Americans should fear the IRS again

The Inflation Reduction Act, which was passed by the Senate on Sunday and should pass the House on Friday, has $80B in new funding for the Internal Revenue Service (IRS).

A lot of that money is going to modernize its woefully underfunded infrastructure, which is still stuck in the 1960s. If you need any convincing that, yes, it’s really that bad, the Washington Post has a must read story that documents how your return is actually processed, at least if you submit a paper return or mail in a check. Once you see it, you’ll wonder why it takes only months for them to process it.

For decades, the IRS has been woefully, systematically, and deliberately underfunded. In addition, it’s been given lots of new tasks, like responsibility for sending out stimulus checks. The root of the problem goes back to Ronald Reagan’s presidency. Reagan declared, essentially, that government is evil. He and most of his Republican successors have made a point of putting his words into action by continually making it harder for the IRS to function.

The result should have been a scandal, if our federal legislature actually cared about a functioning government. The IRS is nearly alone among government agencies in generating revenue. Its inability to have funding to do its job has probably cost the government trillions of dollars in uncollected tax revenues, bloating deficits and increasingly allowing almost anyone to get away with tax fraud.

The chances that your tax return will get audited is .3%. So there’s a 1 in 333 chance that your return will be audited. But if your return is pretty standard with your income and deductions within an ordinary range, your chances are virtually nonexistent. I’ve been paying income taxes for probably forty five years and it’s never happened to me. The closest I came was when I incorrectly missed reporting some capital gains, and the IRS computers spotted it. I paid the tax and a small penalty.

Every year there are fewer tax specialists available to audit tax returns. That’s because they are largely retired. With flat or reduced funding, hiring freezes and inadequate pay, tax auditors are hard to replace. This new act means to address this issue. But it won’t happen overnight.

I am hoping that Americans start to fear the IRS again. If they fear the IRS today, it’s largely a needless fear. Unless your tax return is highly unusual, it’s unlikely to get audited. As long as your income, interest, dividends and capital gains are close to what your employer, banks and brokerages report to the IRS, you have virtually no fear of an audit. If audited, you are probably about as likely as to discover you overpaid your taxes as underpaid them.

It will take years to train a new set of IRS auditors. Hopefully there will be enough old timers still left to train the new bunch correctly. They should be unleashed as soon as they are able. There are lots of tax scofflaws out there, and most of the unpaid taxes are likely owed by businesses using dubious accounting techniques.

It’s harder for us ordinary people to cheat simply because so much of our income is reported automatically. It’s easier if you are paid by cash, but with electronic payments this is getting harder to do. The IRS may be aware that you are cheating on your taxes, but with its insufficient resources it simply chooses to ignore all but the most glaring examples.

The difference between government revenue and expenses is borrowed, so tax scofflaws simply add to our collective debt, and without paying penalties in most cases. Finally, all these decades later, by the slimmest of Democratic majorities, money is being allocated to fully modernize and staff the IRS. A true American taxpayer should be relieved that it will become harder to cheat on our taxes.

Reagan’s idea that government is evil seems to be finally giving way a bit. The United States Postal Service (USPS) is required by law to deliver mail to anyplace in the United States. If it were a true corporation, it could pick and choose who can receive mail based on how profitable doing it would be. For decades, Congress has told the U.S. Postal Service to act like a private corporation. It required the USPS to prepay for all its employees pension benefits. This and declining letter volume quickly caused it to go into a financial tailspin. Congress repeatedly told the USPS to be an entity it couldn’t be and placed constraints on it to force it to be a service while wanting it to act as a corporation.

Lately, even Republicans are agreeing that some government agencies are necessary. In February, the U.S. Postal Service was at least partially bailed out. The bill passed with a majority of Republicans voting for it. It took decades of degraded service and mini bailouts as revenues before Congress finally did the obvious thing: let the USPS be a service again.

It did something similar last year with Amtrak, providing $44B for transportation, allowing Amtrak to modernize. But you can’t expect the USPS to act like a corporation when it’s really a service. The same is true with Amtrak, which will never have competition for passenger rail service nationwide. The attempt to make the USPS act like a corporation was a needless decades-long fiasco. As services, the government must step up to provide the funding needed to ensure it stays a service, because we all need the USPS, even if it seems sometimes that we don’t.

