Sending a Message
by anderson
Actually, yes, we can!"We can't send a message to the American people that we have two sets of rules: one for prominent people and one for ordinary people."
-- Barack Obama
February 4, 2009
She made $18,992 the previous year cutting hair at Supercuts. A few hundred of that she spent to have her taxes prepared by H&R Block.
"I asked the IRS lady straight upfront — 'I don't have anything, why are you auditing me?' " Porcaro recalled. "I said, 'Why me, when I don't own a home, a business, a car?'
The answer stunned both Porcaro and the private tax specialist her dad had gotten to help her.
"They showed us a spreadsheet of incomes in the Seattle area," says Dante Driver, an accountant at Seattle's G.A. Michael and Co. "The auditor said, 'You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle.""They thought she must have unreported income. That she was hiding something. Basically they were auditing her for not making enough money."
The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies …. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.
The IRS, an arm of the Treasury Department, has changed a number of rules during the financial crisis to reduce the tax burden on financial firms. The rule changed Friday also was altered last fall by the Bush administration to encourage mergers … .
"The government is consciously forfeiting future tax revenues. It'sanother form of assistance, maybe not as obvious as direct assistance but certainly another form," said Robert Willens, an expert on tax accounting who runs a firm of the same name. "I've been doing taxes for almost 40 years, and I've never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts."
-- U.S. gave up billions in tax money in deal for Citigroup's bailout repayment
Washington Post,
Dec. 16, 2009
Ok, this isn't really a fair comparison. On the one hand, you've got the IRS casting a wide net in a search for tax evaders. One way to catch a tax evader is to identify someone who is living well beyond his or her means. So if you've got a guy with a $1500 car payment and a $1 mil mortgage sitting on $50k of credit card debt, and he says he's making $40k / year it's not unreasonable to assume the person might be hiding income.
In Porcaro's case, the IRS made a serious mistake in estimating what was a reasonable amount of income for her to make. While the agents didn't react with the most grace or class when conducting the audit, nor did they do their homework when setting their figures, their general policy - identifying people who appear to be living beyond their means and targeting these people for audit - makes sense.
On the other hand, you've got a business whose controlling stock was purchased by the government in a bail out to rescue the firm from financial collapse. The administration knows exactly how much Citi is worth (or they should) and the decision to cut their tax liability is being made well after the information gathering process. And in Citi's case, the company was basically buying back the debt it sold the US government at the beginning of the year.
Tax rules normally stipulate that if one company buys another, the first can't assume the tax breaks from loses provided by the second. In this case, Citi was due a large tax break for it's massive loses, but it sold itself to the US Government. When it bought itself back, it would have lost the rights to those tax breaks. This was an unintended side effect of using company stock as collateral in the bail out.
You're conflating two very different situations here. And while it may be unfair that a poor single mother in Washington is targeted for "being too poor", and while the tax cuts for Citi may or may not be justified, the two cases are about as far apart as one can get in the umbrella of tax laws.
This isn't two individuals running under a split set of rules. This is two completely different situations that just happened to be addressed by the same federal agency.
Posted by: Zifnab | December 22, 2009 at 02:36 PM
Are you some kind of a stooge for the financial industry. You have missed the point entirely. Besides, studies have shown that the poor -- for chrissakes -- are highly targeted by the IRS.
The IRS rang that women through the wringer for years, to finally collect $1400. The entire production is a farce. Stop excusing it.
Posted by: anderson | December 22, 2009 at 03:04 PM
Perhaps it should be spelled out that your argument is specious, or at best, a detailed veneer masking the underlying IRS task bifurcation observed here. The two examples are not incomparable, though I would agree that they are "two completely different situations."
In one, we see the IRS acting in unprecedented manners, unilaterally, even forgoing future government tax revenue, in order to help the distressed financial industry, distressed through their own misdeed. In the other, we see the IRS viciously probing an already distressed American pubic, hitting especially those most on edge, dragging them through court, costing them thousands they don't have.
You should read that article, and what the IRS did to her.
Again, stop excusing it.
Yes. Those are "two completely different situations."
Posted by: anderson | December 22, 2009 at 03:26 PM