Defund the (Tax) Police

Over the last decade, Congress has steadily cut funding for the Internal Revenue Service (IRS) enforcement of US tax law.  As a result, the IRS has lost almost half its auditors and more than one-third of its revenue collectors.  Not surprisingly, this has led to steep drops in tax collection, especially from the wealthy and corporations.

 As part of President Biden’s effort to pay for his $1.9 trillion infrastructure bill, he has proposed an increase in funding to the IRS of $100 billion to restore the agency to its 2010 level of enforcement personnel.  Republicans, however, have unanimously objected to the funding increase.  The problem is that Biden needs the IRS restoration to collect funds that will be necessary to pay for the bill.

According to IRS Commissioner Charles Rettig, the United States loses up to $1 trillion in unpaid taxes per year, in part because there are not enough employees to adequately audit returns for fraud and collect the appropriate revenue.  

Restoring IRS funding is not a “tax increase,” so dreaded by conservatives.  Rather, it only enforces existing law in order to collect from tax cheats.  But the return on investment is extraordinary, up to twenty-four times that of the initial cost.  Estimating this return on investment is difficult since it involves new, more sensitive methods to track the use of cryptocurrency, offshore tax evasion, illegal income undetected by the IRS, and underreporting from pass-through businesses.  It must also include the indirect effect of “voluntary” compliance once the tax cheats realize they are much more likely to be caught.

Current IRS regulations make it far easier to monitor tax compliance among those who work for wages than among those who whose income derives from business and capital gains.  Corporate profits are, if anything, harder to monitor.  IRS requires most employers to deduct taxes from wages, report them and send the W-2 forms directly to the IRS.  Social Security also requires withholding.  This collection of taxes occurs automatically, so cheating is almost impossible.  

But most income received by the wealthy and all income earned by corporations are not subject to W-2 reporting, leading to possibilities for many different kinds of tax fraud.  There are also, of course, many loopholes in the tax law — which is a serious problem in itself — but I am referring here only to fraud.

As a physician and public speaker for twenty years, I was, for tax purposes, designated as a “sole proprietor because of fees I earned giving speeches and seminars at medical schools, universities, and other institutions.”  Accordingly, I had to file separate business schedules on my tax returns to record income and expenses and calculate my tax.  I immediately noticed how easy it would have been to cheat.  

IRS required reports from those who paid me only if the payment exceeded $600, which it usually did not.  So, even though I was legally required to report all that income, IRS had no way of checking up on me without an intensive audit.  It would also have been easy to pad my expense accounts.  This is, of course, only a minor example.  I was astonished by how easy it would have been to commit virtually undetectable fraud.  

Frequent IRS audits of the wealthy and corporations are necessary to discover fraud and recoup the losses.  Due to budget cuts since 2010, however, IRS has lost half of its revenue officers (who collect taxes) and a third of its auditors (who monitor the more complex returns of corporations and the wealthy).  As a result, according to IRS data, the share of tax returns that the IRS audits, especially for ultrawealthy individuals and businesses, has fallen by two-thirds: Just 8.16 percent of returns with reported incomes of $10 million or more are examined.  The IRS now has fewer auditors than at any time since World War II.

 
About 99% of taxes are paid to the IRS when there is automatic withholding and reporting to the agency, but only 45% of what’s owed gets paid when those are lacking.  

This is not just a question of government income.  It is a question of basic fairness.  

Since the beginning of the Republic, political conservatives have favored smaller government and lower taxes.  Beginning in 1980 with the Reagan Administration, the Republicans Party has consistently cut federal taxes.  As much as I may disagree with it, smaller government with less tax is a legitimate political stance, appropriate for democratic debate and legislative decision making.  Republican opposition to the increasing the IRS budget, however, is an entirely different matter.  It is not about cutting taxes but about encouraging the wealthy and the corporate world to flout the law, defraud the government and steal money from the rest of us.

A Radical Right-Wing Conservative Court

When Brett Kavanaugh and then Amy Coney Barrett ascended to the Supreme Court, the fear among progressives was that the newly powerful 6-3 conservative majority would make a radical shift to the right, reversing the Roe v Wade precedent, restricting the rights of the LGBTQ minority, expanding the rights of religious organizations to discriminate, increasing gun rights (however that might be possible) and so on.  

