The IRS Is Outgunned: Why Tax Enforcement Has Collapsed for the Wealthy

The Internal Revenue Service is supposed to be the great equalizer. But a decades-long campaign to defund the IRS has created a two-tiered system where the wealthy can effectively opt out of paying their fair share while working families face aggressive enforcement.

Audit rates for millionaires have plummeted. In 2010, about 8% of returns showing income over $1 million were audited. By recent years that dropped to barely over 1%. Meanwhile, the Earned Income Tax Credit has one of the highest audit rates. The IRS goes after waitresses harder than hedge fund managers.

ProPublica has documented in exhaustive detail how the IRS was systematically gutted through budget cuts. The agency has lost more than 30,000 employees since 2010.

The result is the “tax gap” – the difference between what Americans owe and what they actually pay. Thats estimated at over $400 billion per year. The Washington Post reported on the massive scale of uncollected taxes.

Why cripple tax enforcement? Wealthy donors dont want to pay taxes, and they fund politicians who promise to “shrink government.” The concentration of corporate and wealthy power in the American economy has direct policy consequences.

When a teacher pays a higher effective tax rate than a billionaire, something has gone very wrong. The IRS problem is a democracy problem.