ProPublica's Analysis of the IRS' Global High Wealth Industry Group Is Brutally Depressing

I don’t think ‘the rich cook their taxes to no end’ is a news story. It’s an olds story.

However, ProPublica (which Waypoint readers may remember from a Waypoints episode) has recently released an article delving into how an IRS task force dedicated to investigating the tax affairs of the super-rich was killed before it got started. The article quotes Robert Gardner, a 39-year veteran of the IRS, who called the group ‘dead on arrival’.

The article leads with the example of Georg Schaeffler, who, faced with a tax bill of $1.2 billion in penalties and back-payment in 2016, ended up paying ‘tens of millions’ in 2019 – that’s somewhere between 1-10% of the initial bill.

It’s easy to talk generally about the crooked rich. However, the specifics of how initiatives to stop them are important – it is easy to ask, is there a merit in talking about new taxes on the wealthy if we’re unable to force compliance on what is currently on the books?

Here’s an excerpt (and another link to ‘The IRS Tried to Take on the Ultrawealthy. It Didn’t Go Well.’):

Most people picture IRS officials as all-knowing and fearsome. But when it comes to understanding how the superwealthy move their money around, IRS auditors historically have been more like high school physics teachers trying to operate the Large Hadron Collider.

That began to change in the early 2000s, after Congress and the agency uncovered widespread use of abusive tax shelters by the rich. The discovery led to criminal charges, and settlements by major accounting firms. By the end of the decade, the IRS had determined that millions of Americans had secret bank accounts abroad. The agency managed to crack open Switzerland’s banking secrecy, and it recouped billions in lost tax revenue.

The IRS came to realize it was not properly auditing the ultrawealthy. Multimillionaires frequently don’t have easily visible income. […]

Belatedly attempting to confront improper tax avoidance, the IRS formed what was officially called the Global High Wealth Industry Group in 2009. “The genesis was: If you think of an incredibly wealthy family, their web of entities somehow gives them a remarkably low effective tax rate,” said former IRS Commissioner Steven Miller, who was one of those responsible for creating the wealth squad. “We hadn’t really been looking at it all together, and shame on us.”

The IRS located the group within the division that audits the biggest companies in recognition of the fact that the finances of the 1 percent resemble those of multinational corporations more than those of the average rich person.

Any thoughts on this article or do you folks have companion pieces? I flag this article because ProPublica’s articles are frequently really good reads and worth delving into; I hope this brings it to the attention of a few more folks.

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