IRS Buttwipes Tackle the Poor

[Timber Loftis]

In the face of corporate tax cuts and tax cuts for the rich, this is especially insulting. $6.5 billion to $10 billion lost money is the amount they're chasing - which is peanuts compared to what the white collar folks cheat them out of, peanuts compared to corporate welfare, and probably only a few bucks more than it will cost them to step up enforcement efforts. It is simply enforcement money spent better elsewhere - like at the airline bankruptcy golden parachutes we're now learning about.

Here's the excerpt to pay attention to to understand my ire:

Instead of conventional welfare benefits, the earned-income tax credit provides an offset for the Social Security taxes low-income workers have already paid, along with a credit based on their earnings that is intended to give them an incentive to work. The credits vary according to income and family size, but no household with earned income above $34,692 is eligible. The average tax credit, paid by the government by check, was $1,976 for households with children in 2001. That is less than the average food stamp benefit for households with children that year, $2,904. But the I.R.S.'s proposed rules would make it much harder to qualify for the tax credit than for food stamps.

Anyway, read on ......
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Today's NY Times:

I.R.S. to Ask Working Poor for Proof on Tax Credits
By MARY WILLIAMS WALSH

The Internal Revenue Service is planning to ask more than four million of the working poor who now claim a special tax credit to provide the most exhaustive proof of eligibility ever demanded of any class of taxpayers.

The I.R.S., trying to prevent errors and cheating, says it needs greater proof of eligibility months before people claim the credit on their tax returns because its efforts to find errors through audits after the fact have not worked. Treasury officials estimate that $6.5 billion to $10 billion is lost to improper payments each year.

But some tax experts criticize the higher burden of proof as unfair and a wasteful allocation of scarce I.R.S. enforcement dollars. They say that corporations, business owners, investors and partnerships deprive the government of many times what the working poor ever could — through both illegal means and legal shelters — yet these taxpayers face no demands to prove the validity of their claims in advance with certified records and sworn affidavits.

Others warn that the proposed I.R.S. rules will set a standard of proof so high that it will be difficult, and in some cases impossible, for honest taxpayers to meet it. As a result, some people entitled to the tax credit will no longer receive it. And those who do manage to file successful claims will almost certainly have to pay commercial tax preparers more for helping them with the extra paperwork.

"There is this double standard," said Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a research group in Washington financed mainly by large foundations. "The losses are larger in other areas of the tax code, but somehow a different standard gets applied to this."

Nina E. Olson, the I.R.S. taxpayer advocate, said in her report to Congress this year that two-thirds of audited claims for the tax credit were eventually approved.

The new rules apply to the earned-income tax credit, a provision enacted in 1975 and expanded several times. The credit has long had bipartisan support because it has lifted large numbers of people out of poverty without offering the sort of assistance often derided as handouts.

Instead of conventional welfare benefits, the earned-income tax credit provides an offset for the Social Security taxes low-income workers have already paid, along with a credit based on their earnings that is intended to give them an incentive to work. The credits vary according to income and family size, but no household with earned income above $34,692 is eligible.

The average tax credit, paid by the government by check, was $1,976 for households with children in 2001. That is less than the average food stamp benefit for households with children that year, $2,904. But the I.R.S.'s proposed rules would make it much harder to qualify for the tax credit than for food stamps.

Republicans and Democrats have both supported expanding the tax credit, but as the cost of the program has risen, many Republicans have been vehement in saying that the program is riddled with errors and fraud.

President Bush has praised the tax credit. But his administration has also complained about fraud, and the president has asked Congress for $100 million and 650 new employees to identify potentially erroneous claims before any money is paid out.

There is a similar effort with federally subsidized school lunches. Eric Bost, the under secretary of agriculture for food and nutrition, has increased efforts to weed out students who officials say are ineligible for free or subsidized school meals.

Asked about the I.R.S. proposal, the Treasury issued a statement saying it was committed to reducing "the unacceptably high error rate" and "to get the benefit to those who are entitled but only to those that truly qualify."

A Treasury official who insisted on not being identified said it was unfair to judge the size of the overpayment problem on the basis of just one year's tax credit, because the overpayments can continue year after year until each minor child listed on a false claim turns 18.

