I find it extremely annoying that the USA treasury wants to punish a lot of other countries for being easy to do business in just because the USA themselves doesn’t dare touching their billionaires.
Those two usually go hand in hand. Most of those billionaires built their fortunes on corporate tax avoidance, so when I say go after their billionaires, I don't talk only about individuals. I'm also talking about the Starbucks, the Amazons, etc. Even the Trump empire was built on smart tax credits, avoidance and political lobbying, and most of it happened before it became a global institution.
A global minimum tax rate won't actually fix those institutions tax avoidance, it just makes life harder for everyone else. There are so many more topics to address than just raising an arbitrary tax number. But having that global tax rate, makes it look like they at least tried. Either they don't know what they're doing, or they're intentionally deflecting from the problem. Either way it's not good.
The linked IRS inspector general report the article’s premise is based on is pretty interesting. Basically the IG is saying that the IRS is leaving a lot of money on the table because of gaps between different functions/departments (examination and collection). The report does acknowledge that workforce scale is a problem but it looks like that is stated without considering worker productivity.
The treasury created $8T in bond sales just last year, and accelerating. Bond sales fund every level of the government. Tax revenue will never pay the debt. Buyers know this. It doesn't matter. It's irrelevant.
> But misreporting exceeds 50 percent for certain types of business income, like rental and proprietorship income. The current tax system thus benefits certain high earners who accrue most of their income from sources where misreporting is common.
This would be trivially solved by simple and flat taxes, but the main problem with fair and flat taxes is they lack the flexibility to be used as a political social engineering tool.
However, I seem to remember something about this very issue in history before, and for some reason this period is a theme this morning - something to do with wealthy peasants being an ongoing problematic resitance to policies that promise justice to everyone if they just give up everything. https://en.wikipedia.org/wiki/Dekulakization
The window has not shifted and the crimes of the 20th century are still very much in the minds of people. These guys and the rest of the out of touch Davos crowd basically want to engineer a version of China for the rest of the world. You're never going to guess who won't be giving up their stuff.
It is important to express contempt at these people. They show up in every generation, and the results are always the same.
> This would be trivially solved by simple and flat taxes, but the main problem with fair and flat taxes is they lack the flexibility to be used as a political social engineering tool.
How do simple flat taxes solve the underreporting problem? Surely there is still an incentive not to report rental & proprietorship income if it is not well tracked? Perhaps there is a lower incentive if these mostly affect wealthier people and the marginal rate was lower, but the incentive is still there.
> the main problem with fair and flat taxes is they lack the flexibility to be used as a political social engineering tool
Strange that flat taxes keep getting proposed by exactly the same people proposing other political social engineering tools designed to entrench the power of established economic elites, which, compared to status quo progressive taxes, is what flat tax proposals they make invariably also do.
Every change in public policy is a “political social engineering” tool, and the only time people tell you theirs isn't is when they think you won't like what it is part of trying to engineer.
(And its particularly amusing when the supposed reason its is different is that it “lacks flexibility”, when the flexibility in what it replaces doesn't come from the features it replaces, but higher-level features of the political system that are untouched by the proposal, leaving all of the flexibility in place.)
> This would be trivially solved by simple and flat taxes, but the main problem with fair and flat taxes is they lack the flexibility to be used as a political social engineering tool.
Flat taxes are too penalizing to the poor.
They force you to set a rate that the poor can afford (or make tax exemptions for necessities like food) but they further force the government to cut back social programs due to a lack of funding, further harming primarily the poor.
It's not about "making every country china". Modest progressive tax codes aren't "take everything" codes. Heck, even the most aggressive wealth taxes I've heard about amount to taking 3% of current networth for people with networths > $50 million. That's not "taking everything" or making everyone "poor". Yet those sorts of taxes would be able to fully fund programs like universal healthcare.
Also note this is a wealth and not income tax. When talking about federal taxes and progressive taxes we are generally talking about income tax. A wealth tax solves the problem of millionares/billionares using loop holes to avoid the income tax system/paying low income taxes.
In fact, your effective rate goes down as you get wealthier, because progressively less of your income is treated as “ordinary income” with respect to the tax code, and there are more options available for paying high-end management firms to structure your wealth in ways that minimize taxation. So the wealthiest people have an effective tax rate of zero.
