Gaming the system


From the New York Times (hat tip to the NewMexiKen):

The federal government is moving to eliminate the jobs of nearly half of the lawyers at the Internal Revenue Service who audit tax returns of some of the wealthiest Americans, specifically those who are subject to gift and estate taxes when they transfer parts of their fortunes to their children and others.

The administration plans to cut the jobs of 157 of the agency’s 345 estate tax lawyers, plus 17 support personnel, in less than 70 days. Kevin Brown, an I.R.S. deputy commissioner, confirmed the cuts after The New York Times was given internal documents by people inside the I.R.S. who oppose them.

This is bad enough, but check out these grafs showing the turnaround of the American conscience:

Mr. Brown said that careful analysis showed that the I.R.S. was auditing enough returns to catch cheats and that 10 percent of the estate audits brought in 80 percent of the additional taxes. He said that auditing a greater percentage of gift and estate tax returns would not be worthwhile because “the next case is not a lucrative case” and likely to be of relatively little value.

That is a change from six years ago, when the I.R.S. said that 85 percent of large taxable gifts it audited shortchanged the government. The I.R.S. said then that it would hire three more lawyers just to audit taxable gifts of $1 million or more.

Over the last five years, officials at both the I.R.S. and the Treasury have told Congress that cheating among the highest-income Americans is a major and growing problem.

So, while cheating is a growing problem, we’re working to eliminate our tools for catching those who cheat? Kevin Drum has the right idea:

Actually, this makes sense. See, back when Clinton was president rich people cheated on their taxes a lot. It was all part of the decline in honor and dignity that the Clinton White House presided over, and that’s why he was forced to hire more estate tax lawyers during the 90s.

But that all changed when George Bush was elected, and now rich people feel downright embarrassed about using sophisticated estate planning services and dodgy asset valuation schemes to reduce their estate tax liability. This newfound respect for the law means that we just don’t need all those lawyers anymore. The super-rich can be trusted to do the right thing all on their own.

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