Rooting out tax cheats
It was great to learn that President Joe Biden will address the U.S. Coast Guard Academy’s graduating class on May 19. No doubt, the president will reference the Coast Guard’s many and varied responsibilities, including rescue missions, rooting out drug and human trafficking, navigating a melting Arctic, and keeping the nation’s ports safe.
But it is an agency with a far less popular, but still important task, that has the new president’s attention lately — the Internal Revenue Service.
The IRS’s job is to find tax cheats and collect from them. But its ability to do so has been diminished. After Republicans took control of Congress in 2010, they began to fiscally starve the agency. According to a Congressional Budget Office review, the IRS’s budget declined by 20% and its staff by 22% from 2010 to 2018. Much of its technological equipment is outdated.
The CBO found audits of corporate tax filings fell 37%.
IRS Commissioner Charles Rettig testified at a Senate hearing that his agency is outgunned. Tax cheats know they have the upper hand, including the ability to hide income from cryptocurrencies, he said. The commissioner estimated the government is losing $1 trillion annually, though there is no way of knowing for sure.
Wage income is not the problem. It gets reported. It is high earners and businesses that use various tricks, or just blatant nondisclosure, to hide income and avoid paying their fair share as defined by laws.
President Biden has proposed investing $80 billion over a decade to boost staffing and technology at the tax collection and enforcement agency. The resulting ability to increase audits and find cheaters could boost tax revenue $780 billion over that time, the administration estimates. Advocates for IRS reform say the number could be substantially higher.
Simply knowing the IRS is beefing up enforcement will be enough to convince some to fly straight and disclose taxable income.
No one likes taxes, but the revenue raised is necessary to run government, supply services, and defend the nation. Those individuals and businesses who file honestly should have nothing to fear and can benefit if their competitors are held to the rules.
Is an $80 billion investment in the IRS necessary? Perhaps not. But a substantial investment makes sense. Biden’s proposal deserves congressional action so important governmental functions can be supported, including the missions of the Coast Guard.