In a surprising turn of events, bureaucrats believe that bolstering their own bureaucracy is the panacea they’ve been looking for!
More seriously, based on the level of digitization that has happened in the financial sector over the last 20 years, I think it would be truly shocking if we didn’t have a tremendous reduction in manpower associated with auditing records.
Firstly, most American file their taxes using software that all but makes it impossible for them to be wrong in any significant way.
Secondly, that is aided by the fact that all major financial institutions pipe their customers data straight into the government and into each other. There is very little space for lying or hiding assets. The whole system is computerized.
And to be frank, I doubt that the pursuit of major tax evaders is really a function of lack of resources. I’d strongly wager that it’s a lack of political will. If the authors are being truthful about the existence of a small number of large, known entities simply not filing returns, then we can assume that somebody in the chain of authority has made the explicit decision to not pursue. Adding more bodies without changing that fundamental decision won’t help.
>Firstly, most American file their taxes using software that all but makes it impossible for them to be wrong in any significant way.
>Secondly, that is aided by the fact that all major financial institutions pipe their customers data straight into the government and into each other. There is very little space for lying or hiding assets. The whole system is computerized.
That is true for me and you, but is it true for the people who they are actually trying to catch? Someone with hundreds of millions or billions isn't going to be using TurboTax or have most of their income funneling through a checking account at Wells Fargo.
>And to be frank, I doubt that the pursuit of major tax evaders is really a function of lack of resources. I’d strongly wager that it’s a lack of political will.
These are the same reasons. They have a lack of resources because there is a lack of political will.
It’s probably not true about people with hundreds of millions or billions. Yet, intuitively I’d still assume that the digitization efforts of the last few decades would still result in a net-decrease in audit headcount.
Before the 2000s, it was not uncommon for average earners to get a visit from an auditor. Based on some of the publications by the IRS I have read, it’s now significantly less likely for average earners to get audited than high-income earners. Beyond that, the probability that a high-income earner is growing relative to average income earners.
Given the sheer volume of people in the average-and-below bucket, it makes intuitive sense that changes to the audit rate in that group would have an outsized impact on the overall headcount requirements.
True, but if Tax systems are anything like government healthcare systems, then the reason why it's more expensive to audit records isn't because what data is available, but rather because of how that data is available and how its processed.
In Germany, while you do submit everything digitally it's all scanned and filed on paper, and to some extent the digitally some digitally submitted information is printed at tax office before processing. Obviously when you have nonlinear data, i.e. paper receipts and invoices and a lot of other paper data, more data means more physical labour.
The problem with audits is it’s an adversarial relationship in that you can’t trust the other party. The wealth of computerized records would be great if you could trust them, but anything the IRS automates is begging to be gamed. On top of this internal systems aren’t forced to use a constant standard.
In effect the IRS is stuck at some level doing audits by hand while handed a deluge of low level data.
That isn't the issue. The issue is that these records are not computerized to begin with, THAT is why you can't trust.
You're looking at the wrong end of the problem. Taiwan has a centralized digital receipt standard and apparently had it for years. Lot's of people still like paper, but in general that digital receipt is easy to check. Germany on the other hand rolled out standardized tamper proof paper receipts. So of course you have audit paper records when the source of the information is paper.
Receipts aren’t the only issue. Take something as simple as a family restaurant, a purchase of say rice may look completely legit but if the family takes it home for personal use then that’s not a business expense. It’s hard to track that stuff down, but misclassification is the most common form of tax fraud rather than falsified records which simply take more effort.
Complete myth that those things are what makes the companies bleed money. It's like when people said we have remove paper money because small coffee shops in italy don't report their earnings. Added it's hard to imagine that those stores steel more money than Starbucks.
And just in case you come back with a calculation on the estimated number of coffee shops in italy compared to just Starbucks. Starbucks is obviously just of the institutionalized crooks.
This discussion is basically the same as guilt tripping peoples straw usage when the biggest offender is obviously the plastic industry.
I think you misunderstood the example, classification of marketing as R&D spending for a tax break is the equivalent. This isn’t about people stealing office pens, this is about people falsifying internal records for tax savings.
