IRS Has Been Gutted - Here's Why That Matters

A gutted I.R.S. makes the rich richer.  It's as simple as that.

Had the billions in budget reductions occurred all at once, with tens of thousands of auditors, collectors and customer service representatives streaming out of government buildings in a single day, the collapse of the IRS might have gotten more attention. Instead, it’s taken eight years to bring the agency that funds the government this low.

The result is.... tens of billions in lost government revenue. ProPublica estimates a toll of at least $18 billion every year, but the true cost could easily run tens of billions of dollars higher.

The cuts are depleting the staff members who help ensure that taxpayers pay what they owe.  As of last year, the IRS had 9,510 auditors. That’s down a third from 2010... and still shrinking. 

To many American, the I.R.S. is a money-grabbing enemy taking their cash to the faceless federal bureaucracy.  But its budget has been bled dry by a Republican Congress in service to wealthy donors and businesses aggressively pursuing tax avoidance.

The IRS conducted 675,000 fewer audits in 2017 than it did in 2010, a drop in the audit rate of 42 percent.

Without enough staff, the IRS has slashed even basic functions. It has drastically pulled back from pursuing people who don’t bother filing their tax returns. New investigations of “nonfilers,” as they’re called, dropped from 2.4 million in 2011 to 362,000 last year. According to the inspector general for the IRS, the reduction results in at least $3 billion in lost revenue each year.

Tax obligations expire after 10 years if the IRS doesn’t pursue them. Such expirations were relatively infrequent before the budget cuts began. In 2010, $482 million in tax debts lapsed. By 2017, according to internal IRS collection reports, that figure had risen to $8.3 billion, 17 times as much as in 2010.

The IRS’ ability to investigate criminals has atrophied as well. 

Auditors are stretched thin, and they’re often forced to limit their investigations and move on to the next audit as quickly as they can.

Dodging taxes is as old as taxes themselves. Just ask Trump, who has employed systematic dodging for decades.  And now it's easier than ever for the rich and corporations to exploit loopholes with very few left to stop them.

Corporations and the wealthy are the biggest beneficiaries of the IRS’ decay.  Most Americans’ interaction with the IRS is largely automated.  But it takes specialized, well-trained personnel to audit a business or a billionaire or to unravel a tax scheme — and those employees are leaving in droves and taking their expertise with them.

For the country’s largest corporations, the danger of being hit with a billion-dollar tax bill has greatly diminished. For the rich, who research shows evade taxes the most, the IRS has become less and less of a force to be feared.

Here's a straight-forward example of what it means when Republican Presidents and Congresses cut funding from the IRS... rich corporations stop paying taxes and our roads and schools and healthcare are then cut by those same corrupt Republicans.

In the summer of 2008, William Pfeil made a startling discovery: Hundreds of foreign companies that operated in the U.S. weren’t paying U.S. taxes, and his employer, the Internal Revenue Service, had no idea.  Pfeil and the IRS started pursuing the non-U.S. entities... brought in more than $50 million in previously unpaid taxes... an example of how the tax-collecting agency is supposed to work.

But then Congress began regularly reducing the IRS budget. After 43 years with the agency, Pfeil... retired in 2013 at 68.  After Pfeil left, he heard that his program was being shut down.

Source: https://www.propublica.org/article/how-the-irs-was-gutted

Additional reading: https://www.nytimes.com/2018/12/25/opinion/editorials/irs-audits-rich.html