Originally posted on Quora October 20, 2021
The proposed dragnet surveillance of bank accounts with at least $10,000 in annual transactions as a means to ensure top income earners pay their “fair share” is not only an affront to the basic 4th amendment right to privacy but also to anyone who has any cursory knowledge of how the IRS enforces tax compliance. They’d rather you use your “imagination” to see how this would work to bring in an additional $700 billion over the next decade (+70 billion annually) for a government that is running a $3 trillion deficit (reducing the deficit by a whooping 0.2%).
"Imagine a taxpayer who reports $10,000 of income; but has $1 million of flows in and out of their bank account," the administration said in a memo to congressional Democrats. "Having this summary information will help flag for the IRS when high-income people under-report their income (and under-pay their tax obligations)."
I imagine that such a person doesn’t exist outside Capitol Hill, and even if they do they’d be exempt via selective enforcement of this new law. The inconvenient reality however is that the IRS is much more aggressive in auditing low and middle income workers especially those who receive EITC.
On the one hand, the IRS said, auditing poor taxpayers is a lot easier: The agency uses relatively low-level employees to audit returns for low-income taxpayers who claim the earned income tax credit. The audits — of which there were about 380,000 last year, accounting for 39% of the total the IRS conducted — are done by mail and don’t take too much staff time, either. They are “the most efficient use of available IRS examination resources,” Rettig’s report says.
On the other hand, auditing the rich is hard. It takes senior auditors hours upon hours to complete an exam. What’s more, the letter says, “the rate of attrition is significantly higher among these more experienced examiners.” As a result, the budget cuts have hit this part of the IRS particularly hard.
Of course a leftist rag like Propublica would try to pin the disparity in auditing entirely on Republican budget cuts while failing to consider the fact that the disparity in accessable legal resources between rich and poor (especially accountants and attorneys) also make low income earners easier targets for punitive action. Why spend more money litigating against Richie Rich when you can just garnish Joe Smoes wages and put a lien on his house? They also lose $13 million annually doing this so obviously funding is not the issue.
But even on its face the proposal is an obvious ruse. The multimillionaires and billionaires Democrats claim are cheating the IRS out of their “fair share” don't keep their millions and billions in bank deposits. The FDIC only insures deposits of up to $250,000 and bank accounts pay interest rates well below the rate of inflation so it makes zero sense for someone who has enough money, on paper, to earn a passive income to keep their money in a bank account. Instead the 1% keep their wealth in equity mostly in the form of real estate, stocks and corporate bonds which they leverage to purchase the luxuries they enjoy (on personal lines of credit) so they don’t need large cash deposits. The world's wealthiest man earns a meager $81,000 salary. Elon Musk pays himself a measly $56,000 annual salary ($12,000 less than median household income) and Warren Buffet takes a much more generous $100,000 salary, still a pittance of his actual wealth, while economically illiterate leftards scream for higher taxes on higher income salaries. The fallacy of every ill conceived soak the rich scheme is that they assume the uberwealthy manage their finances the same way the average taxpayer does when in reality they are playing a completely different ball game. Obviously the rich are a lot smarter than the people writing the tax laws or the people writing the tax laws know they’re full of shit and are just using class war rhetoric to garner votes from their braindead voters.
Why is Wealth Inequality Soaring?
The wealthy borrow money at lower interest rates, earn higher ROI (while 44% of Americans don’t even own stock), and unlike most of us live off of passive incomes and personal lines of credit instead of punching a clock. That’s the whole enchilada. When you shut down “non-essential jobs” so that poor service workers who are in debt are forced to go into even deeper debt while rich people with equity make a killing off higher real estate price appreciation and a propped up stock market the gap will inevitably widen and it has almost nothing to do with taxes. California is a testament to the failure of soak the rich wealth redistribution schemes. California demonstrates that it doesn’t matter if you have the highest marginal income tax on the 1% if you artificially inflate real estate prices that make renting living space and leasing commercial space less affordable for lower and middle income families, the main reason they lost 180,000 people over the last year.