Fred Hiatt's Soft Pitch
Answering Fred Hiatt’s challenge.
As an electronic subscriber to the Washington Post, I get an email early every morning highlighting various items at the Post. Yesterday morning, Fred Hiatt, editorial page director of the Post, emailed me (and, presumably, tens of thousands of others) to praise the work of WaPo columnist Catherine Rampell. Exhibit A was her recent column titled “The GOP rebrands itself as the party of tax cheats,” October 21, 2021.
She [Rampell] minces no words in “The GOP rebrands itself as the party of tax cheats” — but the argument that she soberly puts forward strikes me as pretty difficult to refute.
Well, let’s see how difficult it is to refute.
Rampell’s basic claim is that the latest recruit to the Republicans’ big tent is tax cheats. That’s the point she needs to establish.
Then she goes on to discuss the “tax gap,” the IRS’s estimate of the difference between what taxpayers owe and what they pay. The gap, she writes, is “predominantly owed by wealthy individuals.” I have no reason to doubt this. She also points out that rank-and-file wage earners find it harder to “shortchange Uncle Sam.” Again, she’s probably right.
Then she gets a little more controversial. She writes:
Tax cheating is not a victimless crime. When (disproportionately high-income) people don’t pay their bills, everyone else must pay more to fill the shortfall.
Her implicit assumption is that the IRS is going to raise x dollars and if it receives x – 100 billion dollars, it will raises taxes on others to get that $100 billion. She could be right, but I think that’s less clear than she thinks. We don’t have a good enough model of the IRS or of Congress to judge that claim.
But let’s grant her point and see where she goes with it. We’re almost there.
This solution [more reporting] is exactly what Democrats have proposed as part of their big budget bill.
What’s that reporting solution? She writes:
Under Democrats’ latest proposal, banks would — once a year — also report the sums of all deposits and withdrawals for certain accounts. Not every transaction; just the year-end totals. Only accounts with flows of more than $10,000 not tied to wage income or exempted benefits would be affected — the idea being that the IRS already knows about the wage income anyway.
How would the IRS know whether the flow of $10,000 or more is not tied to wage income? Wouldn’t it have to check? And in checking, wouldn’t it have to know which deposits to the account are wages? She doesn’t address that.
Banks complain that reporting requirements might be burdensome to financial institutions and taxpayers. Actually, banks already must file a report on any account that earns more than $10 in interest in a year; adding a couple of lines for aggregate inflow and outflow numbers is hardly outrageous.
Her argument seems to be that the burden is minimal. But then she needs to explain why banks are lobbying so hard against it. She doesn’t.
And then she goes “there,” with the standard “if you have nothing to hide, you have nothing to worry about.” She writes:
As for taxpayers, the only ones who have anything to fear are those who cheat.
Really? So if someone is not cheating, he or she would not at all worry about the IRS having data on inflows and outflows to his/her account? Can Catherine Rampell not think of any other reason why people wouldn’t want their financial privacy violated more than it already is?
And remember that she started off talking about the high rollers who are cheating on huge amounts of undeclared income. What does that have to do with the contractor who has an inflow or outflow of just over $10,000?
Hey, Fred Hiatt, throw us another soft pitch.