldn't care about overhead costs imposed on taxpayers because we don't care about overhead costs imposed on taxpayers?
If you're not aware, the reason we don't have "some sort of easy file card" isn't any choice by the IRS, it's a choice by Congress at the behest of the tax preparation industry.
If you're not aware, the reason we don't have "some sort of easy file card" isn't any choice by the IRS, it's a choice by Congress at the behest of the tax preparation industry.
Yes, and Congress is also the one who makes decisions about funding audits, no?
I still don't understand what your point is. The reason they don't want easy file cards is that corruption is most common when there is a centralized benefit and decentralized cost, because then the kleptocrats will spend more resources to make things that way than the average person will to prevent it. For audits it's the opposite, because for most people there is negligible benefit but it's a major cost to innocent people who are subject to an audit, so you get real opposition to them. That's the politics of it, but what does that have anything to do with what the best policy is?
Instead of contrived, low-ball numbers, you could use the real ones:
> Congress appropriated $11.4 billion for the IRS in FY 2018 and IRS enforcement programs collected $59.4 billion, for a return on investment (ROI) of about $5.2 for every $1 invested in the IRS.
https://home.treasury.gov/system/files/266/02.-IRS-FY-2020-C...
> Congress appropriated $11.4 billion for the IRS in FY 2018 and IRS enforcement programs collected $59.4 billion, for a return on investment (ROI) of about $5.2 for every $1 invested in the IRS.
https://home.treasury.gov/system/files/266/02.-IRS-FY-2020-C...
What contrived numbers? The argument was that the government should increase IRS resources until they're spending $1 for every $1 they recover. I provided several reasons why that would be inefficient, independent of what the current numbers are.
The 'costs' to the taxpayer are in taxes they already owe and should have paid though. Perhaps the increased enforcement will encourage fewer people and corporations to under-pay their taxes, resulting in greater efficiency than that shown by the direct collections of unpaid taxes.
More generally, it seems strange to me to consider having to pay taxes owed as a cost that should be avoided. IE if the police had to spend money to catch a bank robber, we wouldn't weigh the cost to the robber of having to return the stolen money. (Which isn't to say that under-paying taxes is morally equivalent to bank robbery, but I think the analogy holds.)
More generally, it seems strange to me to consider having to pay taxes owed as a cost that should be avoided. IE if the police had to spend money to catch a bank robber, we wouldn't weigh the cost to the robber of having to return the stolen money. (Which isn't to say that under-paying taxes is morally equivalent to bank robbery, but I think the analogy holds.)
> The 'costs' to the taxpayer are in taxes they already owe and should have paid though.
No, they're what the taxpayer has to spend on accountants and lawyers when they get audited even though they haven't done anything wrong. Or have done something wrong, but by mistake, and then the government consumes $1 in total resources to correct a $.90 mistake.
> Perhaps the increased enforcement will encourage fewer people and corporations to under-pay their taxes, resulting in greater efficiency than that shown by the direct collections of unpaid taxes.
Except that major tax fraud is a rare occurrence so there is no low hanging fruit there, and most of the actual violations are mistakes as a result of tax complexity that can't be deterred because the people don't know they're doing anything wrong. You could also end up doing the opposite -- causing even more fruitless compliance costs as taxpayers preemptively spend more on accountants and lawyers but result in no additional government revenues. Or less government revenues, if the accountants and lawyers find deductions the taxpayer had been overlooking previously (e.g. because the deduction is less than the additional accounting cost required to find it, but now you're pushed to spend that money anyway).
No, they're what the taxpayer has to spend on accountants and lawyers when they get audited even though they haven't done anything wrong. Or have done something wrong, but by mistake, and then the government consumes $1 in total resources to correct a $.90 mistake.
> Perhaps the increased enforcement will encourage fewer people and corporations to under-pay their taxes, resulting in greater efficiency than that shown by the direct collections of unpaid taxes.
Except that major tax fraud is a rare occurrence so there is no low hanging fruit there, and most of the actual violations are mistakes as a result of tax complexity that can't be deterred because the people don't know they're doing anything wrong. You could also end up doing the opposite -- causing even more fruitless compliance costs as taxpayers preemptively spend more on accountants and lawyers but result in no additional government revenues. Or less government revenues, if the accountants and lawyers find deductions the taxpayer had been overlooking previously (e.g. because the deduction is less than the additional accounting cost required to find it, but now you're pushed to spend that money anyway).
Your first point is well taken. I hadn't considered that aspect in writing my response, but I totally agree. I run a small business myself and certainly would not relish an audit, both due to direct but also productivity costs.
I'm less sure about the second point, specifically that there's no low hanging fruit there. ISTM if that were true, then investment in enforcement would not show such a large immediate profit. Doesn't that by definition demonstrate that there is low-hanging fruit? If we were close to the 1:1 point then I could see the argument, especially in conjunction with your first point, but we're not.
I do generally agree with the point that the tax system (and especially filing) should be simplified though, as long as the simplification isn't in fact a regressive tax cut in disguise.
I'm less sure about the second point, specifically that there's no low hanging fruit there. ISTM if that were true, then investment in enforcement would not show such a large immediate profit. Doesn't that by definition demonstrate that there is low-hanging fruit? If we were close to the 1:1 point then I could see the argument, especially in conjunction with your first point, but we're not.
I do generally agree with the point that the tax system (and especially filing) should be simplified though, as long as the simplification isn't in fact a regressive tax cut in disguise.
> ISTM if that were true, then investment in enforcement would not show such a large immediate profit. Doesn't that by definition demonstrate that there is low-hanging fruit?
You're talking about two different things. One is what you can get directly by auditing people, the other is the deterrent effect from doing more audits. The second has nothing to do with how profitable the first is. It may have no effect at all, if ordinary taxpayers aren't even aware of how many audits are happening. It could easily have a negative effect for people who are paying attention to it, because they respond by spending more on accountants, which increases overhead (negative externality) and is at least as likely to uncover deductions they're not taking but could than deductions they are taking but shouldn't (no increase and potential decrease in government revenue).
As for the first, consider how the "profit making" nature of audits actually works. The IRS spends thousands of dollars auditing many people who haven't done anything wrong, and causes the same people to have to spend thousands of dollars themselves to deal with the audit -- or more, if the principals of a business get bogged down dealing with it, it can easily cost the business more than it costs the IRS. That's all pure overhead and leads to nothing.
Then one of the audits out of many actually finds a mistake, and it's a business with a few million in annual revenue that has unintentionally underpaid its taxes by 2%, but has been making the same mistake for years. That nets the IRS something like half a million dollars, having spent 20% of that to find it, and caused the audited businesses to spend a further 50% of that on accountants and lawyers. So you create $3.5M in overhead to collect $5M, costing you $1M and the taxpayer $2.5M, but that cost is a deduction to the business, which costs you a further $.875M. So you've created $3.5M in overhead to collect $3.125M for actual programs. That is an extremely bad level of efficiency -- more money is going to overhead than programs. But they call this a 5:1 ratio of profit to expense -- which is still pretty bad (20% overhead) -- because they don't count the cost to the business nor the cost to the government when the business takes that cost as a deduction.
