Yesterday, the Internal Revenue Service announced the creation of a new group that will spend its time chasing down wealthy taxpayers who attempt to shelter their earnings and assets from Uncle Sam's reach. Some people might think it's wrong to target high net worth individuals. They might argue that everyone should be treated equally by the IRS. I disagree. I think a new unit with this focus makes perfect sense.
Reuters provides a good description of the new unit:
The IRS unit, which started operations in recent months, is part of a broader effort at the agency to combat international tax evasion, and the unit will grow over time, IRS Commissioner Doug Shulman told a meeting of the American Institute of Certified Public Accountants.
"We will take a unified look at the entire web of business entities controlled by a high-wealth individual," Shulman told the meeting. "At least initially, we will be looking at individuals with tens of millions of dollars of assets or income."
The high-wealth unit will focus on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals, Shulman said.
Clearly, most Americans have nothing to worry about. Rich tax dodgers, however, probably aren't pleased with this news.
So why should we make sure the rich are paying their taxes as the law dictates? Well, because it's what the law dictates. If the rich believe they are taxed unfairly, then that's an issue that needs to be taken up with state and local governments. It's not okay to cheat the system in order to satisfy that view. Laws should be enforced or repealed.
Moreover, the rich have a distinct advantage over everyone else in avoiding taxes: they have the money to hire
unscrupulous sophisticated accountants who can figure out ways to escape paying the government what they actually owe. The average taxpayer doesn't. Without some extra effort to catch such shady activity, average Americans will pay the government what they owe, while the rich might manage to escape paying what they should be.
Finally, such a group makes sense from a business standpoint. Few probably think of the government as a business. But like a business, it has revenue -- taxes. The group of people that the new unit will target is responsible for the lion's share of tax revenue. If it can squeeze money more out of these individuals, then the return on investment for the cost of putting such a group together will likely far outweigh that of more staff for audits of average Americans who might try to avoid paying their full tax obligation.
Some might complain that this is a covert way for the Obama administration to start instituting its policy to go after multinationals. I wrote about this proposal back in September, saying that it wasn't truly about closing loopholes, but really about new taxes on business. I subsequently noted earlier this month that this legislative effort appears to have failed for the time being. I don't believe that this new unit would seek to, or have any authority to, enforce laws that don't exist. As a result, I see little harm in making sure current tax rules are followed.
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