Help Us Reach our Fiscal Year-End Goal
Make your gift to the Law Center while your gift will be matched, up to $15,000 before the end of our fiscal year.
The wealthy aren’t paying their taxes, but it’s low-income taxpayers who are getting audited.
In the past decade, the IRS has audited low-income taxpayers who claimed the Earned Income Tax Credit (EITC)–with an average annual income under $20,000—at a higher rate than people making $500,000 to $1 million dollars a year. The IRS has been critically understaffed and underfunded for decades, and as IRS Commissioner Rettig explained, EITC audits are automated and simpler than going after millionaires, who have the resources to drag the agency into long legal battles. But this has serious racial, gender, and economic equity impacts. The most-audited counties in the country are majority Black rural counties in southern states like Mississippi and Alabama, where the average income is under $30,000 a year. Meanwhile, the top 1% are responsible for about $163 billion in unpaid taxes every year, and the IRS fails entirely to go after the hundreds of thousands of high-income earners that don’t file taxes at all.
The IRS audits low-income taxpayers at a disproportionately high rate because it is cheaper and easier than auditing the rich, but the negative effects of an audit on a low-income taxpayer can be dire. Unlike the top 1%, who have armies of lawyers and accountants to help them, EITC taxpayers rarely have the resources or assistance needed to dispute the audits. And losing the EITC refund can be devastating—for many low-income families, refundable credits provide a big part of their annual household income. In addition, being audited can have long-term effects on low-income taxpayers’ economic security and the likelihood that they’ll attempt to access benefits in the future. This is particularly devastating for low-income women, who already contend with economic disadvantage due to lower wages, gender and racial wealth gaps, and being overrepresented in poorly paid jobs.
To increase equity and recoup the hundreds of billions of unpaid tax dollars every year, the IRS should—with more support and funding from Congress—focus its resources away from low-income taxpayers and toward the top 1%.
A number of policy changes could help achieve that goal:
These policy changes and additional funds could help to create a more equitable tax system that focuses on raising revenue to support our shared priorities rather than target low-income taxpayers who are already disadvantaged by inequitable laws. The solution to closing the tax gap is making sure the wealthy actually pay their taxes, and it’s time we adopt policies to achieve that.
Written by: Kenna Titus, Legal Intern, Income Security