May 072017

Los Angeles.

If you’re still laboring over your irs seen on tax forms, here’s a comforting thought: Unless you made well over $1 million–and unless your financial life is as complicated as, say, Donald Trump’s–your chances of being audited are getting closer to zero. The IRS says it will process 152 million individual tax returns this year; only about a million returns will trigger an audit. That’s roughly two-thirds of 1%, the lowest rate in more than a decade. There’s a simple reason for the decline: since 2010, Congress has reduced the tax agency’s budget by roughly 17% in real dollars. Spending on tax enforcement, including audits, has been cut even more deeply–almost 30%.

As a result the federal government is losing at least $7 billion in revenue each year, according to tax expert William G. Gale of the Brookings Institution. A smart businessman would look at those numbers and say: That’s nuts. “Every dollar spent on tax enforcement will produce at least $6 in revenue. That’s a return on investment any businessman would love.” That’s what Steven Mnuchin, the Los Angeles banker who became Trump’s treasury secretary, concluded when he took his first look at the IRS. A stronger IRS, Mnuchin said, could reduce the federal budget deficit by closing the “tax gap”, the more than $450 billion difference between what the federal government is owed and what it actually collects.

“This is one of the areas where I think we will all agree: to the extent we add resources, we can collect more money,: he said. And he was sure the president, another hardheaded businessman, would agree. “We add people and we make money-he’ll get that completely. That’s a very quick conversation with Donald Trump.” If Trump is thinking clearly about the wrenching changes he’s seeking in the federal budget–large scale tax cuts, domestic spending cuts, and a big increase in defense spending–he’ll listen to Mnuchin’s argument about revenue.

  •  05/07

 Leave a Reply