Meanwhile all of the businesses that were audited, even the ones that weren't doing anything wrong, had to go out and hire those accountants, who probably found a bunch of deductions some of them weren't taking even though they could. So the next thing that happens is that the treasury takes in a million a year less every year going forward because they induced a bunch of businesses to spend more on tax accounting. That isn't an inefficiency, they're entitled to it under the law, but it's something to keep in mind for the people who only care about government revenue and not the overhead created on the business side.
You're talking about two different things. One is what you can get directly by auditing people, the other is the deterrent effect from doing more audits. The second has nothing to do with how profitable the first is. It may have no effect at all, if ordinary taxpayers aren't even aware of how many audits are happening. It could easily have a negative effect for people who are paying attention to it, because they respond by spending more on accountants, which increases overhead (negative externality) and is at least as likely to uncover deductions they're not taking but could than deductions they are taking but shouldn't (no increase and potential decrease in government revenue).
As for the first, consider how the "profit making" nature of audits actually works. The IRS spends thousands of dollars auditing many people who haven't done anything wrong, and causes the same people to have to spend thousands of dollars themselves to deal with the audit -- or more, if the principals of a business get bogged down dealing with it, it can easily cost the business more than it costs the IRS. That's all pure overhead and leads to nothing.
Then one of the audits out of many actually finds a mistake, and it's a business with a few million in annual revenue that has unintentionally underpaid its taxes by 2%, but has been making the same mistake for years. That nets the IRS something like half a million dollars, having spent 20% of that to find it, and caused the audited businesses to spend a further 50% of that on accountants and lawyers. So you create $3.5M in overhead to collect $5M, costing you $1M and the taxpayer $2.5M, but that cost is a deduction to the business, which costs you a further $.875M. So you've created $3.5M in overhead to collect $3.125M for actual programs. That is an extremely bad level of efficiency -- more money is going to overhead than programs. But they call this a 5:1 ratio of profit to expense -- which is still pretty bad (20% overhead) -- because they don't count the cost to the business nor the cost to the government when the business takes that cost as a deduction.
Meanwhile all of the businesses that were audited, even the ones that weren't doing anything wrong, had to go out and hire those accountants, who probably found a bunch of deductions some of them weren't taking even though they could. So the next thing that happens is that the treasury takes in a million a year less every year going forward because they induced a bunch of businesses to spend more on tax accounting. That isn't an inefficiency, they're entitled to it under the law, but it's something to keep in mind for the people who only care about government revenue and not the overhead created on the business side.
Exactly. It seems obvious that you would want at the very least to fund the agency to the point where you no longer see a marginal profit for each dollar spent. At that point you're still very far from maximizing taxes collected.
Should we do this for other types of law enforcement?
Local police pay for themselves in traffic and parking tickets, among other fees. So maybe we should keep adding cops until we've maximized fine revenue.
Or maybe marginal profit isn't a good way to measure law enforcement...
Local police pay for themselves in traffic and parking tickets, among other fees. So maybe we should keep adding cops until we've maximized fine revenue.
Or maybe marginal profit isn't a good way to measure law enforcement...
I certainly agree with you that it isn't a good model for local law enforcement. The main reason being that there are many areas where we expect police to exercise some discretion. Speed limits being the main one that comes to mind—for whatever reason, speed limits are set at a level that the majority of the population do not follow to the letter, and we consider it unreasonable for police to issue tickets for driving 1mph over the limit. However obviously doing so would be legal and profitable. Also, since nearly everyone breaks this law to some extent, there is a great deal of room for discrimination in enforcement. (Of course one could argue that the proper solution would be to set realistic speed limits that most people will follow, and I would agree with that, but that's not the situation we have now.)
The question is, is this analogous to paying taxes? Perhaps to some extent—there are most likely enough uncollected taxes that discrimination in enforcement could be an issue, for instance. Although I expect that at the current level of enforcement, more investment would reduce that problem rather than exacerbate it. But more generally, do we see 'minor' tax cheating as being analogous to driving 1mph over the speed limit? I'm not so sure. Certainly the consequences should be proportional to the crime: small and accidental underpayments should simply result in having to pay the amount owed. But it seems to me that people (and corporations) should be required to pay all taxes legally owed, so over-enforcement in this area shouldn't be a concern until it got to the level where money was being spent that could be better used elsewhere. (Which obviously isn't the case when you're seeing a marginal profit on enforcement.)
I suppose the logical counter-argument would be that the money could be better spent by the people earning it in the first place—IE that taxes should be lower—and indeed I do expect this is the belief of most people who argue against enforcement.
The question is, is this analogous to paying taxes? Perhaps to some extent—there are most likely enough uncollected taxes that discrimination in enforcement could be an issue, for instance. Although I expect that at the current level of enforcement, more investment would reduce that problem rather than exacerbate it. But more generally, do we see 'minor' tax cheating as being analogous to driving 1mph over the speed limit? I'm not so sure. Certainly the consequences should be proportional to the crime: small and accidental underpayments should simply result in having to pay the amount owed. But it seems to me that people (and corporations) should be required to pay all taxes legally owed, so over-enforcement in this area shouldn't be a concern until it got to the level where money was being spent that could be better used elsewhere. (Which obviously isn't the case when you're seeing a marginal profit on enforcement.)
I suppose the logical counter-argument would be that the money could be better spent by the people earning it in the first place—IE that taxes should be lower—and indeed I do expect this is the belief of most people who argue against enforcement.
Maybe offtopic, but why should we expect police to exercise discretion? That's how you end up with disproportionate crime being prosecuted in neighborhoods of color.
I think laws should be simple and enforced. For example, raise speed limits so they are high enough that nobody has a reason to routinely break them, then draconian enforcement. Old white Grandpa weaving around should get the same penalty as young Black guy weaving through traffic.
I think laws should be simple and enforced. For example, raise speed limits so they are high enough that nobody has a reason to routinely break them, then draconian enforcement. Old white Grandpa weaving around should get the same penalty as young Black guy weaving through traffic.
I don't disagree, but until and unless all laws (not just speed limits) are written with sensible exceptions and thresholds included, police and prosecutorial discretion are the only avenues we have to create a semblance of reasonableness.
>but the law is written to allow tax evasion.
Avoidance. There's no natural tax system so suggesting the law is setup to allow tax evasion is illogical.
Avoidance. There's no natural tax system so suggesting the law is setup to allow tax evasion is illogical.
A problem with loopholes is Congress.
A problem with fraud/non-file/etc. is not enough enforcement, i.e. the IRS budget.
These are separate issues.
A problem with fraud/non-file/etc. is not enough enforcement, i.e. the IRS budget.
These are separate issues.
Minor nit:
> law is written to allow tax evasion.
The law is not written to allow tax evasion. Tax evasion is knowingly violating the law.
The word you're looking for is tax avoidance. Everyone does some amount of tax avoidance whether it be taking deductions or carefully parsing the code to work through it. That's avoidance and it's 100% legal as you mentioned.
Second, corporate taxes are dumb. They're effectively passed through the corporation to the consumer or service user or worse just passed onto labor by reducing wages and hiring to compensate.
> law is written to allow tax evasion.
The law is not written to allow tax evasion. Tax evasion is knowingly violating the law.
The word you're looking for is tax avoidance. Everyone does some amount of tax avoidance whether it be taking deductions or carefully parsing the code to work through it. That's avoidance and it's 100% legal as you mentioned.
Second, corporate taxes are dumb. They're effectively passed through the corporation to the consumer or service user or worse just passed onto labor by reducing wages and hiring to compensate.
