It’s getting worse: The IRS now audits poor Americans at about the same rate as the top 1%

Every year, the IRS, starved of funds after years of budget cuts, loses hundreds more agents to retirement. And every year, the news gets better for the rich — especially those prone to go bold on their taxes. According to data released by the IRS last week, millionaires in 2018 were about 80% less likely to be audited than they were in 2011. But poor taxpayers continue to bear the brunt of the IRS’ remaining force. As we reported last year, Americans who receive the earned income tax credit, one of the country’s largest anti-poverty programs, are audited at a higher rate than all but the richest taxpayers.

How the IRS was gutted

In the summer of 2008, William Pfeil made a startling discovery: Hundreds of foreign companies that operated in the U.S. weren’t paying U.S. taxes, and his employer, the Internal Revenue Service, had no idea. Under U.S. law, companies that do business in the Gulf of Mexico owe the American government a piece of what they make drilling for oil there or helping those that do. But the vast majority of the foreign companies weren’t paying anything, and taxpaying American companies were upset, arguing that it unfairly allowed the foreign rivals to underbid for contracts.Pfeil and the IRS started pursuing the non-U.S. entities. Ultimately, he figures he brought in more than $50 million in previously unpaid taxes over the course of about five years. It was an example of how the tax-collecting agency is supposed to work.But then Congress began regularly reducing the IRS budget.

Why the IRS’ recent dark money decision may be less dire than it seems

Starting next year, the Internal Revenue Service will no longer collect the names of major donors to thousands of nonprofit organizations, from the National Rifle Association to the American Civil Liberties Union to the AARP. Democratic members of Congress and critics of money in politics blasted the move, announced last week by the Treasury Department, the IRS’ parent agency. The Democrats claim the new policy will expand the flow of so-called dark money — contributions from undisclosed donors used to fund election activities — in American politics. For their part, Republicans and conservative groups praised the decision as a much-needed step to avoid chilling the First Amendment rights of private citizens. The Supreme Court’s decision in Citizens United unleashed these groups, typically organized as 501(c)(4) nonprofits, to spend unlimited amounts of money on campaign ads.