The information relevant for the vast majority of taxpayers, including the vast majority of people on HN, is already reported. What this is talking about is all the avenues that aren't open to most taxpayers which are used for tax evasion.
The more relevant part is actually funding the IRS at a level capable of doing its job after decades of systematic gutting. Oh, and if we could actually simplify the tax code and fix the data collection we wouldn't need as many resources in the first place.
Almost nobody employed should have to go through yearly hoops to file taxes. Heck, we probably could eliminate filing and refunds all together were the tax reporting system advanced.
That'd free the IRS to spend their time getting taxes from the people most likely to be dishonest about their taxes.
Yeah, I don’t think government jobs are the main driver of a complex tax code, but rather lobbyists who help write loopholes from which their companies can benefit.
I still can't get over how people fail to realize that arbitrary thresholds for financial reporting (initially set in 1970 at $10k[0]) haven't been adjusted for inflation. To the point where in a not so distant future, settling up funds with friends at a large dinner could in certain cases be considered "structuring"[1]. You have access to all of my credit card records, basically everything I do online, figure it out.
The fed boys have more than enough info, but of course we should trust them with it to tax the rich... Full disclosure, we should definitely tax a-holes with billions in their Roth IRA.
> To the point where in a not so distant future, settling up funds with friends at a large dinner could in certain cases be considered "structuring"[1].
That's a bonkers thing to fear, bordering on conspiracy theory. The feds aren't chomping at the bit so they can bust you and your friends for everyday behavior.
Now, that's not to say they might exploit it in a three-felonies-a-day sense to get someone they have their eye on for other reasons (a-la Al Capone and tax evasion), but if the law too often leads to unjust results, it will be changed. Especially if the unjust result is experienced by people with power and influence (and not just the poor and marginalized).
Deductions are the real "lever" that the ultra rich use, since you can lobby the feds to implement whatever you want. This is why when tax rates post WWII were "over 90%" in top brackets nobody actually paid those taxes. Ironically, in that period most people who would be subject to that tax just took sabbaticals (of sorts) and reduced their income. Contrary to popular belief, most rich people have a far higher IQ than Hollywood actors.
>...most rich people have a far higher IQ than Hollywood actors.
Not surprisingly, back when marginal rates were so high, rich Hollywood actors also hired CPAs to avoid giving 90+ percent of their income to those in power. The previous discussion on this was here: https://news.ycombinator.com/item?id=19031135
> Deductions are the real "lever" that the ultra rich use, since you can lobby the feds to implement whatever you want. This is why when tax rates post WWII were "over 90%" in top brackets nobody actually paid those taxes. Ironically, in that period most people who would be subject to that tax just took sabbaticals (of sorts) and reduced their income.
Did they not pay because they had magic deductions or did they not pay because of sabbaticals and reduced income? Because the former means it was no better than today (and income differential stats around CEO vs line-level employer suggest this is not true), but the latter is by its very nature better than today. It's literally creating more opportunity for more people to earn money? If person A isn't doing the work and making the income, person B is. So inequality will be less!
That high tax rate disincentives a small set of super-high-earners from running ever-more parts of the world? Good!
> It's literally creating more opportunity for more people to earn money? If person A isn't doing the work and making the income, person B is. So inequality will be less!
That's not how things work in reality. Whatever work Jeff Bezos decides to not do as a salaried employee doesn't get distributed elsewhere, because he derives almost no income from his salary.
It has a credit included to make it not that regressive. Compared to tax rates in states like Texas where the poorest quintile pays way more it’s not so bad.
The complexity of the tax code is bound up in efforts to include "rebates" for different activities to offset regressive taxation events.
When someone says "simplify" the tax code - well firstly, this has never happened. A simplification is an amendment, and the tax code gets larger - they've never actually managed to shrink the size of the law there.
But then you get to decide: which exemptions and deductibles are you getting rid of? For who? Because if you want to simplify it, that's what's actually got to happen.
Perhaps because the summary is inaccurate? They also include more auditors, more support personnel, more reporting requirements for financial institutions, and more regulations on tax preparers.
More people with outdated technology won’t fix it. Key statements below. Note that any change in reporting. Requires updated technology as well.
So if they want to make a real improvement, it cannot happen without a big update to their technology. More humans cannot fix the problem, and they cannot handle more information sources without improved technology.