This first term of the new Court, however, led some observers to believe that it was more moderate than predicted.  But it turns out this was just wishful thinking.  The truth is that the Court will be just as conservative as feared.  

For more than fifty years, Republican appointed justices have leaned conservative, since six of the current justices were appointed by Republican presidents, conservative rulings should be expected.  But there is increasing suggestion that the rulings will be not only conservative but also radically right-wing and more partisan, which, if confirmed by future decisions, will be one more nail in the coffin of democracy.

As Leah Litman and Melissa Murray suggest:

This [2020-21] Supreme Court term was significant mostly because of what the court did not do: The newly constituted 6-3 conservative supermajority did not use every case to openly and dramatically move the law rightward. Rather, in several important cases — including those involving the fate of the Affordable Care Act and the tension between religious liberty and gay rights — the court managed to resolve matters on seemingly narrow grounds and with broad majorities that transcended ideological differences.But to call this term a model of judicial restraint — or even nonpartisanship — would be misleading. This is not a moderate or apolitical court. It is a reliably conservative court that, on occasion, chooses to act incrementally.

Most of the cases that were decided unanimously or along cross-ideological lines did so by not deciding very much.

• One case, for instance, involved a high school student who was kept off the cheerleader squad because of a vulgar, off-campus rant on a weekend.  The Court ruled that the punishment was too severe, which seemed a victory for First Amendment freedom-of-speech.  “Too severe,” however, implies that under the right circumstances (whatever they are), schools are constitutionally permitted to limit students’ speech.  So the Court was able to achieve a broad agreement because it neither prohibited schools from suppressing free off-campus speech nor gave them broad license to do so.  
• In other cases, the Court came to its broad agreement by ruling only about technical matters.  For instance, the court refused to limit the Affordable Care Act by deciding that the plaintiffs didn’t have the standing to sue because they couldn’t show that they were harmed by the provision of the Act in question.

Several little-noticed but extraordinary 6-3 decisions along strict ideological lines seemed to have slipped under the public radar. 

• In one case the Court continued its long-standing anti-union bias by ruling that agriculture growers could keep union organizers off their property.  This was not only a blow to unions but also a much broader decision with potentially catastrophic results.  Liberal Justice Stephen Breyer
  

worried that the court’s ruling would endanger any government intrusion on private property, which he said would include “activities ranging from examination of food products to inspections for compliance with preschool licensing requirements.”

In other words, the ruling may allow private property owners to keep the government from enforcing its constitutionally given regulatory powers, making this ruling a radical and dangerous precedent.

• The Court’s continued its tendency to protect large corporations by limiting class-action suits, ruling that a
  

major credit reporting agency could not be sued for wrongly labeling its customers as possible terrorists or drug traffickers on a Treasury Department watch list. The decision accelerates a trend toward blocking the courthouse doors to persons seeking to enforce federal consumer protection laws.

The Court ruled that only plaintiffs concretely harmed by the credit reporting agency have standing to seek damages in federal court.  It didn’t matter that the agency mislabeled you as a terrorist.  If you, say, missed your flight because you were on the watch list, it would probably not be worth the cost of taking the agency to court.  Class action suits are usually brought to deter future corporate misbehavior not to compensate, say, purchasers who bought a $15 tube of mislabeled toothpaste.  The decision’s potential consequences for holding corporations responsible for their misdeeds are important.

• The Court continued to encourage “dark-money” political contributions in a 6-3 decision along ideological lines, declaring unconstitutional a California law requiring charities to report their donors to state authorities.  Most political action committees are tax-exempt, so-called 527 organizations, which are already required to make donor reports to the federal IRS.  The California law broadens this to state governments.  California’s Attorney General Rob Bonta (D) said
  

Stripping our office of confidential access to donor information — the same information about major donors that charities already provide to the federal government — will make it harder for the state to fight fraud and prevent the misuse of charitable contributions.

Since true conservatives generally favor states’ rights, this decision’s favoring corporate desires over states’ rights is especially ominous.

