Auditing the Poor

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David Cay Johnston of the New York Times reported yesterday that the IRS has been freezing tax refunds for hundreds of thousands of poor Americans—most of them involving the EITC, a tax credit for the working poor—by labeling their tax returns “fraudulent.” About 66 percent of the people whose records were frozen were found to be owed all of the money they claimed or more.

Now tax fraud is tax fraud, and it’s nice that the IRS is pursuing it, but tax fraud by the working poor amounts to some $9 billion a year, if that—and many of these supposed “fraud” cases involve people who filled out the wrong form or somehow couldn’t afford a tax accountant to jigger the numbers just right. About 40 percent of low-income Americans have never even heard of the EITC. Meanwhile, as Max Sawicky points out, corporations and wealthy Americans manage to dodge some $340 billion in taxes each year And not surprisingly, the IRS tends to spend a disproportionate amount resources going after the poor, in part because it’s easier—there are fewer lawyers to deal with, the poor tend not to complain, etc.

This partly comes out of the fact that the IRS has become seriously underfunded, especially after taking a beating from the right throughout the ’90s. So the agency has focused more and more on “easier” targets. But what’s happening is also conscious policy. In 2000 House Republicans tried to cut the EITC, which, in the tiny world of small-bore anti-poverty policies, has been one of the most successful. They failed. So instead they decided to use the IRS as a means of attacking the program. And last September, the House Republican Study Committee proposed even more “intensive” audits of EITC filers, although they were apparently uninterested in that $340 billion sitting around. In fact, the IRS won’t even release its “records on how thoroughly [it] audits big corporations and the rich.” Wonder why.

HERE ARE THE FACTS:

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As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

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