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The U.S. Needs to Crack Down on White-Collar Crime

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Re: The U.S. Needs to Crack Down on White-Collar Crime

#11
post #2

What's needed is to make cracking down on white-collar crime profitable. Like the setup for drug task forces.

At ~current funding levels, the IRS brings in ~$3 for every $1 spent on it. The federal government could bring in more tax dollars just by funding the IRS at a higher level; it doesn't, for reasons.

> At ~current funding levels, the IRS brings in ~$3 for every $1 spent on it. The federal government could bring in more tax dollars just by funding the IRS at a higher level; it doesn't, for reasons.

Here are some of those reasons.

$3 for every $1 is an extremely misleading way of putting it, as though the IRS is a business and everything is good as long as it's turning a profit. A better way of putting it is that collecting taxes through enforcement has ~33% overhead, which is high. By comparison, the overhead of normal IRS tax collection is a fraction of a percent.

It also only accounts for the government's side of the expense, not the cost (and stress) imposed on innocent taxpayers who get audited to no avail in order to catch the smaller number of people who were actually committing tax fraud, and who are almost always small business owners because they're the ones with unusual tax returns. So the actual cost is even higher and is paid by a group of innocent people who create a disproportionately large amount of economic value while being at high risk of becoming unviable when you impose large surprise costs and time commitments on them like that.

The IRS also prioritizes its enforcement to maximize effectiveness, which means they're already taking the low hanging fruit and increased enforcement would be at the margin rather than at the existing average. For the average to be at parity you would need to be doing a lot of audits that cost more than the revenue they generate in order to cancel out the revenue gained from the net-positive enforcement that is already occurring.

It's possible that we could actually raise government income by doing less enforcement, because $3 is the average. It would be a net gain to eliminate the ones where we're spending $1 to raise $.50 (or $0) as long as we keep the ones where we spend $1 to raise $20.

Re: The U.S. Needs to Crack Down on White-Collar Crime

#12
We don't need a "crackdown". The problem with our approach to financial crimes is that it is based almost entirely on crackdowns -- splashy press releases that are supposed to deter all the thousands of other financial crimes that we lack resources to prosecute. Sometimes this leads to injustice, e.g., see the documentary film Abacus: Small Enough to Jail. The only bank to be prosecuted criminally for shenanigans in the subprime era.

What we do need is vastly more resources for financial regulators, as well as courts. Yes the laws and regs could also be improved, but that is a harder problem. The easy problem is that the people doing good work to combat financial crimes only have the staffing and money to go after a small, small fraction of likely targets. And the courts do not have what they need to handle a high volume of increasingly complex, technical subject-matter.

Re: The U.S. Needs to Crack Down on White-Collar Crime

#14
Well, yes: if you leave enough crime by the well-connected alone for long enough, in a country with poor election integrity and unlimited campaign finance spending, then you get a country run by gangsters. It came about pretty rapidly in Russia where there was no established democracy to displace.

Re: The U.S. Needs to Crack Down on White-Collar Crime

#15

You'd have to completely reframe the penalty for crimes to be percentage based instead of fixed amounts. Even when caught the penalties are often so low that they don't matter, so white collar criminals go right back to it. When you can routinely make $10 million doing something a $1 million fine the one time you get caught just isn't a big deal. The cost-benefit analysis almost always favors the criminal for white c…

What is an actual example where you can make more money committing a crime than you would be forced to pay back if you are caught and convicted?

I don't think your assertion is true.

Re: The U.S. Needs to Crack Down on White-Collar Crime

#16
post #8

White collar crimes are problematic. I once saw a case where someone was convicted for selling prescription sleeping pills. It shouldn't be illegal to sell under the counter pills, I thought, but otherwise it was hard to fault the prosecution. The accused was caught trying to sell the pills to an undercover officer, fled from the police, and apprehended with a wide variety of illegal substances on his person. There w…

I'm a bit surprised to find someone suggesting that selling prescription pills under the counter shouldn't be illegal. Do you mind elaborating on your perspective?

If there's a willing buyer, and a willing seller, and the goods aren't stolen, and the seller isn't lying about what the goods are, then who is the victim?

If there's no victim, there's no crime.

(And, yes, identical logic does apply equally to illegal drugs).

Re: The U.S. Needs to Crack Down on White-Collar Crime

#17
post #13

Monetary fines are not enough deterrent in many cases. Even short stints in prison might be better.

I totally agree with this. Take the recent Tesla fiasco. Do you think a $20M fine means a damn thing to Musk? That's like $0.01 for most people.

Now a $20M fine and a year in prison would make them think twice. More often than not, they make more in the commission of their crimes than they are fined, so they still come out in the black. In other words, they aren't truly punished.

Re: The U.S. Needs to Crack Down on White-Collar Crime

#18
post #2

What's needed is to make cracking down on white-collar crime profitable. Like the setup for drug task forces.

At ~current funding levels, the IRS brings in ~$3 for every $1 spent on it. The federal government could bring in more tax dollars just by funding the IRS at a higher level; it doesn't, for reasons.

Well, the US government is literally run by tax dodgers right now, whether or not you think that is a good thing.

Re: The U.S. Needs to Crack Down on White-Collar Crime

#19
post #8

White collar crimes are problematic. I once saw a case where someone was convicted for selling prescription sleeping pills. It shouldn't be illegal to sell under the counter pills, I thought, but otherwise it was hard to fault the prosecution. The accused was caught trying to sell the pills to an undercover officer, fled from the police, and apprehended with a wide variety of illegal substances on his person. There w…

I'm a bit surprised to find someone suggesting that selling prescription pills under the counter shouldn't be illegal. Do you mind elaborating on your perspective?

Individual sovereignty.

Drug approval services provided by government are there because we want added safety - not to be told what to do.

Re: The U.S. Needs to Crack Down on White-Collar Crime

#20
post #4
post #2

What's needed is to make cracking down on white-collar crime profitable. Like the setup for drug task forces.

The drug war has been disproportionally devastating along racial and to a lesser extent economic lines and ineffective at its stated goal. Why would we want to reuse this failed strategy to fight another kind of crime?

Just because the overarching goal of a project is awful doesn't mean every detail about the project is awful. There are lessons to be learned from every failure, and like it or not the war on drugs funds itself quite well through asset forfeiture.

Case in point: no one would argue the Nazi regime was anything approaching "good", but when the war was done, we didn't throw away the V2 rocket and start research from scratch. We threw out all the horrible shit the Nazis did but kept their wildly successful rocket.

Likewise, it's possible to throw away the racist bullshit that perpetuates the drug war but use it's funding mechanism to fund prosecution of other crimes that would otherwise be financially infeasible to prosecute otherwise. If someone is convicted of insider trading, take all the money they gained from it and use it to prosecute other insider trading crimes.

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