The IRS Used to Be a Guard Dog. Republicans Neutered It.

The IRS Used to Be a Guard Dog. Republicans Neutered It.

Taxpayers and politicians are forever complaining about rich people taking advantage of “loopholes” in the tax code, but the IRS, America’s most beloved government agency, doesn’t view things such as carried interest or the special tax treatment of offshore insurers—which hedge funders parlayed into an elaborate tax-avoidance scheme—as loopholes.

The law is the law, an agency spokesman told me recently, and subject to interpretation. If a family or company is audited and found in violation, it can settle up, protest to an IRS appeals board, or take the agency to tax court—a little-known venue where the white-shoe lawyers for America’s dynasties ply their trade. If the well-heeled taxpayer loses their case, they can appeal. If they win, they may well stand to save millions of dollars—or billions. And often they win.

That’s assuming they are audited in the first place. President Joe Biden is prepared to announce that his administration will seek $80 billion to beef up IRS audits of high earners—a necessary move given that the water carriers for the dynasties have done their utmost to make such audits exceedingly rare. The Republican Party has waged open warfare on the IRS since at least 1994, chipping away at its resources and enforcement abilities even as mainstream Republican lawmakers and candidates called for the agency’s abolition. [Read more.]