Why the Rich Now Have Even Less to Fear from the IRS

Plus, why Trump's big infrastructure plan may crash quickly

Why Trump's Bipartisan Infrastructure Plan May Crash Quickly

President Trump is scheduled to meet with House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer on Wednesday to discuss how to pay for a potential infrastructure package of $1 trillion to $2 trillion. But the prospects for an agreement appear slim, based on the latest reports.

"President Trump will have a number of pay-fors to share, but they will not be tax increases," an unnamed senior administration official told Axios. That means Trump is likely to present a list of spending cuts that won’t go over well with the Democrats, Axios’s Jonathan Swan says.

Meanwhile, Politico’s Nancy Cook and Andrew Restuccia report that the White House “is reassuring conservative leaders that it has no plans to hike the gas tax to help fund a massive infrastructure package.”

The bottom line: “Senior White House aides and members of Congress are deeply skeptical that a massive infrastructure bill can get approved,” Cook and Restuccia write. “The political reality could result in a standoff between Trump and Democratic leaders, with both sides publicly going through the motions of negotiating an infrastructure deal in hopes of pointing the finger at the other side if it falls apart.”

House Dems Consider Flexing Their Power of the Purse in Trump Oversight Battles: Report

House Democrats are considering using their power of the purse to pressure the Trump administration into complying with their subpoenas for documents and testimony, Axios’s Alayna Treene and David Nather reported Sunday. The idea, in a nutshell, would involve adding provisions in appropriations measures that would restrict funds to a department that isn’t complying with congressional subpoenas — but discussions about how and whether to do so have reportedly only been preliminary.

The bottom line: Given the time it takes to pass spending bills, the tactic wouldn’t likely to lead to quick results, a House appropriations aide tells Axios. “It's a move that has a high risk of failure, since appropriations bills have to be approved by a Republican-held Senate and signed by the president,” Treene and Nather write. “But given the Trump administration's determination to resist all of the Democrats' oversight efforts, and the prospect that court fights could take years, they're being forced to consider every tool they might have.”

The IRS Audit Rate Keeps Falling, Now Below 7% for Households Making $10 Million or More 

The IRS audited just 892,000 individual tax returns last year, for an audit rate of 0.59%, the agency said Monday. That marks the seventh year in a row that the audit rate has fallen.

The IRS Data Book for fiscal year 2018 shows that audits of high-income households fell particularly sharply. Last year, the IRS audited 6.66% of households reporting more than $10 million in income, down from 14.52% the year before — and 34.69% in 2015.

Critics say the IRS is being starved of the resources it needs to do its job, noting that the agency’s budget is 19% smaller than it was in 2010, adjusted for inflation. Treasury Inspector General for Tax Administration J. Russell George testified earlier this month that the IRS was missing out on at least $3 billion in revenues each year due to a lack of personnel.

President Trump’s 2020 budget calls for a 1.5% increase for the IRS budget, as well as $15 billion over 10 years for enforcement. The White House said the increased funding would more than pay for itself through stricter enforcement.

Republican lawmakers, who have cut the agency’s budget for years, have expressed skepticism about increasing IRS funding. “I’m not averse to beefing up their budget a little bit but I want to see results,” Sen. John Kennedy (R-LA), who heads the subcommittee that oversees the IRS budget, told The Wall Street Journal’s Richard Rubin. “I’ve got a lot of confidence in the new commissioner and in the new secretary, but I’m not into just throwing money at the wall because the bureaucracy says we need more.”

Number of the Day: $3.5 Trillion

That’s how much revenue the IRS collected in the 2018 fiscal year. The agency also processed roughly 250 million tax returns and issued $395 billion in refunds.