> the law is written to allow tax evasion
That is not tax evasion. If the law is used to avoid paying a tax it is legal. Tax evasion is when you don't pay taxes that you should have paid and somebody often goes to jail and/or pays penalties for it.
That is not tax evasion. If the law is used to avoid paying a tax it is legal. Tax evasion is when you don't pay taxes that you should have paid and somebody often goes to jail and/or pays penalties for it.
I feel like I'm not understanding your comment.
Is it that you don't want IRS employees sitting around doing nothing?
Because if this resulted in losing $34B in revenue, it doesn't like they were sitting around doing nothing.
Is it that you don't want IRS employees sitting around doing nothing?
Because if this resulted in losing $34B in revenue, it doesn't like they were sitting around doing nothing.
At some point, you'd start spending a lot more money to recover less money. You'd probably be wise to back off at that point... "diminishing returns".
We're not there, though.
We're not there, though.
> We're not there, though.
I suspect that's true, but you don't actually know that from this dataset. Some portion of the cost is born by the auditee to respond/defend against the audit and passed on to shareholders/employees/customers.
If the response costs are great with respect to the IRS's audit costs, the government could quite profitably add auditors, but have a negative overall impact on end citizens.
I suspect that's true, but you don't actually know that from this dataset. Some portion of the cost is born by the auditee to respond/defend against the audit and passed on to shareholders/employees/customers.
If the response costs are great with respect to the IRS's audit costs, the government could quite profitably add auditors, but have a negative overall impact on end citizens.
Even if the IRS "profits" from spending $1B to collect $2B, that's a 50% processing fee on that incoming money, halving the efficiency of that marginal dollar. If that's still worth collecting, it's better to raise taxes. Really the appropriate stopping point in IRS funding has little to do with whether one of these numbers is close to another.
It's also a deterrent to people trying to evade taxes.
It's not fair to raise taxes on other people who are honest and pay because it's a pain to collect from some people.
I realize that's simplifying things some, and not all people who don't pay do so because they're sneaky or dishonest or whatever, but I think the broader point stands.
It's not fair to raise taxes on other people who are honest and pay because it's a pain to collect from some people.
I realize that's simplifying things some, and not all people who don't pay do so because they're sneaky or dishonest or whatever, but I think the broader point stands.
So how do you know we're not at the point of diminishing returns?
The IRS sees maximum revenue at the point where everyone is paying their taxes as specified in the IRC. Anything short of that, people are evading taxes, intentionally or unintentionally. You are in fact arguing that the state shouldn't necessarily collect all it's owed. I doubt that attitude would get you far in the Accounts Receivable department at any business.
It's different with police officers because the number of crimes is un-countable [1] and if you point the police at anyone they'll find crimes. The same isn't really true of a W-2 employee with a 401(k). The taxes due are by definition countable and the compliance process is largely automated. You are just responsible for truing it up at the end of the year.
[1] https://www.wsj.com/articles/SB10001424052702304319804576389...
It's different with police officers because the number of crimes is un-countable [1] and if you point the police at anyone they'll find crimes. The same isn't really true of a W-2 employee with a 401(k). The taxes due are by definition countable and the compliance process is largely automated. You are just responsible for truing it up at the end of the year.
[1] https://www.wsj.com/articles/SB10001424052702304319804576389...
> if you point the police at anyone they'll find crimes.
The same is true for our tax laws. I can almost guarantee every adult over 30 has made an error in their tax return.
There are a million examples. Here's one: do you know someone that has stayed with a friend or family member rent free? The guest should have claimed the fair rent value of this non-monetary "gift" on their tax return. But literally nobody does.
The same is true for our tax laws. I can almost guarantee every adult over 30 has made an error in their tax return.
There are a million examples. Here's one: do you know someone that has stayed with a friend or family member rent free? The guest should have claimed the fair rent value of this non-monetary "gift" on their tax return. But literally nobody does.
Gifts between individuals under $15K/yr have no tax consequences.
And if I'm not mistaken the amount over $15K counts solely to reduce your $11,400,000 lifetime exclusion, and only once you exceed that number do you actually have to pay taxes. [1]
[1] https://www.nerdwallet.com/blog/taxes/gift-tax-rate/
[1] https://www.nerdwallet.com/blog/taxes/gift-tax-rate/
That's also correct. Further, if a married couple (or other joint owner/tenant) let someone stay with them, they can each gift the annual gift amount to the free "tenant".
Errors are fine, you don't go to prison for an error. You get audited, the IRS takes a look, they tell you how much you actually owed, plus interest. I actually don't mind the additional scrutiny this will bring to dark corners of the tax code. The reality is we owe it today, and if we realize it, there may be a bigger push to simplify the tax code down (to be clear, this does not mean reduce tax burden, but just reduce complexity).
Let's take this down a level. If your friend owes you $200, and paid you back $150 because of an honest mistake, does that mean your friend no longer owes you $50 because, oops? Of course not. This is no different at the scale of the IRS.
Let's take this down a level. If your friend owes you $200, and paid you back $150 because of an honest mistake, does that mean your friend no longer owes you $50 because, oops? Of course not. This is no different at the scale of the IRS.
> You are in fact arguing that the state shouldn't necessarily collect all it's owed. I doubt that attitude would get you far in the Accounts Receivable department at any business.
Most AR departments will, in fact, be willing to write off some of what they're owed. There's a cost to pursuing the debts, both in employee time and in goodwill.
Most AR departments will, in fact, be willing to write off some of what they're owed. There's a cost to pursuing the debts, both in employee time and in goodwill.
Sure, that's totally true, however that's clearly not what's happening here. The budget is 11B, down 19%/2.5B from peak. This yielded a reduction in collections of $34.4B. That's a 10X ROI. We're not talking about negative or marginal returns here, which is what an AR department would write off.
Your comparison is a little flawed. IRS staff are a net surplus for the government, and its quite silly to get rid of someone who makes money.
We did it in Denmark during our new public management period. It cost us billions in tax evasion and fraud, and at one point someone did the math. Turned out our tax-agents cost 500.000 danish kroner a year, but they gave the state a net positive of 1.5-10 million Danish kroner. Needles to say, there is now support for our tax agency from every political party, even the ones that want to cut taxes. If your tax-agents aren’t needed, then downsize them, but I’m not sure that’s anywhere.
The police on the other hand are an expense you pay to avoid paying a bigger expense.
We did it in Denmark during our new public management period. It cost us billions in tax evasion and fraud, and at one point someone did the math. Turned out our tax-agents cost 500.000 danish kroner a year, but they gave the state a net positive of 1.5-10 million Danish kroner. Needles to say, there is now support for our tax agency from every political party, even the ones that want to cut taxes. If your tax-agents aren’t needed, then downsize them, but I’m not sure that’s anywhere.
The police on the other hand are an expense you pay to avoid paying a bigger expense.
I think too that, while you may not be able to check each agent's logs and find out that they netted big gains individually, the idea is that over time, when the big fish are caught - possibly reported in the news, other big fish start cooperating without having to catch them. The money just starts getting collected.
Well then, we should make the entire government and every single person in the country an IRS employee so we’ll have infinite money by that logic.
How do you factor in for the point where these agents having diminishing returns? Is it when the agency brings in as much as they cost? If so, why is that the reasonable place to employ to? The purpose of the IRS is to collect taxes to fund other agencies that don’t directly make revenue for the government.
