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IRS audits poorest families at five times the rate for everyone else

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Re: IRS audits poorest families at five times the rate for everyone else

#201

Post by jmyeet »

jcranmer wrote: post #169
Test0129 wrote: post #114

Earlier quoted context omitted.

This is certainly the hottest possible hot take. > Have inheritance trigger a taxable event. This includes, by extension, allowing heirs to inherit stocks and property on a stepped up basis for CGT purposes; This works for billionaires but harms regular people. If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. In many states pro…

> If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. Quiz time: Capital gains is 0% for anything less than $40k, 20% for anything over than $400k, and 15% for everything in the middle. How much do you have to inherit for the total effective tax rate to be greater than 95%? > In many states property taxes are reassessed upon prope…

I pretty much agree but want to add some clarifications.

> The only state where property taxes aren't regularly reassessed appears to be California.

Technically, property taxes are reassessed in California but because of Prop 13, passed in the 1970s, the increase cannot exceed 2% per year. With in inflation in the 70s and 80s, this was a massive boon to incumbent homeowners and their descendants (since that favorable tax rate can be inherited).

California is the poster child for this taxpayer-led cash grab but it's not the only one. New York for example has a very complicated property tax system with various caps that amount to much the same thing but nowhere near as extreme.

> ... highly unsympathetic when the argument boils down to "we bought this property 50 years ago and we couldn't afford taxes on it if it were assessed at market value."

It's actually worse than that. It's always couched in terms of kicking seniors out of their life long homes because they're on a fixed income even though the major beneficiaries are Disney and extremely wealthy people. Worse, property held in LLCs allow you to retain favorable tax treatment even when the LLC changes hands.

Disney has to be singled out here because the're still paying 1960s taxes on their land in Anaheim.

Back to seniors, it's such a ridiculous argument. For one, you can always treat different taxpayers differently and, for example, freeze propert taxes for seniors until they die. You don't need to give a massive tax benefit to Disney to do that.

Interestingly, a state like Texas handles this way better. Property taxes are deferred for seniors until they die. They're still accuring property tax debt but it doesn't hit their immediate incomes.

This gives people a choice: stay in their family home and pay taxes when the houses are inherited or downsize to save on taxes.

This has the added benefit of freeing up housing stock.

Re: IRS audits poorest families at five times the rate for everyone else

#202

Post by jmyeet »

quickthrowman wrote: post #187
jmyeet wrote: post #166

Earlier quoted context omitted.

> If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. That's such a funny remark. First, this implies the tax rate is 100%. How else could you end up with nothing? Long term capital gains is what? 20%? If the "modest gift" of a $1 million house with a cost basis of $300,000 results in $140,000 in capital gains taxes, you still hav…

> It's a remarkably easy problem to solve. Just tax 1-3% of the net value of your assets based on their value on December 31 of each year. Easily avoided by liquidating assets on Dec 30 and rebuying on Jan 1 (or Jan 30 to avoid wash sale if needed) It would also have a nasty side effect, there would be many sellers and few buyers on Dec 30, so the market would crash every single year at EoY.

> Easily avoided by liquidating assets on Dec 30 ...

This creates a taxable event. If people want to realize gains at a much higher tax rate I'm fine with that.

Re: IRS audits poorest families at five times the rate for everyone else

#203

Post by landemva »

s1artibartfast wrote: post #130
jmyeet wrote: post #75

Earlier quoted context omitted.

> Is the IRS just supposed to ignore that? Yes. Or, better yet, just give it to everyone and pay for it by: 1. Eliminating the carried interest tax credit, which has somehow survived 15+ years. It is quite literally a giveaway to hedge fund managers who get to pay lower taxes on managements because reasons. It most recently survived by being removed from the Inflation Reduction Act at the behest of Senator Kirsten Se…

>In fact, auditing anyone who makes less than $50,000 a year should be illegal. Maybe even $100,000. So everyone files below 100k and everyone is immune to audit. I might go for that, but I am also receptive to the abolition of taxes.

Abolition of INCOME taxes. Consumption/use taxes locally and tariff/import taxes federally seem reasonable today and 250 years ago.

Income tax takes my work effort like slavery.

Re: IRS audits poorest families at five times the rate for everyone else

#204

Post by landemva »

Test0129 wrote: post #114
jmyeet wrote: post #75

Earlier quoted context omitted.