• The coup-de-grâce, however, came with the Arizona voting-rights decision that I examined in my last post.  Although the federal appeals court determined (as a “finding of fact”) that the Arizona laws did have a discriminatory impact on minorities, the Supreme Court — without challenging the appeals court “finding of fact” — nevertheless allowed the law despite the 15th Amendment and Voting Rights Act unequivocal prohibition of such discriminatory impact.  The Court ruled that as long as the impact was “small in absolute terms,” the state had the right to limit voting rights. This is an ominous sign for future judgments about laws that abridge the voting rights of minorities.  It is clearly a partisan decision.

This Supreme Court cannot now legitimately be called a moderate court.  A conservative court has a legitimate right to make conservative decisions, even overturning precedent.  It does not, however, have the moral right to make partisan or radical decisions.  The Court has revealed its radical right-wing, partisan agenda. 

In order to protect against government extremism, the Framers wrote into the Constitution a series of checks and balances: Each of the three branches of government — executive (presidential), congressional and judicial — can limit the others.  During the Trump administration, the presidential branch and half the legislative branch were controlled by the radical right. The Supreme Court, with a better balance between liberal and conservative judges, was the one bulwark against extremism. 

Given the ages of the conservative judges, the Supreme Court will no longer serve as a protection against right-wing populism for at least a generation.

The Supreme Court Steps on Voting Rights ... Again

The Supreme Court’s recent decisions to allow Arizona to invalidate votes cast in the wrong precinct and to prohibit “ballot harvesting” have continued its historical role in undercutting voting rights legislation.  To understand where the Court is taking us, let’s review the history of voting protections, including the Voting Rights Act of 1965, and the Court’s role in limiting them.

Passed right after the Civil War, the Fifteenth Amendment to the Constitution provides that 

[t]he right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of servitude.  [Along with the 14th Amendment], these Amendments also empower Congress to enforce their provisions through "appropriate legislation."  (Wikipedia)

During the Jim Crow era, these provisions were largely ignored.  In 1965 Congress passed  the Voting Rights Act, (VRA) which, along with subsequent amendments to the Act, finally enforced the 15th Amendment.

Section 2 of the VRA allows voters to sue if they believe a state or local government has limited their voting rights on the basis of their race, color or membership in a language minority group.

Section 5 required that nine states — along with many other smaller jurisdictions in the country — with a history of racial discrimination needed federal “pre-clearance” before implementing any changes in their voting laws.  

In 1982 the VRA was amended to make a “results test” explicit.  With the amendment, the act “prohibits any voting law that has a discriminatory effect irrespective of whether the law was intentionally enacted or maintained for a discriminatory purpose.”  Only discriminatory results matter.

In 2006 Congress reauthorized the VRA almost unanimously

In 2013 the Supreme Court in a 5 - 4 decision along ideological lines eliminated the pre-clearance provision of VRA’s Section 5.  Chief Justice John Roberts wrote, “our country has changed. … Congress must ensure that the legislation it passes to remedy that problem speaks to current conditions,” legal verbiage suggesting that voting rights had progressed to the point that the pre-clearance provision was no longer necessary.  Roberts’s opinion revealed a remarkable blindness to the country’s structural racism and to Congress’s own determination only seven years earlier that the law was necessary.  

The extent of the Court’s ignorance was soon evident: The Guardian reported that

[immediately] after the decision, Republican lawmakers in Texas and North Carolina — two states previously covered by the law — moved to enact new voter ID laws and other restrictions. … Between 2012 and 2018, [for instance,] there were 1,688 polling place closures in states previously covered by … the Voting Rights Act.  … [Proof-of-citizenship and voter ID laws were also passed.]

Ruth Bader Ginsburg wrote in her dissent for the court: “Throwing out pre-clearance when it has worked and is continuing to work to stop discriminatory changes is like throwing away your umbrella in a rainstorm because you are not getting wet.”

The full impact of the 2013 decision may never be known.  Most of the changes in voting rights are made by local jurisdictions and are never brought to judicial review.

In 2019, again along ideological lines, the Court’s 5 – 4 conservative majority gave the green light to gerrymandering.  As I described here, gerrymandering allows states to expand one party’s Congressional delegation far beyond that party’s proportion of state-wide voters.  Racial gerrymandering had already been prohibited, but — because of the disproportionate number of Blacks, other minorities and poor people who vote Democratic — partisan gerrymandering often results in racial gerrymandering.  

