I found these remarks by the editors of the Wall Street Journal interesting but possibly not for the reasons they editors might want. The editors comment on the difficulties being encountered by the Internal Revenue Service in accomplishing what President Biden intended:
The Internal Revenue Service got an audit of its own in time for Tax Day, and two irregularities jump out. President Biden’s plan to hire a new army of tax collectors is falling flat, and the agents already at work are targeting the middle class.
Those are two findings of the IRS’s watchdog, the Treasury Inspector General for Tax Administration (Tigta). The report examines IRS progress on mandates from the Biden Administration backed by tens of billions in new funding. The first supposed goal was to audit more ultrawealthy and fewer middle-class filers, but it’s not going so well.
By last December the IRS decided that it wouldn’t begin tracking its progress until later this year. That’s because the agency has been slow to shift its focus to high-income taxpayers, who make up a small share of total filings. Its April 2023 strategic plan pledged that future audits would disproportionately target individuals making at least $400,000, but “did not include specifics on how the IRS was going to ensure it met this commitment,” says Tigta.
That part isn’t surprising at all. In fact, it’s exactly what I predicted. There’s a reason the IRS “targets the middle class”. That’s the low-hanging fruit. Those earning under $200,000/year don’t fight back as hard as the “ultra-wealthy”.
But I found this surprising:
Tigta reports that revenue-agent recruitment is “far below” the agency’s target, and it hired only 34 in the first six months of its expansion, according to trade publication Government Executive. That compares with its goal of 3,700 in the first year.
The agency faces the same tight labor market as any other employer, but the job specs aren’t bad. A typical salary for these agents is about $125,000, plus public-employee perks such as up to $60,000 in student-loan forgiveness. But for one reason or another, America’s treasurers and accountants aren’t lining up to become federal tax collectors.
I’m skeptical that the shortfall is due to a “tight labor market”. I suspect that there are other reasons that are keeping the hiring low. An example of such requirements could be the credentials being required or relocation requirements. Given that only 34 have been hired, an enterprising journalist should be able to identify them (their hiring is public record after all) and check their locations and biographies. I suspect the truth won’t fit either the editors’ agenda or the image the IRS wants to project.
Per BLS, UE for accountants and auditors is 1.3%. While the returns on going after the high earners has always been high, they are difficult cases as they hire top level accountants and tax lawyers to defend themselves. Tax lawyers in particular get paid a lot, so I am guessing the IRS is looking for people with more than basic accounting degrees and is facing stiff competition. If they need to hire actual tax lawyers, seems likely, the pay would be a pittance as described. (In general, gove jobs overpay low level workers and underpay higher level workers compared to the private sector.)
Anyway, why is there so much guessing? Just go look up the actual requirements.
https://www.roberthalf.com/us/en/insights/research/data-reveals-which-finance-and-accounting-roles-are-in-highest-demand#:~:text=Job%20volumes%20in%20corporate%20accounting,unemployment%20rate%20of%20just%201.3%25.
Because that link tells you nothing about the IRS.
Who wants to bet in approximately 5-10 years, the outcome was disappointing (as instead of the $100 billion over 10 years that were supposed to be found, they got $10 billion); and they will say the point the “rich” were almost all following the rules; since there taxes were optimized by their lawyers and accountants. Instead to really raise money Congress would need to change the rules; to eliminate all of the loopholes and gaps in tax law.
In the meantime, the supposed savings is being spent, and will have been spent already. Honestly, that’s one of the biggest problems with how Congress does budgets / accounting. “Projected savings” from changes in law gets “spent” before it actually shows up on the income statement.
steve: Tax lawyers in particular get paid a lot, so I am guessing the IRS is looking for people with more than basic accounting degrees and is facing stiff competition.
The rich can always outbid. They can poach the very people investigating them. As an example, the rich poached the people who worked in the ratings agencies, allowing them to reverse engineer the ratings system, so they could sell toxic securities for the price of high-rated securities. The result was that a few got huge profits, while the many paid the price in the Great Global Securities Meltdown.