How do you factor in for the point where these agents having diminishing returns? Is it when the agency brings in as much as they cost? If so, why is that the reasonable place to employ to? The purpose of the IRS is to collect taxes to fund other agencies that don’t directly make revenue for the government.
What a weird argument. The other person says "hey, look, we learned that cutting this service had a negative effect on our country, and we learned from our lesson" and your response is "Well then make everyone part of that service"
What? How does that make sense? Why are you making that drastic of a leap? Why?
What? How does that make sense? Why are you making that drastic of a leap? Why?
How doesn’t it? You didn’t address a single point here.
Many government agencies make no money, as they’re not profitable organizations (I’d argue the entire government is de facto a non-profit organization but that’s a separate argument). The few that are able to make money would typically do so for their own ends (like taxing gasoline for maintaining roads). The IRS is one of the few organizations that generates income for the government specifically to spread across other agencies.
What’s insane to me is people talking about this like there’s no ceiling to how much money the IRS can take or that if the IRS went to $0 per employee that would somehow be a good thing. It’s the same thing when people say NASA generates income for the country therefore we should fund it more. Be intellectually honest with yourselves, if we funded the IRS or NASA or any other entity that makes $X/employee, there is a point where that funding becomes suboptimal. And I’m not seeing anyone discuss what the optimal amount is here, it just seems like you think the amount is “more” because taxing people is “good.”
Many government agencies make no money, as they’re not profitable organizations (I’d argue the entire government is de facto a non-profit organization but that’s a separate argument). The few that are able to make money would typically do so for their own ends (like taxing gasoline for maintaining roads). The IRS is one of the few organizations that generates income for the government specifically to spread across other agencies.
What’s insane to me is people talking about this like there’s no ceiling to how much money the IRS can take or that if the IRS went to $0 per employee that would somehow be a good thing. It’s the same thing when people say NASA generates income for the country therefore we should fund it more. Be intellectually honest with yourselves, if we funded the IRS or NASA or any other entity that makes $X/employee, there is a point where that funding becomes suboptimal. And I’m not seeing anyone discuss what the optimal amount is here, it just seems like you think the amount is “more” because taxing people is “good.”
> If your tax-agents aren’t needed, then downsize them,
I mean, maybe I could have put it more clearly, but I think it is fairly obvious that I wasn’t advocating for what you seem to think.
I’m just not sure what strawman you’re trying to prove wrong here, or who you’re even arguing against. Unlimited funds to tax-agencies is silly, everyone agrees on that, but in both the original and my example, the result of downsizing staff to save a few million on the budget ended up costing society billions.
I mean, maybe I could have put it more clearly, but I think it is fairly obvious that I wasn’t advocating for what you seem to think.
I’m just not sure what strawman you’re trying to prove wrong here, or who you’re even arguing against. Unlimited funds to tax-agencies is silly, everyone agrees on that, but in both the original and my example, the result of downsizing staff to save a few million on the budget ended up costing society billions.
Society didn’t lose out on billions, the government did. Whether or not that is bad is definitely a discussion worth having, but I won’t immediately conflate the two ideas. People and corporations got to keep money they may have otherwise lost due to auditing.
At a glance, I am okay with that, and the arguments put forth so far don’t really convince me otherwise, like the number of dollars per IRS employee is a meaningless metric to me because it doesn’t tell me what’s optimal for government.
At a glance, I am okay with that, and the arguments put forth so far don’t really convince me otherwise, like the number of dollars per IRS employee is a meaningless metric to me because it doesn’t tell me what’s optimal for government.
I’m danish, those billions pay for our education, healthcare and daycare/nursery institution.
Most of the money went out of the country to heavy investment companies and hedge funds who exploited the fact that our vat-repayment system went from hundreds of auditors to just two people. Something we’re now battling international banks, investment funds and pension indexes to get partly back (at another great expense).
I’m not sure what society you live in, but this was such a negative impact on ours that even our most liberal political parties, who exist primarily because they want to cut taxes heavily, support re-staffing our tax-agency.
Most of the money went out of the country to heavy investment companies and hedge funds who exploited the fact that our vat-repayment system went from hundreds of auditors to just two people. Something we’re now battling international banks, investment funds and pension indexes to get partly back (at another great expense).
I’m not sure what society you live in, but this was such a negative impact on ours that even our most liberal political parties, who exist primarily because they want to cut taxes heavily, support re-staffing our tax-agency.
The reach for hyperbole isn't really warranted.
At the moment the IRS brings in $5.2 for every $1 spent, that's $3.2 of extra revenue per $1. But their budget is being cut.
We don't need to reach to see that wherever the line is where we break even, we're not there yet.
At the moment the IRS brings in $5.2 for every $1 spent, that's $3.2 of extra revenue per $1. But their budget is being cut.
We don't need to reach to see that wherever the line is where we break even, we're not there yet.
The US has massive amounts of deficit spending and we're pretty far from balancing the budget. Why does the amount of lost revenue even matter?
Because lack of enforcement is a Tax On Honesty.
I think it's particularly egregious because the part in control while the budget has been broken has classically been the one to strongly advocate for a balanced budget - and will probably start advocating as soon as they fall out of power.
Granted, both parties are terrible when it comes to corporate interest so... they both suck - but one really has a strong tendency to advocate for balancing the books.
Granted, both parties are terrible when it comes to corporate interest so... they both suck - but one really has a strong tendency to advocate for balancing the books.
The budget has been broken with both sides in control. There is no longer a political motivation to actually balance the budget now that there is no way for the government to really run out of money any time soon.
That is one monetary school of thought that I believe will remain valid as long as other nation's currencies are measured against our own, if that standard slipped though that debt would suddenly be realized and repayment would be required at a respectable rate to continue doing international business. It's a major problem I have with MMT - it assumes American prosperity in perpetuity, but history has established that perpetuity isn't a thing and those chickens will come home to roost... If we're smart then the US economy can fade gracefully, like England, otherwise it'll likely get violent and revolutionary.
It’s pretty clear which side of the balance the IRS is on at the moment.
I didn’t read the statement as a universally applicable principle, but rather a description of the current situation.
I didn’t read the statement as a universally applicable principle, but rather a description of the current situation.
>>I also don’t want the IRS to be staffed to maximize revenue
The issue there isn't the IRS though, it's the tax code. The IRS is absolutely a department that needs to be staffed to maximize their revenue.
If you have an easy to navigate tax-code that doesn't require a doctoral understanding of economics, then there's not a problem for the everyday person (TBH you can also say the same thing about the law in general).
>>“Anyone opposing more police officers and equipment is breaking the law” is similar to your argument.
Here's a better statement: I believe the people who are most actively working and spending money to depower the IRS are those who seek the most to gain by hiding their financial doings. They seek to deregulate industry as a whole in the name of corporate gains while simultaneously infiltrating various branches of the government to further this agenda. These people are doing so in an (successful) effort to push more wealth from the majority into the hands of a minority. I believe this is bad for society as a whole.
The issue there isn't the IRS though, it's the tax code. The IRS is absolutely a department that needs to be staffed to maximize their revenue.
If you have an easy to navigate tax-code that doesn't require a doctoral understanding of economics, then there's not a problem for the everyday person (TBH you can also say the same thing about the law in general).
>>“Anyone opposing more police officers and equipment is breaking the law” is similar to your argument.