Americans Seen Tax-Paying as a Duty

The IRS may not be conducting audits like it used to, but according to the agency’s Data Book for 2018, most Americans still believe it’s not acceptable to cheat on your taxes. About 67% of respondents to an IRS opinion survey “completely agree” that it’s a civic duty to pay “a fair share of taxes,” and another 26% “mostly agree,” bringing the total in agreement to over 90%. Accounting Today says that attitude has been pretty consistent over the last decade.

Tax Cheating Data Point of the Day

“Underreporting of income skyrockets when no third party is required to report it, the IRS has found. In instances where companies report their contractor payments, only 7 percent of contractors underreported earnings, according to a 2016 report by the agency,” Roll Call’s Shawn Zeller reports. “But that rose to 63 percent in cases where companies did not report payments.”

Zeller says that the IRS suspects many Uber and Lyft drivers are underreporting their incomes, and it wants the companies to report earnings paid to drivers starting at $1,000, significantly lower than the current $20,000 threshold.

Buttigieg Slams GOP Tax Cuts, Proposes Tax Hikes in Fox News Town Hall

Democratic presidential candidate Pete Buttigieg criticized the 2017 Republican tax cuts and called for a number of tax increases during his Fox News town hall in Claremont, New Hampshire, Sunday night.

Asked early on whether the country needs “generational change” among Democratic leaders, Buttigieg brought up the need to address climate change and fiscal sustainability:

“Making sure we actually have a fiscally sustainable path — I know it’s not as fashionable in my party to talk about deficits — but you look at what the Republican Congress did, blowing a trillion-dollar hole in our budget with a tax cut for the rich that America did not need, these problems will be visited on the heads of not just my children and grandchildren, but me and people in my generation, too.”

Later, after being asked about the $22 trillion national debt and deficits climbing toward $1 trillion a year, Buttigieg said deficit spending can be useful, especially if it goes toward investments that pay for themselves over time. “Now, tax cuts for the wealthy don’t do that,” he said, “but investments in education, in infrastructure, in health sometimes can. So we should be honest about the fact that sometimes that’s appropriate, but not if you have no vision of what kind of revenue is going to support it.”

The South Bend, Indiana, mayor then called for four potential tax increases, saying the U.S. should consider “a fairer, which means higher, marginal income tax rate on those earning the most”; “a reasonable wealth tax or something like that to make sure that people are giving back when they become enormously wealthy”; a financial transactions tax; and closing corporate tax loopholes.

You can watch the full Buttigieg town hall at Fox News.

Chart of the Day: Health Insurance Inflation at 5-Year High

Health insurance inflation hit a five-year high last month, according to a Modern Healthcare analysis of data from the Bureau of Labor Statistics.



As of April, the Consumer Price Index for health insurance was up 10.7% over 12 months—the largest increase since at least April 2014, Modern Healthcare’s Shelby Livingston writes: “The likely reason health insurance inflation is rising is because of growth in managed care, including Medicare Advantage, Medicaid managed care and commercial insurance, according to Paul Hughes-Cromwick, an economist at Altarum. He noted that added administrative costs increase insurance price growth.”

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US Wants to Expand Program That Pays Countries to Give Up Russian Arms

The State Department’s European Recapitalization Incentive Program provides cash to Eastern European countries that are transitioning from Russian to American-made arms. Now the Trump administration wants to operate the program worldwide.

“To get the money, countries must get rid of their Russian weapons, promise not to buy new ones, and commit some of their own funding to buying American,” says Defense One’s Marcus Weisgerber.

The program has spent about $190 million in six countries to help pay for American-made arms since it started about a year ago, Weisgerber reports:

  • Albania ($30 million for helicopters)
  • Bosnia ($30.6 million for helicopters)
  • Croatia ($25 million for infantry fighting vehicles)
  • Greece ($25 million for infantry fighting vehicles)
  • North Macedonia ($30 million for infantry fighting vehicles)
  • Slovakia ($50 million for helicopters)

While the State Department has not identified specific countries that could participate in other parts of the world, Weisgerber says that it wants to include Chinese-made weapons in the program as well.

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