As if being poor weren’t enough

January 11, 2006

On the surface, it’s offensive enough that the Bush White House and congressional Republicans have passed exorbitant tax cuts that overwhelmingly benefit the wealthy while simultaneously cutting already-modest funding for programs that aid the poor. But to literally add insult to injury, the IRS is also unfairly targeting the poor and freezing the refunds they deserve through the earned income tax credit.

Tax refunds sought by 1.6 million poor Americans over the last five years were frozen and their returns labeled fraudulent, although the vast majority appear to have done nothing wrong, the Internal Revenue Service’s taxpayer advocate told Congress yesterday.

A computer program identified the refund requests as suspect and automatically flagged the taxpayers for extra scrutiny for years to come, the advocate said in her annual report to Congress. These taxpayers were not told that the I.R.S. criminal investigation division suspected fraud.

The advocate, Nina Olson, said the I.R.S. devoted vastly more resources to pursuing questionable refunds sought by the poor – which under the highest estimate is $9 billion – than to the $100 billion in taxes not paid each year by people who work for cash and either fail to file tax returns or understate their income.

This is crazy. The IRS is going after those who are poor, haven’t done anything improper, aren’t told that they’re suspected of fraud, and aren’t even offered a chance to respond. The report issued yesterday explained that the average reported income of those targeted by the IRS was about $13,000 — and the refund due was about $3,500.

And how are wealthier taxpayers treated? As Kevin noted, we have no idea.

Records showing how thoroughly the Internal Revenue Service audits big corporations and the rich, and how much it discounts the additional taxes assessed after audits, are being withheld from the public despite a 1976 court order requiring their disclosure, according to a legal motion filed last week in federal court in Seattle….The agency has no plans to release the information, [IRS spokesman Frank] Keith said Friday.

Class warfare is an ugly thing, isn’t it?

I wonder how many of these same extremely poor people voted for Bush either time because, “He’s a straight shooter,” or “I’d rather have a beer with him than Gore or Kerry.”

He is pure evil. Pure, concentrated, end-of-the-world type evil.

  • It’s more than Bush, though. The trend to oligarchy is epitomized by Junior, but is much larger. This is the same problem that produced scoundrels like Abramoff, DeLay, Frist, Cunningham, etc. That list goes on and on.

    Until corporate influence and money is taken out of the political system the middle class and poor will suffer while the rich and corporate profit.

  • Bush may be evil, but he’s the kind of evil bred from indiffernece to others. On the other hand, Cheney, Rummy, Perle, Wolfowitz…those bastards are pure, unadulterated evil…and they pull the strings.

    Back on topic, I work for a tax consulting firm that assists corporations with compliance, but I have seen the results of federal audits for some of these companies after the fact.

    For the most part, the IRS has large companies ($3bb revenue plus) on regular audit cycles…that means every 2-3 years they are in looking at the prior 2-3 year filings. Most of the time, there are small adjustments. Occasionally they uncover a larger issue where the company was trying to pull one over on them. Most audits of this nature drag out for years and don’t get settled without a lot of legal wrangling. And the losing side has to pay interest on the tax/refund.

    My hunch is that the IRS is falling short is on the auditing of rich individuals and companies in the $100 million – $1billion revenue range. That should be the area of most interest to the public.

  • It’s also my understanding that the IRS doesn’t bother pursuing many cases against the very rich or very corporate largely becuase of their budget. They don’t have the funding or the staff to outlast many of their targets, who can spend tens of thousands in legal costs in order to save millions in back taxes. So they instead disproportionately target those who can’t pay for a protracted legal fight – the middle class and poor.

    Gridlock, your description of what happens rather lends itself to support this theory; the “legal wrangling” costs money, and I’ll bet in these budget-strapped (unless you’re the Pentagon) times, the IRS is playing its cards ever more conservatively.

  • This pernicious tax assault against the poor actually finds its roots in the Bush 1 administration. Although too many years have passed for me to be able to give citations, I clearly remember this change:

    Ronald Reagan expressed the policy of going after the “big shots” who owed millions in taxes and more or less “ignoring” those whose liability was UNDER $25,000.00.

    Bush 1 came into office and realized that, as stated by Mark above, the creeps owing millions could fight to the grave with superior resources and defy collection.

    He then ORDERED the IRS to specifically target the poor taxpayers, who clearly would be unable to fight “big government”, and thereby assure that they could collect ANY PENALTY assessed, even if it was mad by mistake or ON PURPOSE.

    It is clear that Bush Jr continues in Daddy’s mold, and that the nut doesn’t fall far from the tree now that the glove is on the other foot (sorry, I ran out of metaphors).

  • What makes the IRS conduct even more heinous is that Congress now requires that anyone who, for whatever reason (inadvertance, misreading the instructions, whatever), improperly takes the earned income credit for one tax year is legally barred from making a future earned income credit claim for ten (10) years. Ten freaking years!

    I have worked in tax law for the better part of three decades, and I have never seen anything so draconian, even for the most egregious tax fraud schemes ever devised. Is there class warfare going on? You can bet your sweet ass, and it is being led by those Jesus loving, morally upstanding, compassionate conservatives, called the Rethugs.

    Lying.Fucking.Bastards. May they all rot in Hell…

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