We’ll need to see a lot more legislation before government is allowed to function with some semblance of normalcy. But with special funding for the IRS, USPS and Amtrak, it suggests Reagan’s foolish notion that the government is evil may be finally dying.

Traveling in the age of covid

We’re leaving New York City after three days of playing tourist. It’s my first trip away from home since the pandemic began.

It’s been interesting to see how much has changed for tourists in the age of covid, which turns out to be quite a lot. In NYC there are definitely privileges associated with being vaccinated. For one, we could get in to see two Broadway shows. Our vaccination cards and IDs were checked at the door, but even so we could not take off our masks during the performance. If you were eating or drinking food from the concessions, you could briefly unmask, but that was the only exception.

Amtrak requires you to self certify that you are vaccinated or have a recent negative covid-19 test, but doesn’t check your credentials. You wear your mask on the train, except when eating or drinking. Their cars are pretty big so it’s likely it wouldn’t be a problem if you were unmasked, but better safe than sorry. The penalty for not wearing a mask could be permanent disbarment from Amtrak.

You end up wearing a mask most of the time because most of the time you are indoors. There are a few exceptions when indoors. It’s pointless inside your hotel room. We had breakfast at our hotel and it was not possible when eating, but to get into the restaurant you had to show proof of vaccination and show an ID. Most people kept their mask on in the restaurant except while eating.

When outdoors, most people were unmasked. Those who were masked probably just didn’t want to bother temporarily unmasking. It’s not pleasant to spend most of your day breathing your warm air, but you do get used to it. The only real problem if that masks can get wet from your own breath after a while. I discovered a cloth mask is preferred, as a paper one I bought failed when looping it over my ears.

How safe is all this in the delta age? It’s hard to say. It’s unlikely I have acquired an infection, but for all I know I might test positive. I just don’t have any symptoms. I’m probably fine despite being in close quarters with other humans for hours at a time.

Without a N95 mask, masks won’t prevent me from getting covid, although they can lessen the odds. Their purpose is to reduce the risk that if I have the virus that I will pass it on to others. It’s basically common courtesy; wearing a mask effectively says that I care to take proactive steps to inadvertently pass it on to you. Not wearing a mask effectively says the opposite: I don’t care enough about you to bother to inconvenience myself by wearing one. No wonder that those of us who are vaccinated by 2:1 majorities are for requiring mask mandates for everyone.

So the vaccine can’t prevent exposure to the virus or ensure you don’t get the disease. If most everyone masks, it reduces greatly the odds of getting infected. But it does mean that if you are exposed to the virus, you may test positive but have no symptoms. The main point of the vaccine is to lessen the likelihood of hospitalization and death. That’s how vaccines work. So I expect that I will get covid-19 at some point, or at least test positive for it. If I’m lucky, I’ll never develop symptoms. If I get it, I will almost certainly not die from it and avoid hospitalization. And if most of us wear masks in public we can markedly reduce the level of infections and deaths.

I am noticing some new trends. At least in New York, restaurants are going menu-less: you need a smartphone to see the menu. You scan a QR code and follow the link to the menu. This saves a lot of paper, obviously, but it also allows restaurants to save money printing menus and to dynamically change prices. This is true of museums and other tourist attractions as well. For example, when we toured St. Patrick’s Cathedral, we used a QR code to download an electronic tour.

We were last in New York City in November 2019. The city has obviously changed since then. There are a lot of closed restaurants, even close to Broadway. Many restaurants are taking over sidewalks and parking places, allowing outdoor dining. The city doesn’t feel quite as busy and vibrant as it did back then. Broadway is about half reopened.

In general, New Yorkers are vaccinated and vaccine-savvy, and don’t have a problem masking up. They suffered 30,000 fatalities early in the pandemic, which helped, but being a large multi-cultural city they have learned to mostly get along with each other and are used to following rules.

It’s not surprising then that the city has weathered this latest covid wave reasonably well. These restrictions seem to be working reasonably well, allowing the city to do what it does best: make money. Judging by our hotel rates and ticket prices, they are making plenty of it again. I doubt this is true of most Southern states.