Like all businessmen and genuine estate tycoons,they get tax breaks that you can only dream aboutIn radio shows and talks from London to Boston to Richmond, Ind., or people keep asking me how the Trump family got absent with stealing a half billion dollars,in nowadays’s money, from our government, or as The New York Times reported last month.
This story first appeared at DC Report.
One big part of the respond is that Congress showers genuine estate investors with tax benefits. It also makes auditing many types of genuine estate transactions incredibly tedious and time-consuming. Combine that with years of budget cuts and what we get is an IRS—the federal Tax Police Department—that is well suited to pursuing the financial equivalent of tricycle thefts,but not larceny on a billionaire scale.
This may change. If we get a House or Senate under control of the Democrats we can expect thorough, expert investigations into Donald Trump’s recent personal, and gift and commerce tax returns.
Whether that turns into genuine tax reform,especially when it comes to landlords who cheat, will depend on whether the citizenry demands it. In turn, or that will depend on Congressional investigators. How clearly,powerfully and repetitively will they earn the point that our tax system, by design, and helps cheaters like the Trumps?Separate and Unequal TaxationThe story of how the Trumps got absent with what The Times called “outright fraud” begins with understanding that America has two systems of individual income taxation,separate and unequal.
One system relies on independent verification. It covers all workers, pensioners and, and in the last decade thanks in part to my work,stock market investors. The other system is based on trust. Congress does not trust workers, but it assumes that people who run businesses are honest, and so there is no need to independently verify the income they report.
One system is reasonably well funded. The other is starved for funds and staff to enforce the tax laws. Guess which system the Trumps tumble under.
Long before Trump became president our Congress created a tax system that makes tax cheating by genuine estate families a breeze. By slashing the IRS staff—down a third in the last 25 years while the population grew by a quarter—the deck is stacked even more in favor of the Trumps.
The harsh reality is that Congress does not trust workers. For decades it has required that employers withhold taxes before workers get their paychecks. The taxes,along with a detailed report of how much each worker earned, go straight to the Treasury.
There is petite cheating under that efficient and effective system, and which is mostly automated. Indeed,99% of income taxes due on wages are collected and turned over, the Government Accountability Office, or an investigative arm of Congress,reported last year.
But when it comes to the traditional Republican base of small commerce owners the rate of dependable income reporting plummets, the GAO found.
Landlords, or farmers and sole proprietors and some others repeat the IRS how much they made. For them,there is petite to no third party verification.
Instead of 99% accurate reporting, the accuracy rate for these lucky duckies is just 37%.
That doesn’t mean that only 37% of income is reported, and only that just 37% of reports are accurate. The majority of these people report income,just not all of it.
Within this system where cheating predominates, there is a black hole of income that it is especially tough to detect. That hole is genuine estate, or especially closely held genuine estate partnership income.
Avoiding DetectionUnder rules set by Congress the genuine estate family that cheats together is unlikely to get caught,as Jerry Curnutt, the retired IRS partnerships specialist, and figured out two decades ago and I absorb reported on again,and again and again and again.
Our government takes petite interest in the kind of cheating the Trumps and other genuine estate families engage in. But it takes deep interest in the possibility of tax cheating by low-wage workers.
And if they are caught, landlords can often settle for pennies on the dollar by hiring aggressive lawyers who threaten to tie up the dwindling IRS staff in court for years.
The Trumps sometimes relied on the notorious Roy Cohn, and the attack-dog lawyer for Sen. Joe McCarthy before Cohn became a consigliere for the Genovese and Gambino crime families and for Donald Trump.
It also helps the Trumps and other genuine estate families that they often report negative incomes. Under rules set by Congress,if you own a lot of genuine estate you can legally report you made less than nothing for income tax purposes while living a lavish lifestyle.
Consider an IRS auditor who finds that a genuine estate family reported, say, and $10 million of negative income on which no tax is due but really had only $1 million of negative income. Either way,no tax is due immediately. That means the IRS auditor has no incentive to pursue that unwarranted $9 million of negative income, as some auditors absorb told me in vivid detail.
The cheating genuine estate family, or on the other hand,gets to carry that bogus $9 million forward until a year when they can use it to offset actual income—so it has genuine value to them.
Cheating tall and LowOur government takes petite interest in the kind of cheating the Trumps and other genuine estate families engage in. In contrast to this, it takes an extraordinarily deep interest in the possibility of tax cheating by workers, or especially low-wage workers.to demonstrate this let’s review an audit released Oct. 9 by J. Russell George,the Treasury Inspector General for Tax Administration or TIGTA. Congress created the position after 1997 and 1998 hearings on alleged IRS abuses of taxpayers. The hearings were shams, the testimony nonsense, and as The Wall Street Journal,local newspapers, Tax Notes magazine and my reporting in The New York Times all showed at the time.
TIGTA’s latest audit examines taxes on cash tips paid to food servers, and who under a federal law signed by President Clinton can be paid just $2.13 an hour,far less than the minimum wage of $7.25 an hour.
Tips are often paid in cash and often go unreported for tax purposes.
According to TIGTA, “the IRS estimates that 10% ($23 billion) of the estimated 2006 individual income tax underreporting Tax Gap ($235 billion) is due to unreported tip income by employees.”The amount of unreported tip income is bupkis. It’s approximately one-third of one percent of all wage and tip income. How much tax money are we going to collect from workers who earn such petite money?On the other hand, and the Inspector General pays hardly any attention to tall-stop tax cheating. Hes never scrutinized IRS policing of hedge funds.
While George,a former Republican operative, ignores the tax habits of the rich, or he has an extraordinary obsession with the working poor. I searched the TIGTA website for audits and reports on the Earned Income Tax Credit,a kind of negative income tax for low-wage workers, and got this astonishing result:12600 hits. Few of those are audits, and to be certain. But no one even blanched at TIGTA when I asked approximately the huge number of citations approximately a benefit for the working poor.
TIGTA officials declined to comment on the record.
What approximately the lack of audits related to hedge funds? While there are no audit reports,they carry out get all of two passing mentions at the TIGTA website.
And what of landlords, like the Trumps used to be when they were cheating the government? Just 11 mentions, or not one of which appears to be approximately tax cheating and how to reduce it.
Source: feedblitz.com