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Opinion The amazing plunge in IRS audits of rich people and large companies

Round after round of budget cuts have forced the Internal Revenue Service to dramatically scale back its efforts to catch tax cheats. And as I mentioned in my column today, some of the biggest beneficiaries of this decline in enforcement are wealthier Americans and larger corporations (that is, the taxpayers with the most resources available to engage in aggressive tax planning).

That’s primarily because these are the groups most likely to get audited in the first place, as you’ll see in the charts below.

But first, take a look at the precipitous decline in key enforcement personnel. These figures come from data the IRS recently sent me.

This appears to be what Treasury Secretary Steven Mnuchin was referring to during his confirmation hearings, when he said he was both “surprised” and “concerned” to learn about a recent 30 percent decline in the IRS head count.

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Now take a look at what’s happened to audit rates for companies of varying sizes:

Audit rates for large firms have about halved, from 17.8 percent in fiscal 2012 to 9.5 percent last year.

Audit rates for individual income tax returns have also fallen. In fiscal 2016, 0.7 percent of 147 million such returns were audited, the lowest rate since 2003. Again, those with the deepest pockets saw the sharpest declines:

In fiscal years 2011 and 2012, the audit rate for those earning more than $1 million was greater than 12 percent; last fiscal year, it was below 6 percent.

President Trump reportedly wants to cut the IRS’s budget further, which will result in even fewer resources available to make sure taxpayers pay what they legally owe. Which likely means tax compliance will fall, which will force lawmakers to raise statutory tax rates to make up for the shortfall, which means law-abiding taxpayers get punished, which causes even more tax cheating, etc. This is a vicious cycle we’ve already seen play out in places such as Greece and Italy.

You know, for a guy obsessed with “law and order,” Trump doesn’t appear terribly interested in making sure people obey tax laws.