Live data from Hacker News

IRS budget cuts cost $34.3B in lost revenue from big business

accountingtoday.com

181–190 of 319 posts

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#181
post #174

Reading the actual study [1], the headline is a bit deceptive. The study looked at audits between 2000 and 2010, a period during which funding to the IRS increased, and found that generally more funding for audits led to more money recovered from audits (duh). But that $34.3B figure is over 10 years, so it's a tiny fraction of a percent of overall federal revenue, and it's not offset by the amount of more money the I…

The latest IRS changes prioritize low income over high income audit targets: https://www.google.com/amp/s/www.forbes.com/sites/rachelsand...

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#182
post #78
post #14

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--spec…

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!

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#183

Earlier quoted context omitted.

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...

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.

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#184

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…

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.

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#185
post #181
post #174

Reading the actual study [1], the headline is a bit deceptive. The study looked at audits between 2000 and 2010, a period during which funding to the IRS increased, and found that generally more funding for audits led to more money recovered from audits (duh). But that $34.3B figure is over 10 years, so it's a tiny fraction of a percent of overall federal revenue, and it's not offset by the amount of more money the I…

The latest IRS changes prioritize low income over high income audit targets: https://www.google.com/amp/s/www.forbes.com/sites/rachelsand...

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.

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#186

Earlier quoted context omitted.

“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.

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 numbe…

> 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.

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#187
post #181

Earlier quoted context omitted.

The latest IRS changes prioritize low income over high income audit targets: https://www.google.com/amp/s/www.forbes.com/sites/rachelsand...

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.

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.

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#188
post #86

Earlier quoted context omitted.

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.

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.

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.

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#189

Earlier quoted context omitted.

Always strange to me they tax corporate profit instead of corporate revenue. "We spent all our money so we don't pay any taxes."

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.

Re: IRS budget cuts cost $34.3B in lost revenue from big business

#190

Earlier quoted context omitted.

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.
Post reply on HN