The opportunity for tax cheating -- and the place where improved compliance recovers the most money -- is with the richest taxpayers.
First, let's get something straight. I am not against rich people. I am in favor of prosperity. I want more of it, and I want it for everyone.
Talking about tax-cheating-millionaires is dangerous ground for any Democrat. It comes across as hostile to the group -- wealthy people -- instead of hostility to the act of tax cheating. I cringed inside when I heard Bernie Sanders condemn "millionaires and billionaires" as if they were immoral somehow for having gotten rich. Or as if property is by definition "theft" from someone more deserving. It isn't, not to my mind. It usually — not always — is the result of having created value. Most Americans feel that way, that wealth is a good thing. People buy lottery tickets, not in the dream that someday they can get an extra $2/hour to keep working at a job they endure because it pays the bills. They imagine getting rich. Democrats will do better in elections if their policy and messages are squarely on the side of more prosperity for their voters. A chicken in every pot, yes. Also no debt. And a new Ford F150 truck in the garage, if they want a truck. Or maybe a BMW. And a bedroom for every child, a big yard, and a landscape crew to take care of it.
Wealthy people are likely to have complicated tax returns. Those create huge opportunities for gray-area cheating on taxes. Combining opportunity with self-interest leads to widespread tax underpayment.
The revenue received by auditing the wealthy climbs substantially at the 95% percentile of income. Audits of average Americans, up through the 70th or 80th percentile of income have the effect of enforcing the institutional norm of tax compliance. That is a worthy goal, but the significant net revenue comes from auditing the wealthy.
Currently the chances of being audited are small. Every professional tax preparer knows that. So do well-informed taxpayers. The real leverage in tax compliance comes from the deterrent effect of the possibility of audit. The IRS calculates 3-to-1 deterrent-leverage for the median taxpayer, and 12-to-1 for the top 10% of taxpayers.
Funding for IRS enforcement dropped after 2010. Democrats attempted to restore funding back to the 2010 level of overall service and enforcement to add back lost personnel.
A credible chance of an audit will lower the deficit because it will raise money legally owed. It will increase tax fairness because honest taxpayer won't be subsidizing dishonest ones. It will do one more thing important in a healthy democracy. It will re-affirm a social norm that "good Americans obey laws, including paying one's taxes." After all, not enforcing the law implies that the government doesn't really expect compliance, not really.
Trump has been the example of the "bad boy," the scofflaw. The system is rigged, he says, so only saps -- losers -- play along. He has done this as regards taxes ("I'm smart."), on emoluments, on the Hatch Act, on awarding pardons, on documents, on elections, on the peaceful transfer of power. Leaders set examples. Republican legislators who opposed re-establishing credible likelihood of being audited -- every single Republican in Congress -- were part of that mindset of saying the laws we pass aren't worthy of being enforced. It is a dangerous one for democracy.
We should welcome tax compliance. File an honest tax return. Expect others to do so as well. Audits: Bring them on.
Senate Republicans attempted to get rid of the estate tax that starts at $12.9 Million per person (couples are double) again this April as they have every year since 2017. This affects the top 0.1% or about 2600 households. This is their priority. They are most worried about the welfare of a couple leaving $23 million or more to their offspring. With priorities like that, you can see why we have the tax code we have. For the record, Oregon's estate tax starts at $1,000,000.