Here's a better statement: I believe the people who are most actively working and spending money to depower the IRS are those who seek the most to gain by hiding their financial doings. They seek to deregulate industry as a whole in the name of corporate gains while simultaneously infiltrating various branches of the government to further this agenda. These people are doing so in an (successful) effort to push more wealth from the majority into the hands of a minority. I believe this is bad for society as a whole.
What specifically is difficult about the tax code? How does it compare to other countries?
I like taxes; with them we buy civilization.
I want the IRS to have whatever resources are necessary to collect every tax dollar owed (but not a dollar more) according to tax statue.
I want the IRS to have whatever resources are necessary to collect every tax dollar owed (but not a dollar more) according to tax statue.
> I like taxes; with them we buy civilization.
You are welcome to over-report them for your own satisfaction.
You are welcome to over-report them for your own satisfaction.
Seems less effective than working to ensure everyone pays what they owe.
That is not liking taxes: that is liking taxes on others.
No, it's appreciating society where everyone puts in according to their ability to make something we can all enjoy.
I'm fine with people who are unable to contribute putting less in, I'm not fine with people who exploit the system - and before some BS about welfare queens gets injected... I also care about scale, the amount of missed revenue from corporate taxes far outweighs how people below the poverty line are able to abuse the system - right now it even seems like they're getting the sharp end of the stick to support the top earners - rather than the squeeze being on the middle class.
I'm fine with people who are unable to contribute putting less in, I'm not fine with people who exploit the system - and before some BS about welfare queens gets injected... I also care about scale, the amount of missed revenue from corporate taxes far outweighs how people below the poverty line are able to abuse the system - right now it even seems like they're getting the sharp end of the stick to support the top earners - rather than the squeeze being on the middle class.
> everyone puts in according to their ability
Ahh yes punish those who worked to provide something worthwhile and reward those who couldn't be bothered to do the same.
Ahh yes punish those who worked to provide something worthwhile and reward those who couldn't be bothered to do the same.
I love how the sick and handicapped are in the category of "those who couldn't be bothered".
The sick and handicapped are not the main recipients of the 33%+ GDP tax revenues of the american government.
>puts in according to their ability
That’s sales speak for “others should pay even proportionally more than me”.
That’s sales speak for “others should pay even proportionally more than me”.
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You're clearly missing the parents point; These are not figurative "taxes people owe", but literal, per the 2018 law, lowered corporate taxes, lowered personal taxes, what people owe.
Happily, if as a trade I can send the people who don't pay for civilization to an isolated desert where they not preaching libertarianism at the expense of everybody else.
Taxes are a membership fee for society. I'm fine with people declaring themselves not members of the society, but they don't get to use the club room then, either.
Taxes are a membership fee for society. I'm fine with people declaring themselves not members of the society, but they don't get to use the club room then, either.
> Taxes are a membership fee for society
If only you could appreciate that the US was founded protesting a 5% GDP tax rate.
If only you could appreciate that the US was founded protesting a 5% GDP tax rate.
If only you could appreciate that it was
* founded by wealthy landowners interested in protecting their interests
* that 5% tax wasn't going towards US infrastructure
* 200+ years have passed since, and we've gone past horse-drawn carriages
* founded by wealthy landowners interested in protecting their interests
* that 5% tax wasn't going towards US infrastructure
* 200+ years have passed since, and we've gone past horse-drawn carriages
> that 5% tax wasn't going towards US infrastructure
This is incorrect as England was providing military services to the American colony. Adam smith implies that the cost of the military was actually higher than the taxes collected.
This is incorrect as England was providing military services to the American colony. Adam smith implies that the cost of the military was actually higher than the taxes collected.
> founded by wealthy landowners interested in protecting their interests
This meme needs to die.
Nobody was sitting around saying "You know what will make me richer, a decade of war with England and if we win followed up with several decades of poor trade relations". The wealthy landowners who founded this country were very much going all in on a bet where the possible outcomes were lose everything or break even. They didn't do it for the money, not that there was any money in it to do it for.
Edit: Is my statement factually incorrect or ideologically inconvenient?
This meme needs to die.
Nobody was sitting around saying "You know what will make me richer, a decade of war with England and if we win followed up with several decades of poor trade relations". The wealthy landowners who founded this country were very much going all in on a bet where the possible outcomes were lose everything or break even. They didn't do it for the money, not that there was any money in it to do it for.
Edit: Is my statement factually incorrect or ideologically inconvenient?
> "You know what will make me richer, a decade of war with England and if we win followed up with several decades of poor trade relations"
Yea, that'd be silly, instead it was "You know what, the crown isn't listening to us and we're ineligible to be lords like those fat cats in england proper, let's throw a big to-do and get invited back in at a proper rank with representation."
Yea, that'd be silly, instead it was "You know what, the crown isn't listening to us and we're ineligible to be lords like those fat cats in england proper, let's throw a big to-do and get invited back in at a proper rank with representation."
I second this. Also, read the Declaration of Independence. It is quite succinctly stated the long list of grievances that led to the founding.
Of course, actually taking that into context takes away some of the dopamine hit from trying to spread the elite hatred that is currently in vogue.
I'm not even saying there is anything wrong with disliking the elite now; just keep in mind then is then, and now is now. The issues are of course going to be different, even if there may be a shred of commonality to them.
Of course, actually taking that into context takes away some of the dopamine hit from trying to spread the elite hatred that is currently in vogue.
I'm not even saying there is anything wrong with disliking the elite now; just keep in mind then is then, and now is now. The issues are of course going to be different, even if there may be a shred of commonality to them.
It's not hatred to ask people that are hoarding almost all the wealth in a country to spend more in taxes. That's just a progressive tax system. There isn't anything controversial about it even if not everyone thinks it's the right thing to do.
Also if you're going to talk about context, the US tax system at the time of its founding isn't relevant at all. I know you didn't bring it up, but you are still defending something largely irrelevant. It'd be like a candidate for President of the United States defending a tithe system because it's mentioned in the Bible.
Also if you're going to talk about context, the US tax system at the time of its founding isn't relevant at all. I know you didn't bring it up, but you are still defending something largely irrelevant. It'd be like a candidate for President of the United States defending a tithe system because it's mentioned in the Bible.
And then proceeded to exceed that 5% tax rate as it built the society we all live in today. Only since the 80s have things gotten really perverse and has this extremist libretarianism gotten any real traction.
And what of appreciating that? Was that 5% taxation being spent on US infrastructure?
"It’s a balance."
What would that look like?
What would that look like?
One way to maximize revenue would be for every tax payer to be audited every year.
Things like that is what I think about when I hear some of the hardline comments here.
Things like that is what I think about when I hear some of the hardline comments here.
> One way to maximize revenue would be for every tax payer to be audited every year.
Oddly enough, the government has the information to do this for many (most?) tax payers every year and send them the forms pre-filled out ready to sign. Unfortunately, the tax prep companies fight letting the government do this.
Oddly enough, the government has the information to do this for many (most?) tax payers every year and send them the forms pre-filled out ready to sign. Unfortunately, the tax prep companies fight letting the government do this.
