The IRS has been under loud scrutiny as of late by House Republicans regarding the agency's role in targeting conservative-leaning political nonprofit groups applying for tax exempt status. Representative Darrell Issa (R-CA) has led the charge in these fiery hearings, earlier this week accusing IRS Commissioner John Koskinen of "game playing" by failing to produce key emails from a senior IRS official. Ranking minority Committee member Rep. Elijah Cummings (D-MD) provided a very different account of the entire episode, apologizing to Koskinen for having to "go through this hell."
All of this political gamesmanship is, however, a distraction, from the real issue facing the Internal Revenue Service -- funding. Many Americans dislike the IRS and will paint you a vivid picture of the tax man knocking down your door for a slice of your hard earnings. Those Americans might be surprised to learn that the current IRS annual enforcement budget has been cut to about $11.3 billion. As a comparison, that's less than the $14 billion Apple Inc. used to buyback its own stock in one month this past February, a move that only serves to provide meager benefits to its shareholders. The IRS simply does not have the budget to do its lawful job effectively, which is to collect revenue for the U.S. government.
What does that mean for taxpayers?
According to an April article from The Associated Press: "This year, the IRS will have fewer agents auditing returns than at any time since at least the 1980s." The IRS loses an estimated $300 billion a year due to tax evasion -- a key contributor to deficits. A proposal by the Obama Administration claims that the IRS could bring in an additional $6 for every dollar it adds to the enforcement budget. IRS Commissioner John Koskinen, a highly regarded veteran public servant, said that he pushes this rather convincing point in Congress to little reception or reaction. "I say that and everybody shrugs and goes on about their business," he told AP. "I have not figured out either philosophically or psychologically why nobody seems to care whether we collect the revenue or not."
Congress certainly seem to care when it comes to heated party politics, however.
The U.S. tax code has long been perforated by corporate lobbyists and corporate tax attorneys whose primary purpose is to circumvent its laws so that their profit-rich companies can avoid paying their fair share to Uncle Sam. In many states, it is a literal race-to-the-bottom for elected officials to offer corporations sweeter tax deals to keep jobs in-state, as illustrated by the Boeing controversy in Washington State earlier this year. Notably, besides getting a state tax holiday, Boeing paid zero in federal income tax on large U.S. based profits last year -- along with many other major U.S. corporations such as GE and Verizon. Some of these Fortune 500 companies even get a rebate check! (See "The Sorry State of Corporate Taxes" report from Citizens for Tax Justice. )
And of course multimillionaires and billionaires, by taking full advantage of tax loopholes, deductions, deferrals and other forms of creative accounting, often pay less in taxes than middle-class Americans. Rep. Paul Ryan's budget plan that passed the House of Representatives earlier this year would shamelessly benefit the wealthy elite with even more tax cuts at a time of rising mass poverty.
The end result is that the wealthy 1 percent continues to profit hand-over-fist using public resources and infrastructure while the 99 percent pay the bills for it -- all the while struggling to pay their own bills, mortgages, student loans, and more. And when Wall Street runs amok, it's the taxpayers who must pay the bills for the catastrophic damage resulting from regulatory slumber, as we saw back in 2009.
It's abundantly clear that significant, transformative tax reform is necessary. What remains unclear is who will benefit the most from such reform. Americans from both the left and right must seriously ask why individual U.S. taxpayers are fronting the money for hugely profitable corporations -- the right calls it "crony capitalism" and the left calls it "corporate welfare." Both agree that it is a serious problem. This is taxpayer money that could potentially be used to repair critical public infrastructure, create decent paying jobs, or, simply, to reduce the tax burden on individuals. (See my new book Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State.)
One solution to ensure that the interests of small taxpayers are accounted for and protected is to establish taxpayer watchdog associations across the country. These organizations would work full-time in each state to make sure that individual taxpayers get the best deal possible. After all, big corporations can afford to support an army of tax accountants and attorneys to continually update the playbook of tactics to avoid having to pay their share. Most taxpayers don't have this luxury. What they do have, however, is sheer force of numbers. Organization of such watchdog organizations could be as easy as a notice on the 1040 tax return and state tax forms inviting people to join. These non-profit advocacy groups would be supported by modest membership dues and would receive no tax money. The members would elect a board of directors that could hire researchers, organizers, accountants and lawyers to work as taxpayer champions.
Such pressure from united citizens would provide an avenue to enhance the influence of individuals and small businesses in a fairer, more efficient tax collection and policy-making process -- something that is much needed in our current American oligarchy. Perhaps even Republicans like wealthy Cong. Darrell Issa could see the benefit of having such groups actively watchdogging for the people.
A simple motto to consider when asking what we choose to tax is: "Tax what they burn before we tax what we earn." Before we place the largest burdens of taxation on workers, we should tax areas that have the most potential negative or damaging influence on our economy and our society. Tax the polluters, the addictive products industry, the Wall Street speculators, the junk food peddlers, and the corporate criminals. Consider this: A fraction of a 1 percent sales tax on high velocity speculation in derivatives and trading in stocks could bring in $300 billion a year!
If taxpayers really want to protect their interests, they must organize and fight for themselves. The corporations certainly have the money -- but they can't match the envoy of an engaged citizenry, especially one that is informed and turns out to vote.
(For an autographed copy of Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State visit Politics and Prose.)