I love what I hear about the new commissioner of the Internal Revenue Service. He sounds like the kind of person that will go after what a New York Times editorial cited as the $385 billion annual shortfall between what taxpayers owe and what they pay.
The commissioner, like me, is of Finnish descent, which means that he traces his roots to Genghis Kahn and the Mongolian hoards. John Koskinen displayed some of that ingrained wrath recently in a slap-down of Rep. Darrell Issa as the latter's inane obsession continued regarding IRS treatment of tea party organizations suspected of trying to finance political interests with tax-deductible dollars. Can't say that I blame them for trying, but laws operating like a sieve in that respect are a contributing factor to the above-mentioned $385 billion.
If everyone paid what they owe, the tax rate for those who are law-abiding would presumably go down. Maybe even the Holy Grail -- a flat tax -- would be supportable. That enormous shortfall, after all, is just over half the total amount we spend on the military each year. Common sense would say that we should spend whatever it takes to collect that missing money.
Instead, we have a Congress that has cut spending at the IRS by 14 percent since 2010. What this means is that people who make more than $200,000 (the threshold where most tax cheating starts) are subject to audits about one-third less often today than would have been the case two years ago. When it costs just one dollar to collect six of what would otherwise remain uncollected, even a first-grader can do the math to see why it's one government expense that should never have been cut. If anything, it should be increased.
What is it about taxes and the IRS that so many people seem to hate? I don't get it. This is the world's greatest country that costs a lot to operate and protect. We get what we pay for. A graduated, progressive tax rate makes sense because people who pay more in taxes have more to protect. Some aspects of our tax code also have ingenious incentives that are great for society. Take "job-creators," for example, who supposedly make up a big portion of the mythical "One Percent." Every dime they ever spent on salaries, benefits, cubicles and computers for new hires or long-term employees was entirely tax-deductible. They may have paid taxes on what they wanted to spend on McMansions, vacation homes or yachts, but not on what they spent to build a business.
Although taxes continue to be reasonable enough given the benefits, some people are not satisfied and struggle to play their part in creating that $385 billion annual shortfall. President Barack Obama has suggested a $1.2 billion increase in spending on the IRS while Congress is trying to further reduce the agency's budget by $341 million. Assuming it is true that $6 is collected for every $1 spent, it looks like that $1.2 billion might make a $7.2 billion dent in the $385 billion shortfall.
It's a start, but we could collect all that is owed to the American people, our fellow patriots, if you will, by spending an additional $64 billion on the IRS ($385 billion divided by 6) and presumably collect every last dime owed to us. We could use some of that tax revenue to expand the penitentiaries necessary to house tax offenders.
So John Koskinen is our new real-life "Michael Clayton," like the "fixer" from the George Clooney movie. By all accounts, he comes exceptionally well qualified. Moreover, he deserves all the money and support we can give him. Congress has a choice. It can support Koskinen or tacitly endorse tax cheating.
Steve Butler can be reached at 925 956 0505, ext. 228 or at email@example.com