The issue of tax cheating, audits, and enforcement have been in the news lately. The topic is of growing concern in my daily business conversations. This post describes my own experiences.
Background
Despite evidence that tax cheating by high income earners has soared over the past decade and that more recent Congressional action is making progress this past year in solving the crisis, this current Congress continues to cut funding for audits and enforcement of wealthy tax cheaters. Increasing tax enforcement and collections is directly in conflict with the stated goals of the current House majority. The new budget deal rumored this past week reportedly contains further cuts in this audit and collections area. Republican Congressman Jason Smith from Missouri took it a step farther in clarifying the Congressional majority’s views when he was quoted by Fox network saying “Over the years, they’ve seen an IRS that has targeted conservatives”. My own conversations with conservatives from all aspects of life confirm that this belief of IRS targeting Republicans is widely held.
Theory
Is the opposition to tax law enforcement just another political issue? Is it that simple? Maybe, but based on statements I’ve heard directly in person, I suspect that is goes one step farther. Widely held beliefs, even without evidence, might be a factor.
My involvement
This week a peer tax accountant expressed surprise that I discuss the political positions of my clients. My perspective is likely unusual. Most accountants would presumably not be so involved in political issues. But my firm represents a significant number of elected officials, a Political Action Committee, and a number of politically funded nonprofits. I am a survivor of politically motivated violence that resulted in years of disability. I have a reputation for representing small business contractors in fraud claims against Donald Trump’s business and leadership of environmental organizations. Politics are front and center here. I am also a state-certified political campaign treasurer. At a minimum, this personal background raises my awareness of the issues. At best, it might provide some insight. Of course, anything involving analysis of politics is inevitably controversial.
Past observations
I took rough feedback from past statements that my anecdotal observations of deliberate tax cheating are skewed toward Republicans. I clarified at the time by saying that I handle far more tax audit representation cases for conservative Republicans than any other demographic. segment. This is natural and expected since most of my clients, friends, family and neighbors in a rural area are also in this demographic sector. (The photo in this post was taken from the home of a strong Republican supporter friend and neighbor yesterday). My anecdotal observations cannot be extrapolated to imply representation of the entire population. Nonetheless, these personal experiences and conversations influence my analysis.
Data
It would not be difficult, using today’s AI assisted technology, to collect data on the political affiliation of tax cheaters. This could easily compare the rate of prosecutions compared to the rate of noncompliance by political party. My guess is that it would prove no bias and that prosecution mirrors incidence of noncompliance.
Yet I see no indication that data, if available, confirming or contradicting that this belief plays would any significant role in its strength. The belief alone appears to be enough to sway Congress away from enhancing tax enforcement and collection measures.
Belief
It appears probable that the CongressIonal majority party members share my suspicion that tax cheating is more prevalent among their party members and that enforcement and collection efforts by IRS would hurt their party. We presume, from other sources, that members of Congress are unlikely to take an action that hurts members of their political party even if it would help the country overall. There is no direct conclusive evidence of any of this, to my knowledge, but beliefs are more powerful than data here.
At ‘street level’, it appears that individual Republicans believe that tax policy enforcement is targeted at them. Media reports this belief, and my own conversations confirm it. That belief is not supported by IRS published data.
What to look for next
I hope that we have the opportunity to read the statements of members of Congress and other government officials on this topic over the coming weeks. Tax compliance is a delicate and controversial topic, and most members of Congress have avoided comment. But recent news may make it unlikely that members can continue to avoid comment.