Around 1/3 of returns are business returns. I don't think the IRS has anywhere near enough information to auto-file those. Anyone who has charitable contributions (and frankly, probably anyone who is itemizing deductions) also likely has return information which the IRS does not have access to. Anyone who is amortizing discount points on real estate or has stock trades from stocks purchased prior to Jan 1, 2011 is in a situation where the IRS can't auto-file for them. In 2017 (last year of returns before the Tax Cuts and Jobs Act rules changes which will reduce the number of those itemizing), about 30% of personal returns itemized.
I do suspect that a lot of "extremely simple" returns could have a pro-forma return auto-prepared by the IRS (and I'd support the IRS trying to permit that, in part because "f*%k Intuit").
I do suspect that a lot of "extremely simple" returns could have a pro-forma return auto-prepared by the IRS (and I'd support the IRS trying to permit that, in part because "f*%k Intuit").
That's because when cops have nothing better to do, they harass and assault people for all sorts of subjective made up infractions.
I do not expect a properly staffed tax agency to.
I do not expect a properly staffed tax agency to.
The IRS has (this decade) targeted specific institutions by their affiliations:
https://en.m.wikipedia.org/wiki/IRS_targeting_controversy
(Read the fourth paragraph of this page)
https://en.m.wikipedia.org/wiki/IRS_targeting_controversy
(Read the fourth paragraph of this page)
And? Why are audits targeted to a type of organization a problem?
If doctors started forming non-profits to do financial engineering to get tax-exempt status, I'd sure as hell hope that the IRS would devote a bit more scrutiny than usual to practitioners of that profession.
Political groups started doing financial engineering to get tax-exempt status. The IRS started auditing them a bit more closely. I don't see the issue.
If doctors started forming non-profits to do financial engineering to get tax-exempt status, I'd sure as hell hope that the IRS would devote a bit more scrutiny than usual to practitioners of that profession.
Political groups started doing financial engineering to get tax-exempt status. The IRS started auditing them a bit more closely. I don't see the issue.
> And? Why are audits targeted to a type of organization a problem?
> If doctors started forming non-profits to do financial engineering to get tax-exempt status, I'd sure as hell hope that the IRS would devote a bit more scrutiny than usual to practitioners of that profession.
> Political groups started doing financial engineering to get tax-exempt status. The IRS started auditing them a bit more closely. I don't see the issue.
The country's inspector general deemed it unlawful. Given the report that came out from the investigation, there seems to be more to the audits than neutral scrutiny that is not performed on the basis of ideology.
> If doctors started forming non-profits to do financial engineering to get tax-exempt status, I'd sure as hell hope that the IRS would devote a bit more scrutiny than usual to practitioners of that profession.
> Political groups started doing financial engineering to get tax-exempt status. The IRS started auditing them a bit more closely. I don't see the issue.
The country's inspector general deemed it unlawful. Given the report that came out from the investigation, there seems to be more to the audits than neutral scrutiny that is not performed on the basis of ideology.
> they harass and assault people for all sorts of subjective made up infractions.
The IRS does this all the time.
And unlike criminal law, the burden of proof is on the accused, not the state.
The IRS does this all the time.
And unlike criminal law, the burden of proof is on the accused, not the state.
Does it actually disproportionately harass people who follow proper accounting practices, and who report their income correctly? Is it harassment when they actually identify that money was owed?
Or is this just a meme largely spread by a demographic who is upset that their magic internet money is, in fact, subject to taxes (or, alternatively, a demographic that thinks all taxes are theft)?
Or is this just a meme largely spread by a demographic who is upset that their magic internet money is, in fact, subject to taxes (or, alternatively, a demographic that thinks all taxes are theft)?
Funny that you mention crypto (I assume that's what you're derisively referring to).
Did you know that the ominous, threatening letters sent out by the IRS to crypto traders was an indiscriminate shotgun blast of mailings sent to every Coinbase customer with an account value over a certain threshold? Did you know that the IRS wanted personal info on every single Coinbase customer until that was ruled unlawful?
So yes, thousands of presumably innocent people who "followed proper accounting practices and who reported their income correctly" were harassed by a letter from a tax agency insinuating that they had misreported crypto earnings.
Did you know that the ominous, threatening letters sent out by the IRS to crypto traders was an indiscriminate shotgun blast of mailings sent to every Coinbase customer with an account value over a certain threshold? Did you know that the IRS wanted personal info on every single Coinbase customer until that was ruled unlawful?
So yes, thousands of presumably innocent people who "followed proper accounting practices and who reported their income correctly" were harassed by a letter from a tax agency insinuating that they had misreported crypto earnings.
This is what anyone does. When someones job is X, and they run out of legit X to do they make things up. We see it everyday in software when people throw away working software to rewrite it in the latest fad.
IRS agents are no exception.
IRS agents are no exception.
[deleted]
I've always thought of the tax system as adversarial, sort of like the justice system: it's supposed to be the goal of individuals and corporations to "try to get away with tax fraud" (i.e. to selfishly claim as few assets and as many deductions as possible), and it's supposed to be the goal of the government to catch all the fraudulent claims and punish them in a way where individuals/corporations are the exactly-right amount of disincentivized from this behavior, without causing undue losses in GDP from trying to chase the long tail of enforcement.
The intended outcome is that the statistical distribution of claims all bunch up at the edge of "being as close as possible to being illegal while still being legal." Which seems to actually be a better Nash equilibrium, economically, than one where people/corporations are so afraid of the IRS that they don't claim as much as they could.
The intended outcome is that the statistical distribution of claims all bunch up at the edge of "being as close as possible to being illegal while still being legal." Which seems to actually be a better Nash equilibrium, economically, than one where people/corporations are so afraid of the IRS that they don't claim as much as they could.
>Any person or political party that is trying to reduce staffing for a tax collection agency is trying to get away with tax fraud or they are working for somebody who is
Wow, that's a very bold accusation. Have you a single shred of evidence for this libel? Being as how this started quite a while ago, I guess all politicians and both political parties are tax frauds or employed by them:
https://www.propublica.org/article/how-the-irs-was-gutted
Wow, that's a very bold accusation. Have you a single shred of evidence for this libel? Being as how this started quite a while ago, I guess all politicians and both political parties are tax frauds or employed by them:
https://www.propublica.org/article/how-the-irs-was-gutted
I generally believe that Taxation is the problem, not the other way around.
What do you mean? Smaller governments work better for the same or greater workloads, of course?!
The paper itself is locked behind a paywall. No mention of the methodology in either the linked article or the paper's abstract. No indication of the overall economic effects.
This is non-knowledge.
This is non-knowledge.
https://webcache.googleusercontent.com/search?q=cache:r_DDSE... has the full content
I'm going to keep saying this in every goddamn tax thread I see here - We need to switch around the way we are taxing from the US level getting the largest pie to the state. I'm not saying I figured it out - but right now there are enormous issues with the way we tax.
1. We have a system where the fed. government holds states hostage for money when it wants to bully things around. (emergencies, etc..).
2. The current system is actively encouraging people to domicile in TX, FL, WA, SD, etc... (income tax free states) and not actually live there, hoping to play the tax lottery (or move around so much they can't be convicted).
3. The "sales tax" system in the US is ridiculous. It's egregiously illegal according to our tax-once rule. If we can get a tax break on all sales tax we paid, that would be one thing, but we can't.
4. Ind. contractors are taxed in extremely unfair ways, often have no recourse to get discounts or tax breaks on health insurance.