"It's a permanent thing," she said. "The I.R.S. tends to take things that are permanent very seriously, and put a lot of resources into them."

[ 04-25-2003, 02:46 PM: Message edited by: Timber Loftis ]

[antryg]

It is always easier for people who make $250,000+ per year and pay less than $1,000 dollars in taxes to complain about those on welfare and welfare fraud. They aren't the ones trying to live and support a family on $7.50 an hour and NOT be on welfare. The working poor don't have a voice or advocate in government. To often it appears that the national view about those who want to and will work at low wages is best summed up by: "I believe that you should kick a man when he is down. If he gets up he deserves a second chance." Unfortunately a chance doesn't mean any help.

[Stratos]

It´s easier to hunt the small Ants than the big Tiger.

BTW antryg, your hair is on fire

[antryg]

Originally posted by Stratos: It´s easier to hunt the small Ants than the big Tiger. BTW antryg, your hair is on fire

ohmygawd! I didn't realize! I NEED WATER!!!!!

[Stratos]

Here you go [img]graemlins/toilet.gif[/img]

[Azred]

It is easier for them to go after the people already using the EITC, because they cannot afford high-quality tax attorneys who can put together a wonderful tax shelter portfolio. The people who could afford to pay their full tax are also capable of finding ways out of paying. Of course, I agree with this--were I able to afford to avoid paying I would do so because the law allows it; after all, it is their money.

Unless I am mistaken (yes, even I make mistakes every now and then) there is no Federal law stating that you must pay taxes, only a schedule of penalties for not doing so. Strange, yes?

[khazadman]

There's just one problem with all this talk about taxes and the working poor. And that is the fact that they will get all their tax money back and in alot of cases some extra. The top 50% of wage earners in this country pay 96.09% of all taxes. It's past time that government stopped trying to shackle the producers in this country.

[antryg]

khaza, I just want more of those workers helping with their taxes instead of given the incentive of not working and actually making more in the form of welfare.

[Timber Loftis]

Originally posted by khazadman: There's just one problem with all this talk about taxes and the working poor. And that is the fact that they will get all their tax money back and in alot of cases some extra. The top 50% of wage earners in this country pay 96.09% of all taxes. It's past time that government stopped trying to shackle the producers in this country.

Taking a (let's use some realistic numbers here) 8-10% cut out of someone who makes $1 mil plus is not exactly "shackling the producers." Note the people who get hit hardest are the $60K-$180K group, people who are not yet wealthy enough to be (generally) starting businesses and are thus not really the "producers." Sorry, but if you make $1Mil plus, we should be taking at least a 50% hunk outta your ass for social usery. Well, maybe I don't feel that extreme, but I would certainly attack someone who would still be rich after I was finished before I would whine about those poor downtrodden rich bastards.

Besides, all this is [img]graemlins/offtopic.gif[/img] The point of this [img]graemlins/rant.gif[/img] of mine is that the IRS is spending a lot of money chasing down $2K tax breaks per poor family they catch making a technical mistake on the tax form. It costs more to implement this program than it will save. Big government's Big waste at its finest. The money this will save us as a society is less than zero - it is a net loss. MOreover, even if it wasn't, the money would still be better spent ferreting out the next Enron/Chewco scheme that finds a creative way to hide $30 million in losses from investors.

Spend time saving pensions and social security rather than cracking the whip above the heads of the poor yet again.

[Sir Kenyth]

Originally posted by khazadman: There's just one problem with all this talk about taxes and the working poor. And that is the fact that they will get all their tax money back and in alot of cases some extra. The top 50% of wage earners in this country pay 96.09% of all taxes. It's past time that government stopped trying to shackle the producers in this country.

Dude! Of course they do! It makes perfect sense when you think about it! They pay 96% of the taxes. I'm also willing to bet that they make about 96% of the income! Listen to the way that comment was phrased! A perfect example of statistical nonsense! Sheesh!

After all taxes are paid everyone except poverty level people pay about the same amount percentage wise. This includes ALL INDIVIDUAL taxes paid. Income, property, and sales tax. It's been argued that I can't include state taxes in a coversation about federal ones. I beg to differ. Taxes are taxes and no matter how you divvy them up they still cost you the same!