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IRS Audit Rate Drops to Lowest Level in More Than 40 Years
The annual IRS report we told you about yesterday revealed that the agency audited just 0.45% of individual tax returns in 2019. That marks the eighth year in a row the audit rate has dropped, says Richard Rubin of The Wall Street Journal, and the lowest level in at least 40 years.
Many tax experts agree that the IRS needs to beef up its enforcement efforts. “The audit rate reported for 2019 was less than half of what it was in 2010, underscoring the depleted state of the IRS enforcement function, which urgently needs to be rebuilt,” Chuck Marr of the Center on Budget and Policy Priorities told Rubin.
Spending more on enforcement makes sense financially. As former Treasury Secretary Lawrence Summers and University of Pennsylvania law school professor Natasha Sarin recently argued, every $1 invested in auditing, technology and increased reporting would produce as much as $11 in revenue. (The government’s estimate puts that number closer to $4.) Summers and Sarin proposed a $100 billion increase in IRS enforcement spending, which they said would generate roughly $1 trillion over a decade.
But Congress spent years cutting the IRS budget, starting with the Republican-led push for fiscal austerity following the financial crisis, Rubin says. Some critics say the reduction in funding — which has reduced the IRS workforce by 30,000 since 2010 — amounts to a hidden tax cut. “There are direct & indirect ways to cut taxes,” says Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities. “Starving the IRS of the funds it needs to enforce the code is among the most pernicious indirect ways, one that leaves billions of owed taxes on the table.”
Richard Phillips, a tax analyst for Senate Budget Committee Democrats, said the decline in IRS enforcement helps at least one group. “Make no mistake,” Phillips tweeted Tuesday, “the primary beneficiaries of this policy shift are wealthy tax cheats.”
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In Showdown With Iran, Trump ‘Overstates’ Military Spending
President Trump has made some big claims in recent days as he defends ordering the military strike that killed Iranian Maj. Gen. Qasem Soleimani and threatens further action if Iran retaliates. “The United States just spent Two Trillion Dollars on Military Equipment,” he tweeted early Sunday. “We are the biggest and by far the BEST in the World! If Iran attacks an American Base, or any American, we will be sending some of that brand new beautiful equipment their way...and without hesitation!”
But, as The Washington Post reports, Trump’s comments “grossly overstate spending decisions and mask an aging fleet of planes.” The Post’s Erica Werner and Aaron Gregg:
“The actual amount spent on military equipment since he became president is much less, closer to $420 billion, according to Todd Harrison, a defense budget expert and senior fellow at the Center for Strategic and International Studies. The rest was spent on things like personnel, operations and maintenance, and research and development. …
“A spokesperson for the White House Office of Management and Budget said the president wasn’t referring just to equipment, but to the overall combined defense budget for 2017-2019.
“Overall, defense spending increased 16 percent from 2016 through 2019, as Trump sought a big increase for military programs. The percentage of the defense budget spent on procurement also has increased, Harrison said. …
“All of the services still suffer from readiness challenges as aging aircraft become more expensive to maintain, defense analysts said. And some procurement experts believe readiness problems may actually have worsened, far from disappearing entirely, in Trump’s tenure. …
“Dan Grazier, a former Marine Corps captain who works at the Project on Government Oversight, said he thinks the Pentagon is 'definitely getting less bang for our buck,' in part because it is spending too much money on super-complex weapons systems that are expensive to maintain.”
Read the full story at The Washington Post.
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Is Health Care a Hidden $8,000 Tax on Each American Family?
The U.S. famously has the most expensive health-care system in the world, and according to two well-known economists it amounts to a hefty tax that households must pay each year.
Speaking at a conference last weekend, Angus Deaton and Anne Case of Princeton University said that Americans pay about $1 trillion more for health care than the next most expensive country, Switzerland. Divided across the U.S. population, it’s the rough equivalent of an $8,000 “poll tax” on each household — a levy that is applied to all regardless of ability to pay.
The problem, Deaton and Case say, is that the extra money provides little or no benefit. In fact, life expectancy in Europe is higher than in the U.S., suggesting that all the extra spending is a waste. “We can brag we have the most expensive health care. We can also now brag that it delivers the worst health of any rich country,” Case said, according to The Washington Post’s Heather Long, who wrote about the issue Tuesday.
Worse, Deaton and Case say the health care system is actively contributing to serious problems in the country, including the opioid epidemic and declining life expectancy. Deaton singles out drugmakers, hospitals and even doctors for the roles they play, pointing out that about one in six of the top 1% are physicians.
“Physicians are a giant rent-seeking conspiracy that’s taking money away from the rest of us,” Deaton told Long. But fixing the problem won’t be easy. “[E]verybody loves physicians,” Deaton said. “You can’t touch them.”
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Chart of the Day: How Hospital Charges Soared Over 20 Years
Hospital care accounts for a third of total U.S. health care spending, and the costs of that care have soared over the last two decades, according to a new study in Health Affairs. The study found that, from 2000 to 2012, payments for inpatient hospital stays, emergency department visits and outpatient hospital care grew much faster for privately insured patients that for those on Medicare and Medicaid. The gap between what private insurers and government programs paid hospitals then stabilized or narrowed between 2012 and 2016. Overall, though, the growth in payment rates for emergency room care in particular stands out, as the Axios chart below highlights.
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Number of the Day: $4 million
The American Action Network, a conservative group aligned with House Republican leadership, plans on spending $4 million on an ad campaign attacking House Speaker Nancy Pelosi’s bill to lower prescription drug prices, according to The Hill. Pelosi’s bill would require the government to negotiate prices directly with manufacturers, which Republicans oppose. The House passed the bill last month, but it is unlikely to get a vote in the Senate.
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News
Views and Analysis
- Do Americans Really Need to Be More Thrifty? – Lawrence H. Summers, Washington Post
- The U.S. Spends $2,500 Per Person on Health Care Administrative Costs. Canada Spends $550. Here's Why – Abigail Abrams, Time
- What Trillion Dollar Deficits in an Era of Full Employment Look Like – Howard Gleckman, Tax Policy Center
- Don’t Use the Iran Crisis as an Excuse to Boost Pentagon Spending – William D. Hartung, Defense One
- Isn’t a Wealth Tax Common Sense? – J. Bradford DeLong, Project Syndicate
- Effective Income Tax Rates Have Fallen for the Top One Percent Since World War II – Robert McClelland and Nikhita Airi, Tax Policy Center
- The Strong Economy Is an Opportunity for Progressives – Matthew Yglesias, Vox
- Economists Care Too Much About Inequality – Leonid Bershidsky, Bloomberg
- Ben Bernanke Sounds Tone-Deaf on Negative Interest Rates – Brian Chappatta, Bloomberg
- American Consumers, Not China, Are Paying for Trump’s Tariffs – Jeanna Smialek and Ana Swanson, New York Times
- Can a Drug's $500,000 Price Withstand Competition? – Max Nisen, Bloomberg
- Giving Infants a Stronger Start – Jay Greenspan and Rahul Gupta, Morning Consult
- Anatomy of a Trump Rally: 67 Percent of Claims Are False or Lacking Evidence – Salvador Rizzo, Washington Post
- The Difference Between Red-State and Blue-State Homelessness – Philip Bump, Washington Post
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