Comment by munk-a
6 days ago
Defunding the IRS is nothing but an effort to reduce tax enforcement. People that have relatively straightforward finances can be trivially audited in a formulaic way with data that's on hand - a lack of human auditing resources tends to benefit those with more complex finances which also tend to be the people with a lot of money who can afford to lobby for less enforcement funding.
Also for reference, in 2024 the IRS had a rate of return of 415:1, they'll obviously target the lowest hanging fruit first but for every dollar of funding received they collected 415 dollars of tax revenue that would have been missed. This is an obscenely efficient organization.
Implied in your statement - it benefits those who can create more complex financial situations. Often the complexity of the situation is largely synthetic.
I agree that the complex financials are generally intentionally created for sheltering and that complexity is only possible because of our overly complex tax code which has been made significantly more complex by tax preparer lobbyists from Intuit and others.
The reflex when people hear "complex" in this era: "Can we use AI for it?".
Next month's headline: "IRS signs 200-million dollar deal with Grok to use AI to analyse tax returns, determine who gets audited".
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In both cases though, mostly rich people.
That “415:1” is misleading and manipulative. The target rate of recovery is ~10:1, which is roughly what the IRS actually achieves.
Audits are not an infinite money glitch. I used to work for a Federal audit agency that also recovered ~10:1. The reason we target 10:1 recovery on audits is because the return on funding additional audits beyond that falls off very sharply. Furthermore, more aggressive auditing greatly increases compliance costs which ultimately come back as costs to the Federal government, so the net recovered revenue is even less than the headline figure.
Audit recoveries tend to be about sloppy compliance, not people trying to cheat the system. People with more complex taxes are more likely to screw up the exponentially more complex compliance aspects. Auditors are mostly fighting entropy.
I'll admit - the 415:1 was pulled from an article detailing information from 2024 but the main point isn't the actual value but the fact that it's more than 1:1. When the IRS receives more funding the US government gets more money than what it is budgeting - this doesn't scale to infinity, at some point you'll have nearly complete auditing capture and more budget will just be burning money but we're no where near that point.
Putting money into the IRS is basically a free money printer for the US government and it's only deep corruption that keeps it so poorly funded.
There are substantial indirect costs not accounted for in that ratio. Anywhere close to 1:1 is a large net loss to the government. Your mental model of the cost effectiveness of audits completely ignores large second-order effects.
The Federal government has a century of empirical data on this. They set their targets accordingly, which as a heuristic is roughly optimal at around 10:1. This may not be intuitive to you. It wasn’t to me either until I worked at a Federal audit agency. Most of it actually makes sense once you understand the bigger picture.
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They already have another money printer that they’re perfectly happy to rely on, at least for the time being.
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Is that 415:1 the rate of return of an audit, or the expense:revenue ratio of the IRS as a whole? I remember hearing some time ago that the expense ratio was 11% for the IRS? But 415:1 is way way less than 11%.
Captured revenue : cost to capture (could be an audit, billing for interest/fees due, etc. lots of avenues to capture revenue that is being missed).
The problem is these metrics aren't really scalable productivity metrics. If you doubled cost, it might go to 100:1, if you tripled cost, it might go to 0.5:1
Each dollar generally gets more expensive to capture.
A key point is that there are large indirect costs that scale up rapidly that are not accounted for in these direct costs. These costs show up on the balance sheet somewhere else in the government, which makes the ROI for the auditors look much better than it actually is.
This is well-understood by the Federal government. When they set their targets they fully account for the growth of indirect costs created by the audit activity that don’t show up in the ratio.
Good point, and kind of interesting in that as we keep cutting funding to the IRS, this ratio will probably get wider (which looks good, but is actually bad for what it implies).
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> Get rid of sales tax, property tax, exemptions, IRAs, 401ks, short capital gains, long capital gains, medicare, state, all of that bullcrap. Annualized, non-annualized, credits for having an EV on the 4th day of the second Tuesday while being a fisherman, married and single filing differences, end all of that.
