Most corporations pay the amount of tax they owe under the law, but the law is written to allow tax evasion. The IRS can’t do anything about this.
The fix is to close several well known loopholes.
I'm all for closing down those well-known loopholes, but that doesn't mean there won't be loopholes, or just people/companies not paying what they owe.
At this stage, those of us that ARE paying our taxes are the ones being taken advantage of.
That's because the point where $1 in IRS spending brings in $1 in government revenue is well past the optimal level.
First, it's not just government spending that matters. If you have the IRS spend $.60 and the taxpayer spend $.60 to recover $1, you're spending a total of $1.20 to get $1, not $.60. (And the burden doesn't inherently fall on people doing something wrong; it costs people money to get audited even when the audit reveals no malfeasance.)
Then you have to consider that IRS spending is unproductive. If the IRS spends $.50 and the taxpayer spends $.50 in order to recover $1, you haven't generated $1 for government programs, it's only $.50, but it costs the taxpayer $1. The collection efficiency of doing that is astoundingly bad -- in normal cases the collection overhead is <1%.
Meanwhile the amount of actual tax evasion in the US is quite low, so more audits don't result in a lot more compliance. (Tax avoidance is something else entirely, but IRS spending does nothing there.)
More generally, it seems strange to me to consider having to pay taxes owed as a cost that should be avoided. IE if the police had to spend money to catch a bank robber, we wouldn't weigh the cost to the robber of having to return the stolen money. (Which isn't to say that under-paying taxes is morally equivalent to bank robbery, but I think the analogy holds.)
> Congress appropriated $11.4 billion for the IRS in FY 2018 and IRS enforcement programs collected $59.4 billion, for a return on investment (ROI) of about $5.2 for every $1 invested in the IRS.
https://home.treasury.gov/system/files/266/02.-IRS-FY-2020-C...
Local police pay for themselves in traffic and parking tickets, among other fees. So maybe we should keep adding cops until we've maximized fine revenue.
Or maybe marginal profit isn't a good way to measure law enforcement...
> law is written to allow tax evasion.
The law is not written to allow tax evasion. Tax evasion is knowingly violating the law.
The word you're looking for is tax avoidance. Everyone does some amount of tax avoidance whether it be taking deductions or carefully parsing the code to work through it. That's avoidance and it's 100% legal as you mentioned.
Second, corporate taxes are dumb. They're effectively passed through the corporation to the consumer or service user or worse just passed onto labor by reducing wages and hiring to compensate.
Avoidance. There's no natural tax system so suggesting the law is setup to allow tax evasion is illogical.
That is not tax evasion. If the law is used to avoid paying a tax it is legal. Tax evasion is when you don't pay taxes that you should have paid and somebody often goes to jail and/or pays penalties for it.
The enforcement arm, which goes after people who aren't using loopholes, but committing actual tax fraud (and stuff like non-filers), has a ROI of something like $5 for every $1 spent. Cutting its budget is like burning piles of taxpayer dollars in a barrel.
A problem with fraud/non-file/etc. is not enough enforcement, i.e. the IRS budget.
These are separate issues.
