IRS Failure To Audit Trump & The Rich Is A Huge Problem

The following is from the editorial board of the Houston Chronicle:

After years of fighting to keep them private, former president Donald Trump’s tax returns have finally seen daylight, thanks to the diligent efforts of the House Ways and Means Committee. The release followed the committee's report summarizing many of the findings earlier in the month. 

"A president is no ordinary taxpayer," committee chairman Rep. Richard E. Neal (D-Mass.) said in a statement. "They hold power and influence unlike any other American. And with great power comes even greater responsibility."

More than a time-honored tradition of our most powerful elected official, turning over tax returns is critical for the American public to get an understanding of who is sitting in that office, and who else they might be beholden to. It took a massive effort to wrest these returns from Trump’s sticky fingers and deliver them to the citizens he was elected to represent. There was public pressure, Congressional inquiries and lawsuits that reached the United States Supreme Court. 

So what did we learn from the thousands of pages of information?

More shocking than the years Trump managed to pay just $750 in taxes, the year he paid none at all or his ongoing business deals with foreign companies while president, is the inaction on the part of the IRS. Since the 1970s, presidential tax return audits are supposed to be automatic and annual.

“The IRS did not even begin auditing Trump’s taxes until 2019,” Noah Bookbinder wrote in the Atlantic, “on the same day the committee began asking the agency about them.”

Alarm sounded.

“That Trump has avoided paying taxes and engaged in questionable practices is hardly new,” Timothy L. O’Brien is senior executive editor of Bloomberg Opinion and author of “TrumpNation: The Art of Being the Donald” wrote ahead of the release.

While that doesn’t mean his dealings are any less concerning, it does make the revelation that the IRS failed to audit Trump’s returns stand out all the more.

That alone needs investigating.

The IRS doesn’t have a great track record when it comes to going after the rich and powerful. In the agency's defense, dealing with high-powered attorneys requires more resources than going after an ordinary, middle-class taxpayer who probably can't afford an attorney at all. And the IRS budget operated on a starvation diet for years. 

Indeed, the agency audits poor families five times more often than it does everyone else, according to a recent analysis of 2021 data from Syracuse University. Of the nearly 9 million residents who reported incomes between $200,000 and $1 million, fewer than 40 individuals had their tax returns audited by the IRS in fiscal year 2021.

Poor people are simply low-hanging fruit, easily intimidated into submission by jargon-laden letters demanding technical information that's often difficult for families to produce, let alone understand. If anyone needed assistance,  according to Erin M. Collins, the National Taxpayer Advocate’s recent Congressional report on the agency’s actions, they were often stuck calling an understaffed toll-free number that was rarely answered— even after hours of waiting on hold.

“There is no way to sugarcoat the year 2021 in tax administration: From the perspective of tens of millions of taxpayers, tax administration did not work for them,” the report begins.

This is especially galling knowing just how seldom America’s wealthiest citizens pay their fair share of taxes. Elon Musk paid zero dollars in federal income tax in 2018, something Jeff Bezos, Michael Bloomberg and George Soros can also brag about, per a recent ProPublica investigation.

Even knowing the IRS’ punitive and uneven approach to auditing, it is still alarming that it would shirk its legal obligation to audit Trump’s returns, until enough public pressure pushed them to.

In 2022, when President Joe Biden signed legislation that added $45 billion to the IRS’ enforcement efforts, it raised alarms. "Biden Admin Targets Lower & Middle Income Earners," read one release from the House Ways and Means Committee Republicans. There is no 87,000-strong army of auditors on the way but there will be more audits although the administration promised they would target higher earners: "It’ll lower the deficit and ask the ultra-wealthy and corporations to pay their fair share," a White House release said of the legislation. 

Will they actually target the billionaires doing everything they can to avoid giving even a dime to the running of this country? Or will they simply step up the nickel-and-diming of America’s poorest families?

When it comes down to it, the IRS has long been stretched thin. As bean counters working with scant resources and an ancient data system, their priorities are heavily influenced by levels of funding from Congress and perhaps, the political will of those in power, namely the guy in the White House.

The IRS' failure to audit Trump while in office warrants scrutiny for the agency and also for those who oversee it and fund it. 

How much do we blame the bureaucrats and how much to blame the people above them? It's up to Congress to make sure the IRS is funded enough to do properly do its job. And with this new funding, the IRS should, in fact, live up to the administration's promises and ensure that all taxpayers—presidents and everyday millionaires alike—pay their way. 