My solution -
I say it's time to start having states collect that 25% and the feds are hands-off of taxing individuals. Beyond that it would make sense for people to declare a state of residence (one that they most want roads repaired at, police hired, etc..). Get rid of sales tax completely - it's a massive waste of time if states are getting a fair amount. Move MOST fed employees to the state level and remove major govt. contractors that are bilking the public (in the long run companies like Northrup Gruman etc.. are paying the heads billions each - there's no oversight.). Remove the national army and start creating state-armies. Re-write the constitution that changes how states operate within the federal level, and completely change the role of the federal government to be allowed to make laws that are scoped towards fairness across states. Make the fed. government in charge of analytics and cross-state environmental regulation. States would then have the right to make laws that apply to the people.
Some might say this is ridiculous but in a time where we getting to the "end of capitalism" a MASSIVE re-write to how money is moved around is damn fucking necessary.
1. We have a system where the fed. government holds states hostage for money when it wants to bully things around. (emergencies, etc..).
2. The current system is actively encouraging people to domicile in TX, FL, WA, SD, etc... (income tax free states) and not actually live there, hoping to play the tax lottery (or move around so much they can't be convicted).
3. The "sales tax" system in the US is ridiculous. It's egregiously illegal according to our tax-once rule. If we can get a tax break on all sales tax we paid, that would be one thing, but we can't.
4. Ind. contractors are taxed in extremely unfair ways, often have no recourse to get discounts or tax breaks on health insurance.
My solution -
I say it's time to start having states collect that 25% and the feds are hands-off of taxing individuals. Beyond that it would make sense for people to declare a state of residence (one that they most want roads repaired at, police hired, etc..). Get rid of sales tax completely - it's a massive waste of time if states are getting a fair amount. Move MOST fed employees to the state level and remove major govt. contractors that are bilking the public (in the long run companies like Northrup Gruman etc.. are paying the heads billions each - there's no oversight.). Remove the national army and start creating state-armies. Re-write the constitution that changes how states operate within the federal level, and completely change the role of the federal government to be allowed to make laws that are scoped towards fairness across states. Make the fed. government in charge of analytics and cross-state environmental regulation. States would then have the right to make laws that apply to the people.
Some might say this is ridiculous but in a time where we getting to the "end of capitalism" a MASSIVE re-write to how money is moved around is damn fucking necessary.
Abolish all of the tax code, pass a federal sales tax, almost entirely do away with the IRS, much more efficient - the end.
This would be the absolute fastest way to shift the federal tax burden from the top 20% to the bottom 50% and would likely cause consumer spending to plummet resulting in a recession. It's also a very nice way to punish lower through upper middle class savers.
This may be an ideal solution in theory, but it would likely be devastating in practice.
This may be an ideal solution in theory, but it would likely be devastating in practice.
>This would be the absolute fastest way to shift the federal tax burden from the top 20% to the bottom 50%
Bezos bought a 65 million dollar jet... at 20% federal sales tax that would have been 13 million dollars in revenue. He would pay more in taxes in one purchase than I'll earn in gross income in 10-13 lifetimes.
I paid a bit over $8000 in w2 employment taxes last year (21.8% of my gross income, with a 20% sales tax I'd have MORE money and yes, I would buy less crap I don't need and use once), in one purchase Bezos would have paid 1974x what I paid last year.
Never mind that under most federal sales tax proposals, a flat-rate rebate is issued monthly, quarterly or annually to everyone which greatly softens the blow for the lowest earners.
Bezos bought a 65 million dollar jet... at 20% federal sales tax that would have been 13 million dollars in revenue. He would pay more in taxes in one purchase than I'll earn in gross income in 10-13 lifetimes.
I paid a bit over $8000 in w2 employment taxes last year (21.8% of my gross income, with a 20% sales tax I'd have MORE money and yes, I would buy less crap I don't need and use once), in one purchase Bezos would have paid 1974x what I paid last year.
Never mind that under most federal sales tax proposals, a flat-rate rebate is issued monthly, quarterly or annually to everyone which greatly softens the blow for the lowest earners.
The Obama administration proved that tax agencies can be used as agents of political censorship. The power of government to censor political speech should be opposed at all levels and at all points of the political spectrum. One easy way of doing this is to reduce the size of these governmental agencies.
https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-...
https://www.npr.org/2017/10/27/560308997/irs-apologizes-for-...
It's worth noting that an FBI investigation found no evidence that the IRS was targeting conservative groups, and that the apology was issued by the Trump Administration, who might have a vested interest in making the IRS look bad.
"In January 2014, James Comey, who at the time was the FBI director, told Fox News that its investigation had found no evidence so far warranting the filing of federal criminal charges in connection with the controversy, as it had not found any evidence of "enemy hunting", and that the investigation continued. On October 23, 2015, the Justice Department declared that no criminal charges would be filed. On September 8, 2017, the Trump Justice Department declined to reopen the criminal investigation into Lois Lerner, a central figure in the controversy.[1]
In late September 2017, an exhaustive report by the Treasury Department's inspector general found that from 2004 to 2013, the IRS used both conservative and liberal keywords to choose targets for further scrutiny."
https://en.wikipedia.org/wiki/IRS_targeting_controversy
"In January 2014, James Comey, who at the time was the FBI director, told Fox News that its investigation had found no evidence so far warranting the filing of federal criminal charges in connection with the controversy, as it had not found any evidence of "enemy hunting", and that the investigation continued. On October 23, 2015, the Justice Department declared that no criminal charges would be filed. On September 8, 2017, the Trump Justice Department declined to reopen the criminal investigation into Lois Lerner, a central figure in the controversy.[1]
In late September 2017, an exhaustive report by the Treasury Department's inspector general found that from 2004 to 2013, the IRS used both conservative and liberal keywords to choose targets for further scrutiny."
https://en.wikipedia.org/wiki/IRS_targeting_controversy
The government did wind up settling. https://www.courthousenews.com/justice-department-settles-te... It does seem that this could be argued as just a political move b/c the settlement occurred under Trump and the accusations are against the IRS during the Obama administration. I guess it's left to the reader if they would rather believe the results of the federal government investigating themselves or one party condemning the actions of the other.
tathougies(2)
Taxing businesses at all has been objected to as double taxation: the business is taxed, then the residual profits are distributed to shareholders, who are taxed. It isn't a fringe idea: in 2015, many of the Republican candidates in the running for President stated they thought making corporate tax rates 0% would not only "boost the economy", it would essentially remove all tax laws from the books, greatly simplifying things.
Superficially it sounds reasonable. But it isn't. The US military spends $700B+ every year, often times very pointedly protecting the interests of US businesses. The state department has untold people spending billions more opening markets and making trade favorable for US businesses. By and large, the benefits to individuals is an afterthought -- what is good for US business is good for US citizens is the thinking. Large swaths of the government function is spent optimizing conditions for business activity.
So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? Apple derives far more benefit and far more directly than I do. Why aren't they paying their portion of the taxes to support it? If part of the cost of doing business is running overseas bases so we can exert influence, that cost should be built into the business expenses as taxes, instead of being externalized to John Q. Public.
The answer is, of course, the super wealthy have captured government and a large part of the media which promotes their interests.
Superficially it sounds reasonable. But it isn't. The US military spends $700B+ every year, often times very pointedly protecting the interests of US businesses. The state department has untold people spending billions more opening markets and making trade favorable for US businesses. By and large, the benefits to individuals is an afterthought -- what is good for US business is good for US citizens is the thinking. Large swaths of the government function is spent optimizing conditions for business activity.
