Over in The New York Times, David Cay Johnston reports:
Tax refunds sought by hundreds of thousands of poor Americans have been frozen and their returns labeled fraudulent, blocking refunds for years to come, the Internal Revenue Service's taxpayer advocate told Congress today.
The taxpayers, whose average income was $13,000, were not told that they were suspected of fraud, the advocate said in her annual report to Congress. The advocate, Nina Olson, said her staff sampled suspected returns and found that, at most, one in five was questionable. [...]
Ms. Olson said the I.R.S. devoted vastly more resources to pursing questionable refunds by the poor, which she said cannot involve more than $9 billion, than to a $100 billion problem with unreported incomes from small businesses that deal only in cash, many of which do not even file tax returns.
Ms. Olson, whose job Congress created eight years ago to argue for the interests of taxpayers, also said the top priority for the tax system must be simplification. She said the tax system is so complex that millions of people have difficulty complying and can get in trouble for subtle mistakes, while those with aggressive advisers can manipulate the system to escape paying taxes they owe.
Once a return is flagged, requests in future tax returns are also frozen for a number of years that the advocate said she is not allowed to disclose because it goes to law enforcement techniques.
Ms. Olson said that 66 percent of those taxpayers who pressed for their refunds were found to be due all the money they sought or even more than they asked for.
As Angelica rightly replies:
Can you imagine if they took this approach to tax-fraud for the rich and superrich? "Hey there, I don't really know if you're guilty of tax evasion, but our computer thingymajig say you might be. Therefore we're going to be holding onto a big chunk of your income until we all get it sorted out whenever, m'kay?"
I have a feeling that wouldn't fly.
No, I don't imagine it would. Meanwhile, all those Masters of the Universe scattered across the upper income brackets are deeply distressed at our how unfair the system is to them. An inability to hide all your assets really ruins a weekend at Martha's Vineyard, you know?
The folks getting screwed by the IRS are not, and never were, the rich. Those bizarre hearings inspired by Frank Luntz's polling and cynically conducted by a power thirsty GOP were straight kabuki theatre. Our system, presently, is massively biased against the poor. We employ error-prone algorithms and punitive measures that wouldn't survive ten seconds amongst a non-marginalized fraction of the society. The GOP, by obfuscating the concept of marginal tax rates, has created a code with no checks against massive inequality and loopholes that make obscene riches all but invisible to tax collectors. Democrats inexplicably slashed taxation on income from wealth and did nothing to reverse the massive slide in government revenues. George W. Bush took the Social Security trust fund filled by the regressive payroll tax and spent it on even-more regressive tax cuts, which'll in turn demand higher taxes later. Social Security, for that matter, could've had its solvency ensured by raising the cap in taxable income, but instead remains in the same "crisis position" that so scared Republicans in January 2005. And the load just gets heavier and heavier on the poor...
But they're the downtrodden, they're used to it. So let's put it on the table: we're all for tax reform. Hell, I'm for truly fundamental tax reform. But some want reform that entrenches the tax code's heavy tilt towards the rich while others want to push the system back towards something roughly approximating equity and progressivism. The question isn't whether or not you want tax reform, but what sort of tax reform you want. And it's a shame that we've not yet had that debate.