Our government is funded on a good-faith agreement that Americans will share the burden, fairly. If too few tax dollars are collected, we must either resort to cutting, borrowing or shifting the burden on lower-income people who can least afford it. 

Majority Of Republicans Think Trump Could Be Reinstated

 

The chart above reflects the results of the Politico / Morning Consult Poll -- done between June 11th and 13th of a national sample of 1,994 registered voters, with a 2 point margin of error.

A ridiculous audit of election results is taking place in Arizona, and several other states with Republican legislatures are considering doing the same thing. Donald Trump still thinks that these audits will return him to office -- possibly as soon as August.

I can understand Trump thinking that. He's a raging narcissist, who cannot accept defeat in anything. But Trump's psychological problem seems to infected millions of other Americans (particularly Republicans). Note that a majority of Republicans (51%) think these specious audits could actually overturn the results of the 2020 election, and return Trump to office.

It's not going to happen, and it's sad that so many Republicans are divorced from reality.

The Defense Department Audit Was A Miserable Failure

The Defense Department makes up more than half of all the U.S. Government's discretionary spending -- spending using income and other taxes, and borrowing. (Social Security and much of Medicare are paid for through separate trust funds). How is the Defense Department doing with its massive budget?

Not too well! The department just finished its first ever audit, and the results were not good. Of the 21 agencies in the department, 14 of them failed that audit, 2 were still trying to finish the audit, and only 5 got what could be considered a passing grade.

It seems that the department is not only a huge money hole, but it's not even sure where all that money goes. Shouldn't the American taxpayers expect more from the Defense Department? Shouldn't it be able to pass the same kind of audit that other government departments must pass?

Here is what the Department of Defense had to say about the audit on November 16th (trying to put the best spin on the audit results that they could):

The first Defense Department-wide audit covered $2.7 trillion in assets and $2.6 trillion in liabilities for fiscal year 2018, making it most likely the largest known audit of an organization in history, the DOD comptroller said recently.

David L. Norquist, who is also the department’s chief financial officer, spoke about the audit Nov. 14 at a Pentagon media roundtable.

The audit covered every asset in the U.S. military, including buildings, fences, storage tanks, planes, ships, tanks, computers, spare parts, invoices, purchase orders and contracts.

Audit Results

Five organizations received an unmodified opinion, in other words a clean opinion, meaning no discrepancies, the highest possible rating. They are: the U.S. Army Corps of Engineers – Civil Works, the Military Retirement Fund, the Defense Health Agency – Contract Resource Management, the Defense Contract Audit Agency and the Defense Finance and Accounting Services – Working Capital Fund.

Two organizations, the Medicare-Eligible Retiree Health Care Fund and the Defense Commissary Agency, received a modified opinion, which means auditors have suggested some areas for remediation.

Audits for the DOD Office of Inspector General and Defense Information Systems Agency are still in progress and should be completed by the end of next month, Norquist said.

Other DOD agencies, which is most of the DOD, he said, received disclaimers, which means there were issues such as inventory discrepancies, information technology systems security issues and financial reporting errors. 

The agencies with discrepancies had by and large never been audited before, Norquist said, and most of them have already started remediation efforts to correct them so that when they are audited again at the end of this fiscal year, they will have shown improvement.

By far, the most discrepancies involved IT security, he said. For example, not revoking certificates of personnel who have departed or using systems that could be hacked. 

Auditors did not find any evidence of fraud, nor did they report any problems for civilian or military pay. And, all of the services were able to account for the existence and completeness of all major military equipment.

Norquist speculated that future audits will generate a healthy competition among the services to be first with a clean audit, meaning no discrepancies for every single organization.

How the Audit was Conducted

The DOD Office of the Inspector General and independent public accounting firms performed the department’s financial statement audits.

It was important that multiple auditing agencies were used to generate healthy competition, Norquist said.

About 1,200 auditors conducted more than 900 site visits at more than 600 locations, including military bases, depots and warehouses.

The auditors reviewed hundreds of thousands of items. Auditors confirmed counts and condition of assets, reviewed DOD systems, and validated accuracy of personnel, he said.

However, the auditors didn’t count every single bean, bullet and bandage, Norquist added. Instead, he said, they took statistically significant samples.