Qualifications for being an IRS examiner are here. They’re pretty basic. More than 40,000 people graduate with an undergraduate accounting major each year. You should be able to hire more than 34 people from that large a pool.
The $125,000 the WSJ editorial cites exceeds the typical starting salary for an accountant. Either they’re not looking for IRS examiners or there are qualifications beyond those they state.
Dave and Steve: I think you guys are missing an essential point. I think Curious is closer.
Most professional tax accountants and lawyers don’t intimidate the IRS. The IRS just understands that if returns are prepared by pros they are likely to be right, or perhaps aggressive. In either case: not where the money is. These guys don’t commit fraud. Bad career move.
Its politicians and wild assed partisans like steve who insinuate that these professionals disobey the Code, and are impervious to attack because they will “fight back.”
To be sure, a client can instruct their professionals to take aggressive or standard postures. But a professional will not sign a return if he/she suspects untoward behavior. They simply advise the client, in an environment of uncertainty endemic in the Code, what the ramifications are for taking an aggressive posture.
The IRS goes after the middle class because the number of payers (large) x $ is large, and that is actually where most of the fraud is. The small business owner who charges the country club as a business expense, including his mistress and Chateau Lafitte. The family who donates some shoes, and it now is a $500 deduction The home office. And so it goes. The notion of the rich as tax cheats is convenient, but middle America is the cheating class. Few eyes on them, traditionally.
We all know why the tax code is so complex. Politicians and pundits, and steve, should just STFU. You want tax fairness? Flat tax.
Never happen.
IF the IRS is trying to hire 3,700 tax attorneys, that goes directly to the title of my post. They’re dreaming. There are fewer tax attorneys than that in the U. S. They’re dreaming.
Even better would be a prebated VAT, prebated on an income-adjusted scale.
I believe that a fairly skewed definition of “fairness” is being used. It’s certainly not the conventional usage of the word. I’m not quite sure how to state it. Breaking one of the cardinal rules of micro? “Don’t compare utility functions”.
The tax code reminds me of an old client of mine. They had the most complex system of incentive pay you can possibly imagine. They had individual incentives and group incentives, bonuses for producing more than the standard on a sliding scale. They believed that the complexity was the key to their success. Nobody understood it but they thought they were benefiting from it.
Dave-Link was confirming the UE rate and overall difficulty finding accountants. I think the WSJ should have looked it up. They should know how to easily find it.
Back before the GOP started cutting back IRS employment they used to go after richer people. IIRC the ROI was about 10, so it was worthwhile doing it. The wealthy dont have better morals than everyone else, just more money. They commit plenty of fraud. Besides the large scale fraud like SBF, Theranos, Madoff, etc we had the Panama papers and the money hidden in Swiss accounts, for which almost all of the wealthy got amnesty. Now, if you want to claim that the majority of wealthy people dont cheat I would agree but at least as high a percentage as the general population cheat.
Why is the tax code so complex? So that the wealthy people who got their congress critter to make it that way would benefit. Its certainly not aimed at the bottom 99%.
Steve
I’ve never claimed that. I think that, depending on how you define “cheat”, EVERYBODY cheats. There is almost no way to avoid cheating. Between the complexity of the law itself and the IRS’s interpretations and regulations our tax code is a mess.
Drew: The notion of the rich as tax cheats is convenient, but middle America is the cheating class.
It’s all about incentives. The rich will almost never be held criminally liable for “inadvertent” mistakes. (Just ask their lawyer.) Due to the rarity of audits, and the power the rich can wield to overwhelm outside auditors, they will rarely even have to pay the back taxes, much less a penalty. Hence, the incentive is to cheat.
Dave- So the wealthy influence how tax laws are written to benefit themselves then they claim it’s so complicated they have to cheat. Now I see why Drew claims they never cheat.
Steve