Saturday, December 30, 2006

Study: IRS not enforcing tax laws on big corporations

The New York Times's David Cay Johnston (probably the best journalist in the country covering tax policy) has a very interesting, and extremely troubling report on how the IRS has basically abdicated its responsibility. Based on data recently made public, the federal agency under President Bush has dramatically cut the amount of time it spends auditing the nation's largest corporations. Specifically, "the I.R.S. had reduced the time spent on each audit by 21 percent in the last five years, to 958 hours from 1,210 hours. At the same time, the number of actual audits, which had increased in the last two years, has fallen back to the level of 2002."

At a time when the US is experiencing record budget deficits thanks to tax cuts for the rich, the continued prosecution of an illegal and immoral war in Iraq and necessitating the wholesale slashing of spending on the social "safety net" for the working poor - the fact that our government is not enforcing tax collection from multibillion dollar corporations that benefit from being based in this country is simply unconscionable. Put another way, at the same time the GOP is telling this country's most vulnerable citizens that they will have to do without much-needed government services, it is nodding and winking to corporate America that the tax laws don't need to be complied with. It also directly contadicts statements made by IRS commissioner Mark Everson that he has increased tax law enforcement during the past three years.

It is also a development that has not occurred in isolation. As I discussed on this blog back in August, Johnston had reported back in July that Bush eliminated the jobs of nearly half of the lawyers at the IRS responsible for auditing tax returns of some of the wealthiest Americans, specifically those who were subject to gift and estate taxes when they transfer parts of their fortunes to their children and others. The irony of this was exquisite - while trying to eliminate the estate tax the administration was simultaneously working to create a back door tax cut via lack of enforcement.

Discussing the most recent revelations about the IRS and its lack of enforcement, Johnston notes: "The nation's 12,137 largest corporations, with $250 million or more in assets, earn 87 percent of the profits reported by the nation's more than five million businesses.

About 4,000 of these companies were audited in the fiscal year that ended Sept. 30. If large companies were audited at the same rate as a decade ago, when the auditing staff was a third larger, more than 6,000 of these companies would have had their tax returns examined.

Auditors concluded that the 4,000 companies underpaid the government by $13.7 billion, accounting for three-fourths of all the individual and corporate tax cheating uncovered by I.R.S. examinations of returns that year."

A simply incredible and disgusting display of the Bush administration's continued war on the Middle Class.

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