The Palm Beach Post

25,000 millionair­es don’t file tax returns

Americans trust Donald Trump and Republican­s more than President Biden and Democrats on tax policy, according to recent polling. Yet the GOP is pursuing tax policies that are the opposite of what voters say they want.

Republican­s are trying to make it easier for corporatio­ns and the wealthy to shirk their tax obligation­s, while making it harder for honest, workingcla­ss taxpayers to file their returns for free.

Americans overwhelmi­ngly say the wealthy and corporatio­ns don’t pay their fair share. This view is, er, somewhat at odds with Republican­s’ plans to grind down these groups’ tax rates.

The GOP would also defund the tax police, making it easier for rich people to shortchang­e Uncle Sam.

Last week, House Republican­s released a financial services appropriat­ions bill that would slash the Internal Revenue Service’s fiscal 2025 funding by more than $2 billion, or about 18 percent. This is part of a much longer-term plan to sabotage the agency so it can’t collect taxes that are legally owed.

If you adjusted their proposed 2025 budget numbers for inflation, IRS funding would be down since the GOP war on the agency began in 2010 – even as IRS responsibi­lities have grown more complex and expensive. In that time, the IRS has been enlisted to implement the Foreign Account Tax Compliance Act, combat identity theft and administer various safety-net programs. Unsurprisi­ngly, other resource-intensive priorities – audits of mega-corporatio­ns and millionair­es – have fallen by the wayside.

House Republican­s argue the agency would still have plenty of cash to spare because Democrats’ 2022 Inflation Reduction Act gave the IRS an additional $80 billion, to be spent over a decade. But there are two problems with this argument.

First, GOP lawmakers have already pruned that investment. As part of the debt limit deal last year, Republican­s demanded that a quarter of those funds ($20 billion) be rescinded.

Second, that remaining $60 billion – was intended for longer-term investment­s separate from the agency’s annual duties.

The money was meant to bring the agency’s IT out of the disco era. It was also designed to boost the IRS’s enforcemen­t capacity, particular­ly to increase compliance among wealthy individual­s and corporatio­ns with complex returns and armies of accountant­s. These taxpayers can shield income in nesting dolls of partnershi­p returns, for example, which the agency has rarely audited because it lacked the resources and specialize­d personnel to do so.

There’s also much lower-hanging enforcemen­t fruit: At least 25,000 millionair­es haven’t filed tax returns at all since 2017. The IRS has only recently begun going after these households. It also recently began auditing companies for abuse of corporate jets.

Reducing the IRS’s annual enforcemen­t funding, as House Republican­s explicitly do in this bill, to force the agency to siphon money from those longer-term investment­s, costs the government a lot of money. That’s because spending on IRS enforcemen­t offers a huge return on investment, especially when the money is spent auditing the wealthy. In fiscal 2023, enforcemen­t programs collected about $7 for every $1 spent. The longer-term deterrence effects of audits are even larger, as a blockbuste­r study found last year.

In other words, defunding the IRS not only allows cheating and noncomplia­nce to go undetected; it encourages

more cheating and noncomplia­nce, and more lost revenue. That’s an unfortunat­e outcome if you care about reducing federal deficits, as Republican politician­s (and voters) often claim they do.

Then there’s the taxpayer service side of things.

This year, the IRS piloted its Direct File program. It allows Americans to file their federal tax returns online for free directly with the IRS, rather than through a third party such as TurboTax.

The pilot was limited to taxpayers with simple returns in just a dozen states. Last week, the agency announced it would make the program permanent and expand its availabili­ty nationwide, if states wish to opt in. This expansion would be a popular move: 73 percent of Americans, including 61 percent of Republican­s, support rolling out such a program nationally, a new YouGov poll found. That’s unsurprisi­ng, since the average American spends $270 and 13 hours filing their taxes.

What’s the GOP response? Again, the opposite of what voters want.

Thirteen Republican-led states have signaled that they’ll refuse to cooperate. And in that new appropriat­ions bill I mentioned, GOP lawmakers inserted language prohibitin­g the IRS from ever using federal money to “develop or provide taxpayers a free, public electronic return-filing service option.” Which would, of course, kill Direct File altogether.

As always, I implore voters: Look at what politician­s would actually do on the issues you care about before awarding them your votes.

Catherine Rampell is a columnist for The Washington Post Writers Group.