Mean Joe Biden's IRS Going After Rich Tax Cheats Like He Said He Would
Despite GOP threats, no 'army of IRS agents' doing no-knock raids on Gramma Millie.
The US Treasury and the IRS announced Monday an effort to close a great big stinkin’ tax loophole that only certain “large, complex, partnerships” can exploit, meaning people with assloads of money and ambitious accountants won’t be able to use paper-shuffling to reduce their tax burdens. All told, the agencies expect shutting off this one avenue for cheating will raise more than $50 billion over the next 10 years, possibly more.
The plan will crack down on a practice called “partnership basis shifting transactions,” a little trick that some big partnerships use to “make billions of dollars in taxable income disappear” and thus escape taxation. Here’s how the Washington Post explains it (gift link) so even a little pissant mommyblogger can understand it:
A partnership is a “pass-through” business structure of linked entities that passes income and losses directly to investors, rather than being taxed at a corporate level. When a partnership sells assets such as land or equipment, the taxes are determined only after subtracting the asset’s original cost — the “basis” — from the proceeds.
Certain rules in the tax code allow partnerships to recalculate that basis when other assets move in or out of the business. The IRS asserts that partnerships are regularly manipulating the basis of assets to avoid taxes.
In some cases, the business might repeatedly depreciate the same asset.
In other words, the partnerships are shuffling assets around inside their own “related parties” to avoid being taxed at the rates they would if they sold the assets to an outside entity. Aren’t phony transactions that exist solely for the purpose of avoiding taxes fun?
Deputy Treasury Secretary Wally Adeyemo told reporters that “These transactions don’t create any economic activity for the US. Their sole purpose is to reduce tax bills.” As the Post points out, that violates a rule that transactions have “economic substance,” which these suckers do not, which the IRS considers an abuse of the law that it can crack down on.
And yes, the agencies say, the rise of such hinky practices coincided with recent decades when the IRS was being starved of funding, which the press release doesn’t point out was mostly due to Republicans in Congress, because did they even have to? As a result,
audit rates for these increasingly complex structures plummeted. Filings from passthrough businesses with more than $10 million in assets increased 70 percent, from 174,100 in 2010 to 297,400 in 2019. But the audit rate for these partnerships fell from 3.8 percent in 2010 to 0.1 percent in 2019.
More cheating, fewer auditors to go after it, just the way the GOP wanted it. 2022’s Inflation Reduction Act provided $80 billion over the next decade so the IRS could upgrade its ancient computer systems and hire as many as 87,000 new staff (no, not all at once) to make up for previous cuts and expected retirements as well.
Republicans launched a disinformation campaign, with help, as always, from Fox News, claiming that the IRS was hiring an army of 87,000 stormtroopers who would be busting down the doors of small businesses and auditing — probably at gunpoint!!!! — sweet grandmothers who sell crafts on Etsy.
Instead, this policy and other recent IRS announcements — like May’s announcement that the agency would increase by 50 percent its audits of individuals making more than $10 million in annual income — underline that the new funding is going exactly where it was planned: to making sure that the wealthy pay something at least approaching their fair share in taxes.
As the agencies note in Tuesday’s announcement, the top one percent of tax filers have an annual gap of about $160 billion between what they should owe and what they actually file and pay, so there’s still plenty of legal tax revenue that can be recovered from them, even without actual tax increases, which would be a damn good idea anyway.
The GOP will come up with a whole bunch of new scare stories to prevent that, we’re sure.
[Treasury & IRS announcement / WaPo (gift link) / NBC News]
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You simply have NO idea how much these action by the IRS please me. It about damned TIME for the mendacious malcontents manipulating the tax code to wheedle out of paying their fair share.
Them what has the most $$$ should pay the most $$$ in taxes.
Mitt Romney's job at Bain Capital was to minimize the taxes Bain paid. He specialized in moving profit offshore leaving debt behind in the USA which was used to show losses to further reduce taxes. He was good at it.