IRS Warns on ‘Dirty Dozen’ Tax Scams

By Yuval Rosenberg

Biden’s Fuzzy Math Problem on Infrastructure

President Joe Biden faces a pair of thorny math problems in
trying to enact his infrastructure agenda.

The first, amply covered by the political press, is simply
securing enough votes to ensure that the infrastructure deal
reached with a bipartisan group of senators and a separate
Democrat-only package covering the rest of Biden’s agenda can pass.
The second, which could also cloud the fate of Biden’s bipartisan
deal, involves the financing mechanisms the senators agreed to —
which, as budget expert Howard Gleckman of the nonpartisan Tax
Policy Center
writes, largely amount to “pixie dust.”

The bipartisan framework Biden and senators agreed to calls for
spending $973 billion over five years, a boost of $579 billion over
previously planned levels. How to pay for that new spending was
always a stumbling block, given that Republicans ruled out Biden’s
proposed tax increases and the White House shot down the idea of
indexing the gas tax to inflation or imposing user fees on owners
of electric vehicles. Another option, finding offsetting spending
cuts, never seemed to gain much traction.

What negotiators ended up instead with was a mix of other
pay-fors that analysts said from the start were likely to raise far
less in revenue than the bill will cost, leaving lawmakers to
borrow much or most of the money they’re looking to spend.

“They’ve settled on a grab-bag of narrow revenue raisers and
promised spending reductions that likely never will happen,”
Gleckman explains. “Or if they do, they’ll generate far less than
the plan’s backers hope. Some of the ideas have been used to pay
for spending increases as far back in the 1980s. They didn’t
achieve the goal then. They won’t now.”

Some details:

* Unemployment benefits: The negotiators agreed to cut
federal spending on unemployment benefits by some $70 billion by
reducing fraud and waste in the program. But analysts estimate that
such cuts will total closer to $35 billion over the next decade,
The Washington Post’s Jeff Stein
reports. “The idea there’s any large-scale fraud
is nonsense — they’re clearly not going to get $70 billion from
cutting people who are getting benefits improperly,” Dean Baker, a
liberal economist at the Center for Economic and Policy Research,
tells Stein.

* Repurposing Covid relief funds: “The plan also includes
repurposing about $80 billion in coronavirus relief funding that
nobody has yet identified or agreed to,” Stein reports.

* Extending the “mandatory sequester”: The deal also
calls for extending the “mandatory sequester,” or automatic cuts to
programs, including Medicare payments to providers, implemented if
Congress fails to hit certain budget targets. “Congress has waived
those cuts repeatedly during the past decade, and there is little
reason to believe lawmakers will not do so again,” Stein
writes.

* Selling oil from the Strategic Petroleum Reserve:
Lawmakers say they’ll raise $6 billion, “but the oil
will have to be repurchased at a later date, making the actual
savings unclear,” Stein notes.

* 5G spectrum: The deal includes $65 billion from selling
5G spectrum. “That sale occurred in February, a White House
official confirmed, but is being counted as new savings for the
plan,” Stein says.

* Dynamic scoring: The macroeconomic benefits of the
infrastructure investment plan are reportedly being counted on for
another $60 billion in additional tax revenue. “But these
investments inevitably will be a mix of needed projects and bridges
to nowhere,” Gleckman says. “Before knowing the mix, trying to
calculate the overall economic benefits is a fool’s errand. That
won’t stop supporters from putting some formulaic number on them.
But any resemblance to what turns out to be reality will be purely
coincidental.”

* Public-private partnerships: These methods of financing
infrastructure investment are expected to generate about $100
billion in revenue, but some experts question that total, noting
that some could reduce revenue rather than raise it.

* Reducing the tax gap: Negotiators reportedly agreed to
a $40 billion increase in the IRS budget, which they project will
generate in the collection of $100 billion in unpaid taxes. Some
analysts say that the actual revenue gains could be even higher,
but it will take time for the IRS to ramp up its staffing and
enforcement efforts, and Stein notes that Republicans may balk at
using the additional funding to crack down on wealthy tax cheats
and corporations. “What some experts regard as the most effective
way to bring in additional revenue from tax cheats — imposing
additional reporting requirements on financial institutions — has
been ruled out of the final agreement,” Stein adds, citing
congressional aides.

More borrowing ahead? Some economists argue that the new
spending doesn’t have to be fully offset because the infrastructure
investments will improve productivity and thus help reduce fears
about rising inflation. And, they add, interest rates remain low,
making this a good time to spend. “I don’t think it needs to be
paid for,” Jason Furman, a top economist in the Obama
administration, tells Stein. “Some of the pay-fors are real, some
of them are less real, and from an economic perspective, that’s
fine. These are long-term investments that will pay off over
time.”

