In full transparency, the following is a news release from the office of Sen. Elizabeth Warren. She was elected by voters in the Commonwealth of Massachusetts to serve the Washington DC state in the US Senate. She is a democrat.
WASHINGTON, DC – In a hearing for the Senate Finance Committee today April 20, US Senator Elizabeth Warren (D-Mass.) Emphasized the importance of addressing racial inequalities in US tax law, how implicit bias affects the different examination of Affecting Low Income Taxpayers It’s important to make sure the IRS has the resources it needs to tackle the biggest tax frauds. Senator Warren advocated her upcoming bill to provide a mandatory flow of funding for the IRS.
A recent report from the Treasury Inspector General found that the IRS is not handling the cases of high income taxpayers who fail to file their taxes but owe more than $ 45 billion in aggregate. The top percent of Americans account for more than a third, and possibly 70%, of taxes owed but not paid. However, the IRS’s efforts to enforce our tax laws are not focused on these wealthy taxpayers: the agency screened disproportionately low-income tax advisors who apply for the earned income tax credit.
In response to Senator Warren’s question about what testing lower-income taxpayers instead of the richest would mean to the racial impact of our tax enforcement strategy, Dorothy A. Brown, Professor of Law at Emory University, responded. said that this means enforcement “is carried on the backs of black Americans, not where the tax gap is – with higher-income white Americans who have access to tax attorneys.”
Professor Brown told Senator Warren that hiring the IRS to scrutinize the richest taxpayers and the largest corporations – where large amounts of money are not being raised – could “absolutely” help reduce racial disparities in the tax system.
“I am working to provide a new, targeted mandatory flow of funding to the IRS so that the agency has a predictable, sustainable and protected pot of money to ensure that the rich and big companies pay their fair share. Senator Warren said as he finished her questions.
Transcript: Tackling Inequality: Taxes Code and Racial, Ethnic, and Gender Differences US Senate Committee on Finance
Tuesday, April 20, 2021
Senator Warren: Thank you Mr. Chairman.
Almost every component of tax law has an impact on racial justice. But it’s not just about which tax laws are on the books. It’s also about how they’re enforced.
Last week the IRS commissioner told this committee that the tax gap – the amount of taxes owed but not paid – could exceed $ 1 trillion each year.
The top percent of Americans account for more than a third, and possibly 70%, of taxes owed but not paid. However, the IRS’s efforts to enforce our tax laws, including the reviews that are conducted to verify that a taxpayer is compliant, do not focus on these wealthy taxpayers. In 2019, low-income families applying for Earned Income Tax Credit accounted for nearly 40% of all IRS exams.
So Ms. Brown, we are screening a lot of lower income taxpayers instead of focusing on the richest people. What does this mean for the racist impact of our tax enforcement strategy?
Professor Brown: This means it is worn on the backs of black Americans, rather than where the real gap is between higher-income white Americans who have access to tax attorneys whom the IRS would apparently prefer not to push back against for EITC applicants Pursue low income who I don’t have access to tax lawyers to hold them back. It’s very unfair.
Senator Warren: That’s true. And Professor Brown, am I right that you went to the most audited counties in America?
Professor Brown: Well, ProPublica has researched it and of course I’m familiar with it. Yes, and they live in rural, black communities in the south. And in the south there is a disproportionately large number of black Americans who live in the south. So they were black Americans in the South who submitted the EITC when research showed that over 50% of EITC applicants were white.
Senator Warren: Thank you, I appreciate it, Professor Brown. You know, as your research shows, one reason for this is implicit bias – politicians and bureaucrats adopting harmful stereotypes about black Americans that can lead them to single out EITC recipients.
But there is another piece here. After years of Republican budget cuts, the IRS is targeting the people who are cheapest to scrutinize. And these are low-income taxpayers, many of them black people.
It’s cheap and easy for the IRS to blow up letters to intimidate EITC recipients. But rich people use complicated tricks to evade taxes. Hence, these investigations require time, money, and expertise – things that the IRS lacks.
In fact, a recent report from the Treasury Inspector General found that the IRS isn’t even working on the cases of the highest income taxpayers who don’t file their taxes at all – but owe more than $ 45 billion in total.
So, Professor Brown, if we give the IRS a large pot of money and tell the IRS to spend it on auditing the richest taxpayers and the largest corporations – goals where we know a large amount of money will not be raised – could this help reduce the money racial disparities in the tax system?
Professor Brown: Absolutely. Absolutely. It would make who pays taxes a lot fairer.
Senator Warren: Well. So thank you very much. They know that we have to do a lot to make our tax system less racist. And an easy place to start is to make sure the IRS has the resources and clear direction to track down the biggest tax frauds.
I am really glad that Commissioner Rettig is supporting the bill I am working on to provide a new, targeted mandatory stream of funding for the IRS – so that the agency has a predictable, sustainable and protected pot of money to help ensure the rich are determined and that big companies pay their fair share.
It would give us a better, stronger, and fairer tax system for all Americans.