Law How do we tackle tax evasion by the wealthy?

[Trotsky]

In short, the last time that the IRS was charge with recovering the billions lost annually due to tax evasion by the wealthy, they roundly failed due to said wealthy tax evaders being able to spend endless amounts of money dragging out litigation and obfuscating the issue.

The, err, simple fact is that tax evasion is more complicated now than in New Deal-era times. The international legal instruments that the wealthy use to shrink, disguise, and hide their income are remarkably sophisticated.

Moreover, wealthy tax evaders have a very powerful ally: the Republican Party. The GOP has hamstringed Democratic efforts to tackle tax evasion at every corner. And with IRS litigation sometimes lasting five, ten, or fifteen years, the chances of Republicans gaining control of government during a recovery effort and sabotaging it are considerable. Since 2011, three years removed from the last time the Republican Party at least pretended to oppose tax evasion by the wealthy, the Party has aggressively lobbied for cuts to IRS funding: so much so that, now, the IRS chiefly focuses not on tax evasion itself but rather on tax evasion that is concurrent to other illegal activity, such as drug trafficking, that is being criminally litigated in other jurisdictions so as to fray the legal funding burden borne by the agency.

@PolishHeadlock2 @Gandhi @Quipling @Jack V Savage @kpt018 There would seem to be a number of potential solutions, with none of them being perfect and many or all of them running into issues of constitutionality and conflicts with international laws and laws of other countries.

• The government could automatically have power of reimbursement for operational and litigation costs in cases won against audited persons: this could have powerful effects on the choices of wealthy taxpayers to litigate, but it could also lead to the agency accruing massive debt, and it could foreseeably lead to the agency squeezing out lower-income taxpayers that have a bona fide case against their audit but are afraid of the additional costs.
• The government could seek to limit the due process rights of persons who appeal audit findings, such as requiring arbitration, making the arbitration findings binding on recovery, and then allowing further court appeals (or not).
• The government could pass laws criminalizing the offering of legal or financial services that purport to, or actually do, shrink the taxable income of clients. In a perfect world, this would be my solution, but it would encounter massive political resistance by powerful lobbies, and it could foreseeably get nixed by a conservative Supreme Court.
• The government could expressly limit the scope of the IRS to only focus on tax evaders who, accounting for their evasion, would have annual income greater than $100,000 or higher.

Thoughts?

 

[MMAViewer]

When the wealthy are paying the campaign costs of the legislators in charge of these policies we have no chance in hell of changing these laws.

 

[Gregolian]

When the wealthy are paying the campaign costs of the legislators in charge of these policies we have no chance in hell of changing these laws.

This is always an option.....

Serious note though... I don't have a good solution. It'd be nice if there was a way to control where/how these folks hid their money to avoid paying taxes.

 

[ElKarlo]

Dude good question. Been thinking this myself.
It’s easy to offshore and it’s easy to make charities and what not that allow you to shelter money.
Meanwhile I have to give my SSN when I exchange 20 bucks for yen at the bank.
I think private charities should be abolished. You give money to cusses and to people not to an organization that sits in it and then gives you access for that money.

 

[Natural Order]

Violent revolution.

Not sure how you rein this all in through pretend legislative policies in a corrupted duopoly fueled by corporate lobbies. Won't ever be able to keep pace with the greed, it's just futile. One step forward, two steps backwards.

I find it interesting that a Marxist is not welcoming all of this egregious corruption and impending failure that stems from capitalism, seeing as these are predictors and requirements to usher in the utopic worker state. Can you elaborate on the idea that you wish for a communist ideal while actively posting ways (and pretending be distraught about it) to prevent it from happening? I find this contradiction fascinating. Or maybe I've got your shtick wrong?

 

[bobgeese]

Term limits and lobbying reform are certainly needed. As long as politicians pockets are being filled by these folks, not much is going to change.

 

[Sycho Sid]

We might start by replenishing the gutted IRS.

 

[HOLA]

In recent years Republicans have attacked the IRS' budget so that they can no longer go after the ultra-wealthy, who use sophisticated evasion tactics and have the best lawyers to drag the IRS into costly legal battles. The IRS is left with the ability to only go after the easiest targets. Bolstering the IRS' budget would be a major benefit.

 

[Jack V Savage]

We might start by replenishing the gutted IRS.

Fund the tax police. I like Trotsky's first idea, too.

