Yes, you heard that right. The time is perfect in this abysmal economic environment to beef up the IRS. IRS audit resources have never fully recovered—in relation to the workload the IRS faces—from the IRS-bashing of the late 1990s. That’s too bad because IRS internal studies show each dollar spent on an additional examiner brings in on average 4 to 5 dollars of additional revenue. Fortifying enforcement would seem to be a “no-brainer” when we have a tax gap of at least $400 billion. (The last estimate, for tax year 2001, was a gap of $350 billion.)    more »

Senator Mitch McConnell proposed over the weekend to cut the 25-percent tax bracket to 15 percent as part of the economic recovery package. This might make sense politically, but it’s a pretty dubious economic stimulus. On the positive side, the proposal wouldn’t cost much compared with the hundreds of billions bandied about by the president-elect. Total cost: $18 billion in 2009. But it’s so cheap because it would throw 5 million taxpayers onto the AMT, boosting AMT revenues by almost 80 percent. (More middle-class taxpayers fall prey to the shadow tax system because the lower tax rate pushes regular tax liability below the AMT threshold.)    more »

The soon-to-be Obama Administration floated quite a trial balloon over the weekend: $300 billion in tax cuts for workers and business over the next couple of years. When you get past the eye-popping number, perhaps the most striking element is how conventional most of the ideas are. For individuals, they’d include some version of Obama’s Making Work Pay Credit, a refundable tax credit (aka cash payment) for everyone making roughly $200,000 or less. Obama aides did not say how this money would be distributed, although they hinted they’d try something other than the rebates that the Bush White House turned to three times over the past eight years. One idea: reduced withholding, which would release the funds more slowly than a lump-sum payment would.    more »

It was quite a year. Taxpayers are now shareholders in most major U.S. banks, a massive insurance conglomerate, and three failing car companies. After years of debating whether the government was implicitly or explicitly guaranteeing Fannie Mae and Freddie Mac debt, Washington settled the argument by buying the mortgage giants. I know George Bush liked to talk about an ownership society, but I never imagined this is what he had in mind.    more »