Lyman Stone suggests that you can get the trifecta of more revenue, less burden for the poor and middle class, and less corruption by requiring that 50% of all IRS audits be on the 1% in income. That group is not the same as the 1% in assets. I will note that the committed Marxists who believe that it is the asset group that is ultimately more corrupt because they conceal their oppression of the poor by very deep and clever manipulations of the system aren't able to produce evidence for the proposition, just feelz that it must be so. Their graphs and statistics usually amount to "Some people are much richer than others, much, much richer, and poor people have less stuff, and that must mean it's all rigged somehow, don't you see?" I will mostly let him and his commenters make their own argument. He has reasons why after the initial surge of love from the Bernie supporters, it might be the conservatives who get behind this.
Update: I should have linked to the beginning of the tweet, which includes the link to the paper.
He's starting with the assumption of "the top 1% are bigger crooks than anyone else". I don't know if I buy that, but I do buy that if you want money, you have to go after the people with the money (as summarized by Willie Sutton). The mid-income people could be just as corrupt, or could wish to be as corrupt (but not have the resources), but cracking down on them isn't the fiscally responsible thing to do - de facto making yet more crime OK as long as it's under the threshold.
ReplyDeleteThe argument to sway conservatives that Soros would have a bullseye on his back every year falls into my category of ideas "to fix things" that approach Bills of Attainder.
This also illustrates the division between two camps on how to fix the IRS: More IRS to catch the crooks, because the tax code is so complex, there are many ways to cheat; or, reform the tax code to reduce the ways to cheat, then there's less need for the IRS to investigate.
I think the high-income versus high-asset group is likely to be more corrupt because they are more volatile. We see the same thing at the other end of the scale. The people who have been poor for a generation likely have some low-level dodges that they don't even think are wrong, but don't tend to suddenly get involved in international smuggling. That would be the people who just recently became poor.
ReplyDeleteIn the main, however, I think you are correct that the lower-middle versus upper middle income levels of corruption may not be that different.
As for the specific that they would go after Soros, I think he was mostly joking, but thought the hint that people like that would come under extra scrutiny would be made. As the elites are increasingly liberal you could make the argument in much the same way that Bernie does about the 1%. Reform the tax code? Sure. Best choice. I recall Bill Bradley making that argument in the 70s, so I'm not holding my breath.
Eh, I want to see numbers, not percentages. I want to know if its wages earned or interest earned. It seems a far too simplistic solution
ReplyDeleteI'm kinda with Donna B (no relation) on this, though I have to confess I'm going just from the idea of 'focus on the 1%'. My objection sees no difference if it's assets or income. I suppose Stone is a smart guy and has answered this but I feel it's an issue that doesn't have a technical solution. As a purely theoretical exercise he's undoubtedly correct. I just don't see that it'll ever be implemented, politically.
ReplyDeleteEither way the immediate problem is that anybody in that bracket is both highly motivated to contest any audit findings if they are facing an increase in their tax bill, as well as highly motivated to spend the resources to do it, and the problem only gets worse the higher marginal rates go. That includes not just lawyers and accountants but getting people like congressional aides and other movers and shakers on speed dial via donations and other favors. I suppose you could construct a scenario where an additional amount wouldn't be worth contesting but given the small number of taxpayers in the 1% (nearly half the population current don't pay any income taxes at all) collecting a piddling amount from the 1% isn't going to be nearly as remunerative as collecting a slightly smaller dollar amount from the vast majority of taxpayers, most of whom will either lack resources to make an objection or figure the effort of objecting is a wash versus paying the additional tax.
The other factor to keep in mind is the mentality of most workers. It is an extremely exceptional situation to see a group focus for an extended period of time on a difficult task and bring it to a successful conclusion. The vast majority of worker bees are gonna go for the quick dopamine hits of many small tasks rapidly completed. It's certainly going to look better at review time to have cleared 200 cases for an average of even $500 additional taxes than having to explain that "next year we're really gonna nail him to the wall" even if you didn't accomplish squat this year. Twenty guys like former are an extra $2 million versus the team of twenty spending a year going after the potential of $2 million from a 1%er. Most bosses are going to look for the bird in the hand.
There's a reason why the IRS wants 87,000 new agents and reporting on cash transfers. It's just way easier to intimidate large numbers of people of modest means into coughing up relatively small amounts of cash than to pin down a high roller given our current tax code, and that doesn't even take into account that our tax code is far more about penalizing people who don't act in the ways the current regime likes. Raising revenue is decidedly secondary.
A big part of the complexity of taxes lies in the *definition* of income. For business proprietor, for example, what is deductible in current year versus what must be depreciated or amortized over multiple years? Similar issues apply for people invested in limited partnership, whether publicly-traded or not.
ReplyDeleteFor Biden, apparently a substantial part of his (reported) income comes from distributions paid via S-corporations, which allow the avoidance of Medicare and Obamacare taxes on that portion of their income. Although this is legal, there are also limitations of how much a particular individual can draw from an S-corp as non-salary vs salary payments. An individual may not be in the "upper 1%", but still could be evading substantial taxes via improper S-corp useage.