How that is inaccurate is beyond me.
Paragraph 4: “ In particular, the agency’s siloed and antiquated I.T. ”
Paragraph 6: “ This is because they include, for example, modernizing outdated technological systems”
It is inaccurate because it is incomplete. Sure it will help, but it won't give them additional information needed to get the unreported or do much to help to give support to confused people.
> Six hundred billion dollars per year, and growing in "unpaid taxes".
I foolishly tried to file my own taxes in 2018. Used the IRS's free online calculator. According to the letter I got recently, when I put $11k into some tax-advantaged retirement account, it resulted in me not counting that $11k as income, but I actually put it in the wrong account, so that $11k should have counted as income on which I owed taxes.
To put it lightly, I am _extremely unsympathetic_ to the IRS complaining about "unpaid taxes" when... i mean, literally everything about the system is broken.
There are 1000 things I'd rather spend the $80k/yr my wife and I have taken from me, under threats of violence, by the many agencies who think they have a right to our income.
I'm struggling to understand the arrogance that's just dripping through this entire piece.
People in America are struggling right now, it's been a difficult two years. The heads of the "revenue collection agencies", complaining about how their job is difficult?
Your read of the situation is truly bizarre. Yes, the system is broken. That's not the IRS's fault. They have no power to fix it.
And complaining about the system being broken because you make a mistake and it had consequences, and because you have to pay taxes on a large income in order to pay for the costs of operating a modern society, is just whining.
Sure the government has gotten it wrong in the past. But this time we need more government because the right guys are in charge and it will work better this time. Promise.
You say that like the IRS has any power at all to simplify the tax code. That's all congress, who are paid by H&R block and rich people in general to keep it complicated.
I think the difference is that you know that you 'intended' to put the money in the correct account, but the government doesn't care about intent, it only cares about what actually happened. Furthermore, I'm not sure that the free tax form should be blamed for your misattribution of your funds (unless it was prompted and/or executed by the form).
So, double checking everyone's taxes (a step you didn't pay for someone to do for yours) is a hard job. But without that work, the penalties would only be worse in the future. So maybe have a little gratitude for those taking care of you when you don't take care of yourself.
Perhaps if the system was given more resources it might have a chance to become less broken. Of course just pouring money into the problem alone won't fix it, but I think it's clear to see the IRS cannot continue to operate on the level of funding it currently gets.
Implement a flat tax. That would make it easier to collect taxes (and I'm not even saying whether taxation levels should be higher or lower than now. Just pick a rate and get rid of the exemptions). Sadly it would result in less people employed as tax collectors, so tax collectors won't advocate that.
"It is difficult to get a man to understand something when his salary depends on his not understanding it."
There's also going to be a lot of people complaining that flat taxes are regressive because the marginal value of money is different depending on how much you have. Taking that to its logical conclusion means taxing or subsidizing everyone to exactly the same buying power. I'd rather see a no-deduction, no-exception flat tax that treats all income the same coupled with a UBI to give people a flexible but modestly uncomfortable safety net.
Personally I care less about equality and more about fairness. Getting rid of complexity and giving everyone equal access to the benefits of and the burden to support society while reducing complexity and compliance costs sounds great to me. And it still sounds great if my tax burden doesn't change one iota when implemented.
If society feels that it's bad to have a handful of mega rich people, look at modifying the competition laws that let their empires get too big in the first place.
> There's also going to be a lot of people complaining that flat taxes are regressive because the marginal value of money is different depending on how much you have. Taking that to its logical conclusion means taxing or subsidizing everyone to exactly the same buying power.
Er, no, it means assessing the marginal utility curve and taxing everyone an amount that represents the same share of the pre-tax utility of their income, if you believe that taxes should be flat when viewed through a utility rather than dollar lens.
That's very different than taxing or subsidizing to the same end value.
A flat tax is a tax hike on the poorest % of Americans if you try to maintain current spending (hint: you have to, because the US is carrying trillions in debt and spends more then any other country on Earth on it's military).
The taxable burden you'll impose on people for whom every dollar is the difference between essential services, versus the wealthy for whom every dollar is the difference between more investment in their offshore bank account (which they have no incentive not to keep using, because why pay any tax if you don't have to?)