So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc? Apple derives far more benefit and far more directly than I do. Why aren't they paying their portion of the taxes to support it? If part of the cost of doing business is running overseas bases so we can exert influence, that cost should be built into the business expenses as taxes, instead of being externalized to John Q. Public.
The answer is, of course, the super wealthy have captured government and a large part of the media which promotes their interests.
> So, to get to the point: why should I pay higher tax to protect the business interests of Grumman, and GE, and farmers, and Apple, etc?
You'll end up paying those taxes regardless. When companies are taxed directly then those taxes are baked into the prices of everything they sell, just like every other business expense. This functions like an inefficient and regressive sales tax except that, unlike normal sales taxes, buyers don't see it as a separate line-item on the bill.
You'll end up paying those taxes regardless. When companies are taxed directly then those taxes are baked into the prices of everything they sell, just like every other business expense. This functions like an inefficient and regressive sales tax except that, unlike normal sales taxes, buyers don't see it as a separate line-item on the bill.
Thank you for replying instead of simply downvoting.
That isn't true. If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity.
In reality, they might raise the price of their products some, but that is fine -- the people who use the products and benefit from the government's expenditures to promote Apple's business interests are exactly who should be paying for them.
I don't buy Apple products, so I shouldn't be subsidizing their products via taxes.
As for calling it a regressive tax, the costs of production of the product should be built into the product price. If it is abnormally low because Apple isn't paying their share of taxes, that is a market distortion. It is regressive if you only stop at first order thinking. Apple's prices would go up, which hurts some consumers, but they would also be paying significantly more in taxes, which helps consumers.
Let's pick another example. Would it be OK with you if the government decided to donate $5B/year of crude oil to Exxon? Hey, it would make Exxon's bottom line look great. I don't think anyone (except Exxon) thinks that would be right, yet that is exactly what is being done in kind: Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing. (As for $5B, I just picked a number out the air).
That isn't true. If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity.
In reality, they might raise the price of their products some, but that is fine -- the people who use the products and benefit from the government's expenditures to promote Apple's business interests are exactly who should be paying for them.
I don't buy Apple products, so I shouldn't be subsidizing their products via taxes.
As for calling it a regressive tax, the costs of production of the product should be built into the product price. If it is abnormally low because Apple isn't paying their share of taxes, that is a market distortion. It is regressive if you only stop at first order thinking. Apple's prices would go up, which hurts some consumers, but they would also be paying significantly more in taxes, which helps consumers.
Let's pick another example. Would it be OK with you if the government decided to donate $5B/year of crude oil to Exxon? Hey, it would make Exxon's bottom line look great. I don't think anyone (except Exxon) thinks that would be right, yet that is exactly what is being done in kind: Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing. (As for $5B, I just picked a number out the air).
> If the assertion is that if Apple has to pay $10B/year more in taxes, than they will raise the price of their products $10B/year and keep a fixed profit, that assumes there is complete price elasticity.
No, I'm not assuming that. The quantity sold will decrease, of course, if the price increases. That is a hidden cost paid by prospective buyers who must now do without the good, complementing the more visible cost paid by those who continue to purchase the good at the higher price. A company's profitability (ROI), on the other hand, is relatively fixed—in the end all investments tend toward zero economic profit, or equivalently a level of accounting profit equal to the opportunity cost of the investment, assuming even a moderately competitive market. Higher-than-average profitability invites competition, while on the opposite side if profitability is low then investors put their money elsewhere and the business closes. There is some variation due to factors like brand recognition, other natural or artificial monopolies, and risk, but generally speaking a corporate tax won't be paid from the company's bottom line as most people imagine. There just isn't much flexibility in that area to begin with.
> Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing.
This is not a subsidy to Exxon, it's a subsidy to the people consuming oil-based products. If you want to stop subsidizing oil, fine; but that is a completely separate policy decision from where to levy the tax. Anyway it's not like you're proposing to tax Exxon specifically for the cost of keeping the oil flowing, which would defeat the point of the subsidy. A corporate income tax would spread that cost across all products, even ones that have nothing to do with oil, and be paid primarily by people who spend most of their earnings on corporate-produced goods (i.e. not the rich, who tend to spend a larger share on investments).
No, I'm not assuming that. The quantity sold will decrease, of course, if the price increases. That is a hidden cost paid by prospective buyers who must now do without the good, complementing the more visible cost paid by those who continue to purchase the good at the higher price. A company's profitability (ROI), on the other hand, is relatively fixed—in the end all investments tend toward zero economic profit, or equivalently a level of accounting profit equal to the opportunity cost of the investment, assuming even a moderately competitive market. Higher-than-average profitability invites competition, while on the opposite side if profitability is low then investors put their money elsewhere and the business closes. There is some variation due to factors like brand recognition, other natural or artificial monopolies, and risk, but generally speaking a corporate tax won't be paid from the company's bottom line as most people imagine. There just isn't much flexibility in that area to begin with.
> Exxon not paying much/anything in taxes, and $B spent every year globally to keep the supply of oil flowing.
This is not a subsidy to Exxon, it's a subsidy to the people consuming oil-based products. If you want to stop subsidizing oil, fine; but that is a completely separate policy decision from where to levy the tax. Anyway it's not like you're proposing to tax Exxon specifically for the cost of keeping the oil flowing, which would defeat the point of the subsidy. A corporate income tax would spread that cost across all products, even ones that have nothing to do with oil, and be paid primarily by people who spend most of their earnings on corporate-produced goods (i.e. not the rich, who tend to spend a larger share on investments).
On the first point, the company I have worked for for the past 15 years has had wildly different ROIs during different phases of its life. Assuming that ROI is a fixed quantity will lead to a wrong conclusion.
On the second point, yes, free oil to Exxon will lower the price of gas, and that is a benefit to the consumer. But you assume 100% of that benefit is given to the consumer. In reality, corporations keep as much of the profit as they can and either keep it in their war chest, acquire assets, or distribute it to shareholders.
On the second point, yes, free oil to Exxon will lower the price of gas, and that is a benefit to the consumer. But you assume 100% of that benefit is given to the consumer. In reality, corporations keep as much of the profit as they can and either keep it in their war chest, acquire assets, or distribute it to shareholders.
I did say that there is short-term variation in ROI, in particular based on risk. However all economic ventures in a competitive market do tend toward zero expected economic return, i.e. an expected ROI (including factors like risk) commiserate with their opportunity cost. Corporations obviously try to maximize their profits but they don't operate in a vacuum. If they consistently earn higher-than-normal profits then that will attract competition, pushing prices (and profits) back down toward the margin.
You might be interested in the concept of tax integration. Tax laws are generally designed to take this issue into account.
Also unmentioned is the very real negative externalities that IRS audits cause. Audits disproportionately affect poor people [2], who are also the least able to spend time dealing with them. The United States already has extremely low tax evasion rates [3]. Rather than spending money to catch more of the very few cheaters by audits, other country's tax authorities have found "nudge" letters were found to be similarly effective and vastly cheaper.
[1] https://www.aaajournals.org/doi/abs/10.2308/accr-52520?utm_s...
[2] https://projects.propublica.org/graphics/eitc-audit
[3] https://www.researchgate.net/figure/Size-and-development-of-...