> Is the IRS just supposed to ignore that? Yes. Or, better yet, just give it to everyone and pay for it by: 1. Eliminating the carried interest tax credit, which has somehow survived 15+ years. It is quite literally a giveaway to hedge fund managers who get to pay lower taxes on managements because reasons. It most recently survived by being removed from the Inflation Reduction Act at the behest of Senator Kirsten Se…

This is certainly the hottest possible hot take. > Have inheritance trigger a taxable event. This includes, by extension, allowing heirs to inherit stocks and property on a stepped up basis for CGT purposes; This works for billionaires but harms regular people. If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. In many states pro…

> I pay so much tax as a software engineer

Over a decade ago I was complaining to my tax CPA. He replied, "No income, no income tax." I quit that week.

Re: IRS audits poorest families at five times the rate for everyone else

#205

Post by pgodzin »

kyleblarson wrote: post #116

And the bill that just passed adds 87000 new IRS agents. Additionally every single democrat voted against an amendment that would have prevented new agents from auditing individuals and small businesses with less than $400,000 of taxable income.

Why would anyone want to pass a law saying that anyone below a certain income threshold can cheat on their taxes and it's illegal for anyone to look into?

Re: IRS audits poorest families at five times the rate for everyone else

#206

Post by serf »

LorenPechtel wrote: post #120

I really wish they would quit calling the simple these-numbers-don't-match correspondence things "audits". It gives a very different picture to what's happening. Yeah, if you're poor you're a lot more likely to be doing your taxes by hand and thus you have much more room to make a copied-the-number-wrong mistake. Hence a high rate of "audits" in lower incomes. There's also more room to misunderstand something and ent…

>Yeah, if you're poor you're a lot more likely to be doing your taxes by hand

that hasn't been my experience.

friends and family at poverty levels of income routinely buy TurboTax garbage or go to H&R Block or equivalents every year.

These options, while wasteful, are attractive to them because they're low-effort and they generally offer pay-with-refund financing options.

Re: IRS audits poorest families at five times the rate for everyone else

#207

Post by powerhour »

DavidPeiffer wrote: post #159
TAForObvReasons wrote: post #89

Earlier quoted context omitted.

Looked into this years ago in a semi-related discussion: https://news.ycombinator.com/item?id=21874358 https://www.finance.senate.gov/ranking-members-news/irs-budg... > IRS Research Division estimates in the 2003 GAO report, however, placed returns for activities such as tax enforcement at more than ten – and in some cases more than 20 – dollars collected for every dollar spent. Phone calls to follow up on tax debts…

> Imagine 20 dollars per dollar spent, that's the type of unicorn investment that basically every VC hunts for. It's frustrating that every business person who has ever lived would absolutely throw money at that formula if it was part of their business, but that's not politically popular because the IRS costs money to operate. Mathemarically it makes sense to go until you hit 1:1. If we increased enforcement until, s…

If they become more efficient because they get a larger budget, that would very publicly contradict a lot of campaign messaging.

Re: IRS audits poorest families at five times the rate for everyone else

#209

Post by areyousure »

jeffwask wrote: post #176
rrrrrrrrrrrryan wrote: post #160

Earlier quoted context omitted.

For every $1 of additional funding, the IRS brings in $3. They're the only federal government entity for which this is true. Increasing their finding should be an absolute no-brainer, but many powerful people have a vested interest in keeping the IRS weak and small and underfunded, so that's what we've got.

The Panama papers should be all the proof we need. The Panama papers had enough data to chase tax cheats for decades. The Panama paper resulted in zero.

> zero

https://www.irs.gov/compliance/criminal-investigation/us-tax... https://www.irs.gov/compliance/criminal-investigation/us-acc...

Re: IRS audits poorest families at five times the rate for everyone else

#210

Post by alistairSH »

usaar333 wrote: post #136
alistairSH wrote: post #81

Earlier quoted context omitted.

$400k is a 98% percentile income in San Francisco metro, DC metro, and NYC metro. Sure, inflation may increase the number of households earning $400k, but it's still a tiny minority of the population and will be for a long time.

> $400k is a 98% percentile income in San Francisco metro, DC metro, and NYC metro. You care about household income, not individual. https://dqydj.com/income-by-city/ gives 95th, not 98th in SF Metro area for household income. 92nd in Silicon valley.

Ok, but that doesn’t change the main point - that’s still a small fraction of the total population.
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