Tuesday, October 27, 2009

Targeting the actual criminals for once.

For many years, the admitted focus of IRS audits was on people who made less than a certain amount of income. According to some news program I saw a couple years ago, a larger percentage of "random" audits was on people who reported income below the poverty line. The idea being that if you were reporting less than a certain amount of money, you must be lying.

Since we all "know" that the rich lie, cheat and steal their way to riches, it felt like a misallocation of IRS resources to be searching for criminals and tax evaders amongst the poor. (Forgive me if I'm confusing tropes for reality, it's not like I actually know any rich people. All I know about the rich I learned from TV and movies.)

You can imagine how happy it made me to read the following bit of news, concerning a new special unit within the IRS:

"We will take a unified look at the entire web of business entities controlled by a high-wealth individual," Shulman said. "At least initially, we will be looking at individuals with tens of millions of dollars of assets or income."

"The high-wealth unit will focus on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals. While use of sophisticated legal structures are at times legal, there are other instances where they 'mask aggressive tax strategies,' he said."

"You cannot assess compliance among the nation's wealthiest individuals by looking only at their 1040s [tax returns]," Shulman added. "Our goal is to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise."

It's about damn time. Anecdotal common sense suggests the rich cheat the government at a higher percentage than the poor. Even if that widely-held belief doesn't prove true, the amount of income the government stands to gain by making one rich man pay his fair share is a lot more than the amount some poor sod might be hiding. So if you can only afford to perform N audits this year, why not put the majority of them on the rich? From the money that shakes loose, you'll be able to perform N + X audits next year. Seems like a no-brainer to me.

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