Democrats Call for IRS Crackdown on the Rich

By Yuval Rosenberg

Democrats, Liberal Groups Push to
Boost IRS Audits of the Rich, Corporations

Democratic Reps. Ro Khanna of California and Peter DeFazio of
Oregon each introduced bills on Thursday aimed at
boosting tax enforcement on the wealthy and

shrinking the “tax gap,” the amount of taxes owed
that goes uncollected each year.

In conjunction with the unveiling of the legislation, nearly 90
labor groups, left-leaning think tanks and other organizations
published an open
letter Thursday calling on the Biden
administration and Congress to beef up the Internal Revenue
Service’s enforcement capabilities with the aim of reducing tax
avoidance by the wealthy and corporations.

The letter from 88 groups was organized by the Center for
American Progress, Public Citizen and Americans for Tax Fairness.
It was signed by the AFL-CIO and other unions and by think tanks
including the Economic Policy Institute and the Institute on
Taxation and Economic Policy.

The groups behind the letter point to a recent analysis
that found that the 2019 gap, was $574 billion. “Yet the IRS’s
enforcement budget has been reduced by about a third (in real
dollars) over the last decade,” the letter says, “with enforcement
weakened most dramatically for high-income taxpayers and large
corporations—to the point where low-income workers claiming the
Earned Income Tax Credit are audited at about the same rates as the
top one percent.”

The letter argues that the IRS needs "substantial increases in
funding for enforcement and technology” provided over a number of
years so that the agency can appropriately staff up, including
hiring auditors who can handle complex tax returns of wealthy
individuals, passthroughs and corporations. It points to various
estimates, including from the Congressional Budget Office and the
Treasury Department, that have indicated that the additional IRS
enforcement funding would more than pay for itself.

The groups also say that the IRS must address racial imbalances
in its audit practices, noting recent

reports that showed that audits are most heavily
concentrated in many low-income counties in the Deep South, where
tax filers, disproportionately people of color, claim the Earned
Income Tax Credit. “Correcting these imbalances would be an
important part of the effort to address systemic racial bias in our
tax system and economy,” the groups say in their letter.

Both DeFazio’s bill, the IRS Enhancement and Tax Gap Reduction
Act, and Khanna’s bill, with a catchier title — the Stop
Corporations and Higher Earners from Avoiding Taxes and Enforce
Rules Strictly (or Stop CHEATERS) Act — would mandate minimum audit
levels for high-earning individuals and corporations and boost IRS
funding, with some differences in the details. Khanna, for example,
would provide an additional $100 billion in IRS funding over 10
years, including $70 billion for enforcement, $20 billion for
taxpayer services and $10 billion for technology upgrades and
operations support.

Khanna says his bill would raise an estimated $1.2
trillion in revenue over 10 years.

Treasury Gets a Tax Windfall as
Stocks Soar

The booming stock market is producing a surge in capital gains,
and the U.S. Treasury now expects to collect more in capital gains
taxes this year than it has in a decade as investors take their
winnings off the table.

The Congressional Budget Office has increased its estimate of
expected asset sales, which it refers to as “realizations,” by 45%
this year, bringing the total to more than $1 trillion. The
increase in realizations is more than 10 times larger than the
expected increase in wages and salaries, Politico’s Brian Faler

reported Thursday.

The haul will mean that capital gains tax receipts become the
third-largest source of government revenue, surpassing corporate
income taxes.

“It’s a rare bright spot in the government’s otherwise dismal
budget outlook — one that hearkens to the days of the dot-com
bubble of the 1990s,” Faler wrote. “Back then, swelling capital
gains went a long way towards erasing the government’s
deficit.”

The stock market surge is helping state government budgets, too.
Tax revenues are 39% higher than expected in Connecticut, for
example, pushing receipts back near pre-Covid levels.

The bottom line: In the early days of the pandemic, the
CBO cut its estimates for capital gains realizations in 2021 to
$823 billion, a reduction of 18%. But the ever-climbing stock
market has spurred CBO to revise that estimate upward to $1.2
trillion. As a result, capital gains taxes are now estimated to
come to $197 billion in 2021, up from $164 billion in 2020.

Measured as a percentage of the economy, capital gains
realizations will equal 5.4% of GDP, Faler said, a level not seen
since before the Great Recession.

Quote of the Day

“Before President Biden and congressional Democrats try to
pass trillions more in spending, the American people need, at the
very least, a thorough and accurate accounting of the trillions of
dollars already approved.”

– Rep. Jason Smith (R-MO), the top Republican
on the House Budget Committee, as quoted in an article at
The Hill about the GOP’s highlighting unspent
funds from previous relief packages in their criticisms of Biden’s
current proposal. Smith says that an estimated $1 trillion in
approved funding has yet to be spent.

U.S. Life Expectancy Fell by a Full
Year Due to Covid

Life expectancy in the U.S. fell by a full year in the first six
months of 2020 due to the coronavirus pandemic, the Centers for
Disease Control and Prevention announced
Thursday.

In the largest decline since World War II, average life
expectancy fell to 77.8 years for the U.S. population, down from
78.8 years in 2019. There were significant racial differences, with
life expectancy for Black Americans falling by 2.7 years to 72.0,
eliminating two decades’ worth of gains.

Unlike the declines in life expectancy associated with
opioid use and so-called “deaths of despair” seen in recent years,
the Covid-related drop is expected to be short-lived. According to

The New York Times Thursday, life expectancy in the U.S.
fell by more than 11 years during the 1918 pandemic but rebounded
the following year as the outbreak came to an end.

Best Way to Control Hospital Costs?
Regulate Prices, New Study Says

Hospitals account for the largest single category of health care
spending in the U.S., and policymakers have long debated the best
way to bring their costs under control. According to a new
report from the RAND Corporation, the best option may be
the most obvious one: using government-imposed price
regulations.

The RAND analysis examined three widely discussed options for
controlling hospital costs: increased competition, increased price
transparency and direct price regulation. The last option — which
was operationalized by applying Medicare prices to all commercial
payers — was by far the most effective, reducing spending by nearly
$62 billion. Less aggressive price limits would produce smaller
reductions, but price regulations remained the most effective
approach.

Increased price transparency led to a reduction in spending of
about $8.7 billion in the analysis, while increased competition in
the form of reduced market concentration produced about $6.2
billion in savings.

The bottom line: RAND says that
federal price limits on hospitals would produce the largest
reductions in spending, but it also acknowledges — and underplays —
the obvious hurdles to such an approach, noting that it “would
likely face political challenges.”

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