(Originally aired: Dec. 4, 2022)
The Biden Administration’s Inflation Reduction Act includes $80 billion tax dollars for the IRS over the next 10 years, enough to hire 87,000 new agents at $100,000 a year. Some critics say America’s tax agents spend too much effort harassing the little guy while bypassing multi-millionaires. James McTigue heads up the tax policy at the General Accountability Office, a government investigative agency, which recently examined IRS audit trends.
The following is a transcript of a report from "Full Measure with Sharyl Attkisson." Watch the video by clicking the link at the end of the page.
James McTigue: In 2010, IRS audited basically nine people out of a thousand, and today, it has fallen to fewer than three in a thousand.
Sharyl: But the concern over not having enough people audited, potentially, must lie in the idea that money is being lost somehow?
McTigue: Studies have shown that taxpayers are more likely to comply and make payment if they think IRS may be checking up on them. And everyone is not really delighted to pay their taxes, but if I know you're paying your taxes, that makes me feel a little bit better about me paying my taxes, or my neighbor, and vice versa. So, that's why it's critically important.
Sharyl: So in simple terms, what did you study, and what did you find?
McTigue: We looked at IRS audit rates over the last 10 years or so, broken up by income. And what we found is that, over that period, audit rates have declined across the board, both for our high-income taxpayers, as well as low-income taxpayers. They've declined a little bit greater for higher-income taxpayers than lower-income taxpayers, but still, audit rates are about a third of what they were back in 2010.
Sharyl: There has been some outside criticism that says the IRS treats high-income earners better in some instances than low-income earners. Did you find that that was the case? That there could be more money they would get through audits of the high-income earners, but they're gravitating to more low-income earners?
McTigue: We didn't see that specifically. You know, what we did see is that on average the additional tax collected from a high-income audit is about 50 times what it is for a lower-income audit. So in terms of bang for the buck, the audits of the highest income, highest-earning individuals, those with incomes in excess of $5 million annually, those do have a higher return on investment.
Sharyl: If, when the IRS audits someone making above $5 million a year, they're more likely to get a lot more taxpayer money that hadn't been properly paid, why don't they spend more time auditing that population?
McTigue: Well, as our report did show, IRS does spend a lot of time auditing that population, and, in fact, audits that population at the highest rate, when broken up by income. The problem is that those tax returns tend to be very complex. It's very labor intensive, requires a lot of audit hours, and also requires a fair amount of — not just a fair amount of expertise, but a very high level of expertise. And it takes time to train and develop the expertise that is needed to go after these higher-income — you know, really, well-financed in terms of their tax and accounting advice. So IRS, to some extent, has been outgunned.
Sharyl (on-camera): IRS staffing was over 100,000 in 2010. That had been cut back to about 75,000, but now, with the new money, the agency is well on its way past its previous mark.
Watch story here.