Former Critics of IRS in Congress Now Clamor for Tough Enforcement

WASHINGTON -- Four years ago, leaders of the Senate Finance Committee bashed the Internal Revenue Service as heavy-handed and pushed the agency to ease its pursuit of tax dodgers. Audits and penalties, property liens and seizures, declined steadily.

Now many of the same politicians are prodding the IRS again -- to be tougher. And audits and penalties are on the rise.

Note the emphasis that they are placing on "wealthy" taxpayers. They are targeting "tax shelters promoted by Big Five accounting firms and other well-paid advisers".

The wealthy see this as exactly what it is - a direct attack on them, regardless of whether they are tax cheats or not. The wealthy know that the tax laws are so convoluted that no matter how diligent they are at attempting to stay within the law, the IRS can pick and choose among regulations, to make even the most conscientious taxpayer look guilty. They know that it has nothing to do with tax evasion and everything to do with CONTROL and INTIMIDATION.

This is supported by the words and actions of the senators involved:

Mr. Baucus has asked the General Accounting Office, the congressional watchdog agency, to monitor IRS efforts in pursuing tax avoidance.
But, [Mr. Grassley] adds, "I see such a drive by people who want to avoid taxes and their ingenuity, that I'm going to opt for a little while on breaking the back of tax cheats."

They completely ignore the fact that tax avoidance is legal and that the IRS is on record as stating that every taxpayer should do what he can to avoid unnecessary taxes. According to the IRS, when you take the personal deduction for yourself and deductions for your children, you are engaged in tax avoidance. When you deduct your tithe contributions to your church, you are engaged in tax avoidance.

Tax AVOIDANCE is LEGAL!

By definition, lawmakers are going after people who are engaged in perfectly LEGAL ACTIVITY!

Furthermore, Sen. Grassley even goes the extra step of equating tax avoiders to tax cheats. Is a picture beginning to develop here? It has absolutely nothing to do with tax evasion and everything to do with control and intimidation of the only group that they have yet to be able to either control or intimidate.

Yet, lawmakers continue to fail to see the folly of such attacks. Their blindness is exemplified by the following statement by Sen. Grassley:

I'm amazed at the creativity of those who like being Americans but dislike their American tax obligation.

The lawmakers wrongly assume that the wealthy have strong reasons to remain US citizens. In fact, as a direct result of such attacks on the wealthy, an alarming number of wealthy individuals are discovering that being an American no longer carries the advantages that it used to. The result is that a disturbing and increasing number of wealthy individuals are leaving the United States and taking all of their wealth with them. That translates directly into lost tax base and lost native investment capital.

When you consider that the top 1% of taxpayers were responsible for over 36.2% of all personal income tax collected in 1999 and the top 5% were responsible for 55.5%, you can see what a threat such forced expatriation of the wealthy represents. If only the top 1% of taxpayers leaves, the remaining taxpayers will have to shoulder a tax increase of 56.7% to make up the difference. Then consider that in 1999, 1% of taxpayers was only 1.26 million and roughly 100,000 Americans permanently left the United States last year. How many of those do you thing were poor?

The fact is that the wealthy are already leaving in alarming numbers and such attacks on the wealthy will only increase this exodus. Furthermore, due to the 1996 Health Insurance Portability and Accountability Act (26 USC 877(a)(1)), that claims the right of the IRS to tax ex-citizens for 10 years after they renounce their US citizenship, when the wealthy leave now, they have no choice but to take ALL of their wealth with them and place it out of the reach of the IRS.

In their overzealous attempts to control and intimidate the wealthy, the lawmakers are actually driving those same wealthy completely out of the reach of US laws. It's time that the lawmakers realize that it's the wealthy who fund our economy. It's the wealthy who already pay most of the taxes already. The wealthy are only here because the business environment is most suitable. And, if they continue to attack the wealthy, more and more of the wealthy will find the business environment here unsuitable and exercise the only legal option that they have left.

They will leave.

For more information on IRS induced expatriation and the severe threat that it presents, see the article "Tick-Tick-Ticl - The Economy Bomb".

It is not some much the taxes, but the paper work and Nazi tactics the IRS (and for that matter ALL of government) uses.

If you go back and re-read my post, you will see that we are really not in disagreement. In fact, near the top of that post, I stated:

They know that it has nothing to do with tax evasion and everything to do with CONTROL and INTIMIDATION.

The whole point of the post was that "it has nothing to do with taxes." The reason for the vast amount of paperwork and incomprehensible rules is to achieve CONTROL and INTIMIDATION. Even when you attempt to obey all the laws and fill out the paperwork to the best of your ability, there is still INTIMIDATION, since the IRS and other agencies can always choose to enforce a different rule(s) than those you employed. By requiring you to report on your finances every year, they can exert massive CONTROL at any time they choose. I think that is the Nazi tactics that you talk about.

The wealthy are leaving, NOT because of the level of taxation, but to escape the CONTROL and INTIMIDATION of the IRS and other government agencies. It is the same Nazi tactics that drove large numbers of wealthy Jews out of Germany just prior to World War II. The problem that this creates is that as the wealthy are forced to leave, we lose a large amount of tax base - and guess who gets to make up the difference.

Yes. It has nothing to do with taxes today. But, when the wealthy leave, it will eventually force taxes up for those who remain, regardless of how the government may change tactics and reporting after the wealthy are gone.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.