 

[HOLA]

https://budget.house.gov/publications/report/funding-irs

"due to a lack of resources, the IRS failed to audit more than 897,000 wealthy individuals who skipped out on filing tax returns over a three‑year period – and these individuals owed nearly $46 billion in taxes... From 2010 through 2018, IRS funding was cut by 20 percent in inflation-adjusted dollars, resulting in the elimination of 22 percent of its staff. These cuts have gutted the agency; depleted its well-trained, specialized staff charged with auditing corporations and wealthy taxpayers; and weakened its ability to carry out emergency tasks...Lacking staff and resources, the IRS has been forced to shrink its programs—even those that brought in billions of dollars, like pursuing individuals who do not even file tax returns. This is great news for wealthy tax cheats who have become less fearful of being audited by the IRS...have resulted in a perverse system where the examination rate for higher-income taxpayers fell, while the examination rate for lower‑income taxpayers remained fairly stable."

 

[Graves The Elder]

nice copy pasta btw

For all his promise of taxing the wealthiest citizens, Biden won't do shit. Guarantee the middle class will take it in the ass again though.
The top 1% are there for a reason, they know how to protect their money via hidden assets and disincentives.
What Biden will do is attempt to institute some random, poorly thought out corporate tax that will result in lost jobs and higher product
costs, which should fit nicely with the dangerous inflation that will be present after he throws billions and billions of dollars at social problems.

 

[StoneColdSteveAustin]

I recently read Biden was looking to give the IRS 80 billion to go after high income tax cheats

 

[CantCucktheTuck]

Did their budget cuts have anything to do with being used as a political tool by the Obama administration?

 

[Graves The Elder]

AOC proposes a 70% tax on earners over $10 but, according to Bill Gates the wealthiest man on the planet until last year when Bozos past him, her approach is a 'misfocus.'
Sure, what would you expect him to say.
He thinks the government should go focus on estate tax, capital gains and social security.

..and that's why the rich stay rich. Let's go after social security. smh.

 

[Cubo de Sangre]

Abolish income. Problem solved.

Maybe simplify the tax code? I agree with taxing non-profits.

 

[mkess101]

Fund the tax police. I like Trotsky's first idea, too.

Doesn't that first option make it super prohibitive for the average Joe to fight the IRS even if they have a case? The uber wealthy will have their team of lawyers and accountants making calculated decisions on whether to roll the dice or not, but even if they did and they lost they can afford to pay whatever operational/litigation costs there are. Joe sixpack can't afford to take that gamble, even if he has a legit case. Because if he were to lose, he's ruined.

 

[Jack V Savage]

nice copy pasta btw

For all his promise of taxing the wealthiest citizens, Biden won't do shit. Guarantee the middle class will take it in the ass again though.
The top 1% are there for a reason, they know how to protect their money via hidden assets and disincentives.
What Biden will do is attempt to institute some random, poorly thought out corporate tax that will result in lost jobs and higher product
costs, which should fit nicely with the dangerous inflation that will be present after he throws billions and billions of dollars at social problems.

You want to make a firm prediction on jobs and inflation numbers that we can check later?

 

[PolishHeadlock2]

Fund the IRS first and foremost.

With current FBAR and FATCA the tools are already there to clamp down on a lot. Especially if we stop giving preferential treatment to passive income and get rid of a lot of deferrals

 

[Graves The Elder]

You want to make a firm prediction on jobs and inflation numbers that we can check later?

Sure, give me a minute.

I'm seeing pundits predicting inflation approaching 3%, up almost a percentage point
from it's traditional 2% but this can always be addressed by the Fed.
As for jobs, skill workers have been hit hard by covid protocols but biden may actuallly
be the recipient of modest job growth as this sector recovers.

 

[Jack V Savage]

Doesn't that first option make it super prohibitive for the average Joe to fight the IRS even if they have a case? The uber wealthy will have their team of lawyers and accountants making calculated decisions on whether to roll the dice or not, but even if they did and they lost they can afford to pay whatever operational/litigation costs there are. Joe sixpack can't afford to take that gamble, even if he has a legit case. Because if he were to lose, he's ruined.

Empirically, increasing IRS funding pays for itself and it does mostly come from high-earning tax evaders (that's where the money is). I think you can put some safeguards in place for what you're talking about, but it's probably not really necessary.