Many politicians have repeatedly talked about the need for “the rich” to pay more income taxes.  Even Warren Buffet has joined the debate.  Regardless of whether Congress acts, the IRS has already taken matters into its own hands and has started scrutinizing wealthy taxpayers to an unprecedented degree.

The audit rate for taxpayers with an annual income of more than $1,000,000 is already eight times higher than the general population, which had a 1.1% audit rate.  For those with $10,000,000 or more in annual income, the audit rate climbs to almost one in five returns—almost 20 times higher than the general population.  However, the IRS is planning on increasing audit rates on wealthy taxpayers even more.

The IRS effort involves a new “wealth unit”.  Audits will be conducted by a team of IRS agents who will focus not only on a taxpayer’s individual return, but the returns of all related entities.  The scope of these audits will be much wider than a typical income tax audit.

For example, the IRS...

From the NYU Colloquium on Tax Policy and Public Finance

Link to Materials: Envy and Altruism in Hard Times

Kenneth Scheve (Yale University, Department of Political Science)

Abstract:

The politics of economic crises bring distributive economic conflict to the fore of national political debates. How economic activity is to be regulated and how policy should be used to transfer resources between citizens become central political questions and the answers chosen often influence the trajectory of policy for a generation or at least until the next crisis. This paper investigates how social preferences, specifically envy and altruism, influence individual policy opinions in these debates. I argue that social preferences have a powerful influence on support for policy alternatives which in turn shape the incentives faced by politicians in setting policy. I conduct original survey experiments in France and the United States and provide strong evidence that individuals care both about how economic policy alternatives affect their own interests and how they influence the welfare of others. Their concern about the welfare of others is consistent with inequality aversion -- both envy and altruism. The analysis focuses on key policy areas in the response to the current international economic crisis: trade policy, financial sector regulation, and tax policy. This preliminary draft presents the results from the United States only as the French survey is in the field.