Last month’s Supreme Court decision (by a 6-3 margin, again along ideological lines) continues the Court’s limitation of voting rights.  The ruling let stand those two laws enacted by the Republican Arizona state legislature that lower courts had found made voting harder for voters of color.  

The first of those laws required election workers to invalidate ballots that had been cast in the wrong precinct (for instance if a voter moved to a different voting district but cast their ballot at their previous polling place), even if the ballots were for state-wide and federal elections, where precincts didn’t matter.  

The second law prohibited “ballot harvesting,” denying campaign workers, activist groups, and others from collecting ballots and bringing them to the polls.  This restricted the voting potential of invalids, shut-ins and others by preventing outside help in casting their ballots.  In Arizona, this especially affected Native Americans, many of whom live in remote parts of the state far from polling places.

In accepting the two laws, the Supreme Court justices wrote that states’ rights to prevent fraud outweighed any impact on voting rights, despite the fact that there has been no significant voter fraud in Arizona or anywhere else in the United States, which the justices surely knew.

The practical impact of these two Arizona laws is unclear, but in a state where the eleven electoral college electors were decided by a mere 0.3% margin, they could have a major future impact.  More important, however, the decisions portend how the Court may rule upon the nearly 1000 state bills limiting voting rights proposed since the beginning of the year.  

A solid 6-3 conservative majority seems prepared to allow states to ignore the 1965 Voting Rights Act and the Fifteenth Amendment and pass laws permitting (or even requiring) certain kinds of discrimination in voting.  

While the Court has made decisions this year that have crossed ideological barriers, last month’s voting rights decision along with the 2013 and 2019 decisions demonstrate that the 6-3 conservative majority solidly and consistently favors state voting-right restrictions.  The For the People Act and the John Lewis Voting Rights Bill contain far stronger provisions than the Court has already ruled against.  Even if these bills can make it through Congress (Republicans are almost unanimously opposed), their eventual chances in this Supreme Court are not good.

Taking Aim at American Election Integrity

David Hilfiker

It is no accident that, according to recent polls, fully one-third of all Americans and two-thirds of all Republicans believe that President Joe Biden only won the 2020 election because of fraud.  A recent Washington Post article detailed extraordinary campaigns — financed by wealthy Trump supporters — intended to “document” the lie that vast conspiracies stole the White House in the 2020 election.  

The campaigns comprise films (for instance, a live-stream film The Deep Rig that premiered on June 26), podcasts, broadcasts from right-wing media, and social media.  While the total monetary investment is unknown, several individual donors have spent upwards of $7 million each, and untold amounts of money have been contributed by smaller donors to nonprofits.  

Ex-President Trump is, of course, using speeches, rallies, and his own PAC to disseminate the lies about the “stolen election.”

The campaigns have been extraordinarily effective in spurring wholesale distrust in American election integrity.    

The most well-known example is in Maricopa County, which contains 60% of the Arizona population and until 2020 was the largest county in America to vote Republican.  According to the Washington Post, after Biden’s victory,

[a]llegations of fraud or irregularities in Arizona’s vote were rejected … by state and federal judges. Maricopa’s results were confirmed through a number of reviews, including a hand recount of a sample of ballots conducted jointly by both political parties, as well as a forensic audit conducted by federally accredited labs that was ordered by the county and concluded in February.

Nevertheless, in late April, Arizona Senate Republicans commissioned the fourth audit of the 2020 vote and hired CyberNinjas, a company owned by a Trump supporter who had previously promoted conspiracy theories about the election.  CyberNinjas had had no previous experience with ballot recounts and many different observers have noticed multiple errors in the process.  A scathing letter from all seven Maricopa County election officials (five of them Republicans) declared that the recount was a “sham.”  Indeed, fearing that tampering might have occurred to the election machines while under CyberNinjas’ control, Maricopa County will not reuse the expensive hardware in future elections.

Republicans across the country are demanding similar recounts in their states.  As has been noted many times, there has been no evidence of significant voter fraud despite multiple recounts and over fifty lawsuits.  

Few expect that any of these concentrated, well-funded Republican efforts will lead to overturning the election.  (Indeed, there is no legal mechanism available for overturning the election.)  What these efforts will do is continue to sow doubt about the integrity of the election process in our country, further increasing the extraordinary percentages of people who already do not trust election results … indeed, who do not trust government at all.