I agree with your overall point of simplifying taxes by merging more things into income tax, but some of the taxes you mentioned are levied by local governments to fund themselves. The United States has a federal system; it would be a much bigger change to centralize all of the funding.
I... don't understand how that excuses complexity?
what stops "local governments" from applying same type of tax as higher levels? why would they need taxes specific for them?
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> The United States has a federal system
That doesn't prevent there being a single point of collection and distribution.
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Didn’t they just get rid of the IRS automated filing app? You’ll have to kill off TurboTax and siblings to simplify the tax code.
Yes, it was completed and operational and the new administration pulled it from public use.
Taxes aren't just there to provide an income stream to the government. It's also a mechanism to guide behavior via incentives (or punishment). Right or wrong there we're providing an incentive to hold assets longer, or use less fuel or buy from domestic producers etc.
IIRC, this was one of the main arguments for the Articles of Confederacy, the states were pretty nervous about this exact situation.
This was reaffirmed by Marshall [1] with the famous “the power to tax involves the power to destroy."
[1] https://www.archives.gov/milestone-documents/mcculloch-v-mar...
I wholly support drastically simplifying the tax code - I disagree with the extent to which you'd simplify it since there is a very good reason to have property taxes and some of the sin taxes have notable social benefits. Additionally, using tax rebates as an incentive to install home solar is an excellent initiative for the environment. Our tax code should be pretty simple - it shouldn't be a single line (or even multiple graduated lines).
Until we simplify the tax code, though, can we properly fund the IRS to actually audit it? I think my thing (funding the IRS) is a lot easier to do quickly than your thing (completely rewriting how the government garners revenue) and I don't want perfection to be the enemy of the good.
Ok what about for the people that mainly earn their living not from an income paid by a job; ie the richest people in the country?
That's an excellent criticism of the parent and why we really do want a somewhat complex tax code even if it should be far simpler than what we have today.
We also want to balance regressive and progressive taxes, we do want to influence some behaviors through taxes that provide positive social outcomes - there are several really good complexities to have in our tax code. Just not as many as we do today.
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> Get rid of sales tax, property tax
The very first things you list aren't related to the IRS at all. They're local and state taxes, and to get rid of those would require a radical rewriting of the Constitution itself. Not to mention it would destroy all fire department, county hospital, school, city park, state park, etc. funding.
Of course they're not, but this is how you smell someone that doesn't really want to enforce paying taxes, but just wants to evade them as much as possible.
How quickly people show their colors.
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This misses the point that tax exemptions are the way politicians campaign for voter blocks. Having different kinds of taxes makes it easier to target a voter blocks more precisely.
Why would you simplify the tax code if the whole point of the tax code is to create loopholes so you can pay way less taxes than the public would vote for?
The tax code exists for Welfare Queen Billionaires like Elon Musk.
Well see, you actually missed the catch that by eliminating everything except income tax people like Elon wouldn't have to pay any tax, it's even better for them. He's not getting a W-2, virtually all of his income is actually capital gains or similar.
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Well it's a retort on the 2022 IRA bill, which increased the IRS budget by 80 billion over 10 years, and paved the way to hire 87,000 people. There has been a lot of hiring recently so it's hard to tell one thing from another but this isn't so much of mass layoff as an attempt at returning to normal.
Please provide evidence for what you considered to be normal to be an effective workforce for the ongoing task at hand (nation state tax collection).
We had an exceptional increase in funding, followed by an attempt to curb that increase in funding. The size of the IRS is not just a financial exercise but a moral one, and I believe the prior budget increases as part of the 2022 IRA provides important context to staffing in the IRS.
I think we should first agree on what “normal” means.
I personally view our IRS head count as being at historical lows by raw headcount; and even lower by population size if we look at the last 40 years (would love data that goes back further).
The evidence was the baseline before the increase
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Normal?
The 100k headcount and bill doesn’t cover what we in the US used to enjoy, with a smaller population: - https://taxpolicycenter.org/sites/default/files/2025-04/IRS%...
- https://www.washingtonpost.com/documents/5856e771-dd09-4517-...