The bottom line: The Congressional Budget Office will
issue an official score as the package moves through Congress, but
the negotiators behind the bipartisan deal have insisted it will be
fully paid for and that’s not likely to be the case. “It’s a
daydream to think they can take a list of proposals like this and
pay for a $1 trillion or $500 billion plan. There’s not a chance
they’re going to get it off a list like this,” Gleckman told the
Post. “It’s full of stuff that isn’t a tax increase and isn’t a
spending cut and is just wishful and fanciful.”

That could be an obstacle to the deal’s passage. Senate Minority
Leader Mitch McConnell has said Republicans “need to see whether
the proposal is credibly paid for." Right now, it doesn’t appear to
be.

Anecdote of the Day: Infrastructure and Ice Cream

President Biden traveled to La Crosse, Wisconsin, Tuesday
to sell voters on the importance of his $973 billion bipartisan
infrastructure deal. The Associated Press
reports: “Biden, making an impromptu stop for ice
cream after his speech, received a suggestion to order the rocky
road flavor as a nod to the infrastructure bill but he quipped
‘it’s been a rocky road, but we’re going to get it done’ and
instead ordered cookies and cream and strawberry.”

Democrats Risk Fracturing Over Infrastructure

Democratic leaders are scrambling to maintain a sense of unity
over the budget and infrastructure legislation they have to define
in the coming weeks, with progressives calling for a massive
spending package in the range of $4 trillion and centrists pushing
for a more modest proposal.

Speaking to a group of senior Democrats Monday, House Budget
Committee Chair Rep. John Yarmuth (D-KY)
reportedly cautioned against publicly debating the
size of the overall plan, including the bipartisan bill negotiated
by the White House and a group of centrists in the Senate and the
larger but as-yet undefinded reconciliation bill that would provide
more spending on Democratic priorities. “The details matter. And we
don't have those yet,” Yarmuth said. “So it's just safer not to
talk about top line numbers.”

In a speech Tuesday in Wisconsin, President Biden pushed hard
for his bipartisan infrastructure deal. “I know that neither the
Democrats nor Republicans got everything they wanted in this deal,
it’s not all that I proposed but that’s what our economy is all
about,” Biden said. “That’s what it means to compromise and reach
consensus. And that’s what’s in the heart of every democracy.”

But back in Washington, House Speaker Nancy Pelosi (D-CA) made
it clear that she plans to link the progress of the president’s
bipartisan bill with the larger reconciliation package that
Democrats expect to pass on a partisan basis — a linkage that
Republicans have said could cause them to withdraw support for the
bipartisan deal.

Pelosi’s strategy has the goal of keeping the Democratic caucus
together. Some progressive Democrats may not support the smaller,
bipartisan bill unless they know there’s another larger bill coming
along with it. And most Democrats are reportedly supporting
Pelosi’s approach.

The bottom line: As President Biden
begins to sell his bipartisan infrastructure deal to the American
people, Democrats are trying to keep it together amid internal
divisions over just how big they plan to go.

IRS Warns on ‘Dirty Dozen’ Tax Scams

The IRS has released its annual rundown on tax scams to look out
for, and this year’s “Dirty Dozen” list includes schemes related to
the massive government effort to provide Americans with financial
relief amid the Covid-19 pandemic.

“We continue to see scam artists use the pandemic to steal money
and information from honest taxpayers in a time of crisis,”

said IRS Commissioner Chuck Rettig. “We provide
this list to alert taxpayers about common scams that fraudsters use
against their victims.”

Intended to help taxpayers, tax professionals and financial
institutions avoid falling prey to scammers, this year’s list is
broken down into four categories:

* Scams related to pandemic aid, such as the theft of
Covid relief checks;

* Stealing personal information through phishing,
ransomware and phone "vishing” (voice-driven phishing);

* Cons focusing on unsuspecting victims, including
seniors and immigrants, sometimes using fake charities;

* Schemes to get taxpayers to make payments they think
will settle tax debts. 

In addition to the theft of Covid relief checks, the IRS called
out efforts by scammers to steal personal identities for the
purpose of filing fraudulent unemployment claims aimed at claiming
some of the enhanced jobless benefits provided by Congress.
Taxpayers would not see those payments but might receive tax
documents related to them. “The IRS reminds taxpayers to be on the
lookout for receiving a Form 1099-G reporting unemployment
compensation that they didn't receive,” the IRS says.

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