Think you’re too not wealthy enough to get audited by the IRS? Think again. The IRS audits low-income taxpayers at about the same rate as the top one percent. Why? Because it’s easier to audit lower-income families.
Pro Publica has been reporting on this craziness since tax time last year. Now they have an explanation from IRS, and it isn’t good. Auditing poor taxpayers is easier, the IRS says. They can audit these taxpayers by mail and using only lower-ranking IRS employees. Auditing the rich, on the other hand, takes hours and days of work by senior auditors. Republicans in Congress have cut enforcement funding for the IRS over the past decade, so they just can’t afford to audit any more rich people.
In Minnesota, the IRS audits taxpayers in Cass, Beltrami, Mahnomen, and Traverse counties at a rate higher than the rest of the state and slightly higher than the national level. In the first three counties, poverty rates run substantially higher than the state and national levels. On the other hand, in Washington County, where the poverty rate is less than half the national average, the audit rate is also below the national average. (Check out your county average on Pro Publica’s helpful interactive map.)
Tax cheating by individuals costs an estimated $290 billion a year. Tax fraud by corporations costs even more—an estimated $360 billion each year.
U.S. taxpayers generally file honest returns. The “voluntary compliance rate”—paying taxes on time and as required—runs above 80 percent, higher than most other countries. When someone does cheat, that person is not likely to be a low income taxpayer. A typical tax cheat is someone “in a high tax bracket with a complex return.”
Tax fraud is only the beginning. HuffPost describes in great detail our current Golden Age of White Collar Crime. Prosecutions of white collar crime fell last year “to their lowest level since researchers started tracking them in 1998.”
“Even within the dwindling number of prosecutions, most are cases against low-level con artists and small-fry financial schemes. Since 2015, criminal penalties levied by the Justice Department have fallen from $3.6 billion to roughly $110 million. Illicit profits seized by the Securities and Exchange Commission have reportedly dropped by more than half. In 2018, a year when nearly 19,000 people were sentenced in federal court for drug crimes alone, prosecutors convicted just 37 corporate criminals who worked at firms with more than 50 employees.”
That’s not because white collar crime is declining. On the contrary:
“Since 2009, the percentage of employees at large companies who report that they’ve been pressured to commit ethical breaches has doubled. In a 2015 study, more than half the auditors for the country’s largest companies said they had been asked to falsify internal audit reports. In Ernst & Young’s 2016 Global Fraud Survey, 32 percent of American managers said they were comfortable behaving unethically to meet financial targets.”
The HuffPost article is a long read, but an important one. When corporations and billionaires evade taxes, the rest of us pay more.
To be clear, this is not about rich vs. poor. This is about all of us who care about the country against the biggest thieves among us. When corporations and executives break the law with impunity, we all pay, with costs including unsafe products and working conditions, damage to the environment, and higher consumer prices.
Even more important, when wealth buys impunity, we lose respect for our institutions and the social fabric rots. We cannot afford to let that continue.