As President Joe Biden tries to push his infrastructure plan over the finish line, Republicans in Congress just claimed a win: They forced him to scratch a plan to boost funding for the IRS.
Superficially, it sounds like good politics: Everyone’s afraid of audits, and Republicans pride themselves in their anti-tax positions. So of course they’d want to starve the IRS.
But as former top IRS officials for Republican presidents, we think Republicans are getting something wrong here. This IRS expansion was based on a smart idea, which could also be good politics and serve the interests of both parties: Not more audits, but better technology and income tracking to catch wealthy cheaters.
The point of Biden’s plan wasn’t to boost audits but to close the “tax gap” — the amount of taxes currently owed but not paid. We know firsthand that it’s a gigantic number — in 2019 alone it totaled $574 billion, and it’s estimated to reach $7 trillion over the next 10 years. In perspective, that’s equal to the amount of federal income taxes that the bottom 90 percent of individual earners pay in federal taxes on an annual basis.
Closing the tax gap doesn’t require siccing the IRS on hard-working families and small business owners. Quite the opposite: Most of the people who don’t pay their fair share are upper-income people who use financial vehicles to avoid tax bills. Fixing the tax gap is good politics for both parties because it reduces pressure to raise taxes on law-abiding taxpayers.
Here’s an amazing stat: Workers who get a W-2 pay 99 percent of the taxes they owe. It’s those who funnel income through financial vehicles the IRS doesn’t or can’t monitor who pay as little as 50 percent of what they owe. The tax gap has grown because an increasing number of filers, particularly upper earners, do not receive W-2s or other forms that report their income. This is fundamentally unfair and unsustainable.
Biden’s idea for strengthening the IRS wasn’t to add audits, but to improve technology — which is a smart use of federal money to bring in revenue. When we were at the IRS, audits were pretty much the only tool we had to find most of that missing income. But it was and is an inefficient tool. While there is an essential role for audits, they bring in less than 0.5 percent of IRS revenue, and 20 to 40 percent of audits produce nothing.
The main reason the tax system works when it does is that taxpayers, knowing that they and the IRS have the same information about their income, simply pay what they owe. So the best way to do that for wealthy tax-avoiders is to enhance the reporting of sources of income that aren’t currently collected by the IRS. This additional reporting will increase the efficiency of the IRS’ enforcement activity and also be much less burdensome for taxpayers. Starting an audit to gather information from a taxpayer, only to find that there was no problem in the first place, is not good for anyone.
What makes the Biden administration’s plan more effective than past attempts to improve tax collection is a three-legged stool of policies. The first is improving access to income information, accompanied by more reliable funding for the agency and advancements in technology.
Over the last 10 years, the IRS has been crippled by funding cuts, growth in quantity and complexity of tax returns, staff losses and the complex process of distributing Covid relief. The Biden plan calls for a steady and manageable increase of 6 percent per year above inflation in new funding over 10 years, which should improve services for ordinary taxpayers. It also relies on information reporting and technology to pinpoint where taxpayers are not paying what they owe and reduce the proportion of unnecessary audits on taxpayers who are paying accurately.
Currently, banks and other financial institutions report on a range of transactions, from income to interest to proceeds from securities transactions. The Biden plan would require these institutions to report two additional numbers: total inflows and total outflows from certain accounts.
This will not be an onerous new requirement. Banks and financial institutions currently issue more than 3 billion 1099s on a range of transactions, from income to interest to proceeds from securities transactions. This new 1099 is a reasonable step that will impose minimal cost on banks and financial institutions, will help taxpayers file more accurate returns, and will enable the IRS to better determine where to look for scofflaws.
Modern software technology, such as that used to detect credit card fraud, would allow the IRS to analyze all the information it has, including the increased financial account reporting noted above, other information reports such as income on foreign accounts and income from businesses organized as partnerships, and results of past audits, to pinpoint returns with possible deficiencies. Currently, the IRS cannot use this information except in a laborious manual audit.
Are we talking about eliminating the whole tax gap? Of course not. The administration estimated that their plan would shrink the tax gap by around 10 percent over 10 years. Three credible, independent estimates show that the administration proposal will produce over a trillion dollars within 15 years. But that still would represent a significant amount of new revenue without imposing new taxes.
As Congress has done in the past when it grants legislative authority to the IRS, it also should provide additional taxpayer protections and insist on clear goals for the IRS to ensure that funds are used in a way that will produce the most increase in revenue from voluntary compliance as well as enforcement, and with the minimum burden on taxpayers. Setting these goals and protections in law will also provide Congress an effective means of conducting oversight.
At a time when Congress is considering tax increases that would be paid by those who already pay what they owe, it is especially important to seize this opportunity to collect a significant portion of the tax gap. That goal can be attained by using modern technology to analyze information and increase service to taxpayers, not by more auditing alone.
Cheney-McCarthy war of words heats up over Jan. 6 investigation
Liz Cheney is already taking public heat from House Minority Leader Kevin McCarthy — and dishing it back — over her Democratic appointment to the select panel investigating the Jan. 6 Capitol attack.
The relationship between McCarthy and Cheney has steadily deteriorated throughout the year, with an apparent peak coming when the California Republican helped oust Cheney from the House GOP’s No. 3 leadership spot. But tension is spiking again now that Cheney and Illinois Rep. Adam Kinzinger — Donald Trump’s two most vocal GOP critics in Congress — are serving on the select panel thanks to Speaker Nancy Pelosi. McCarthy dubbed Cheney and Kinzinger “Pelosi Republicans” on Monday.
Cheney, as she walked into a prep session meeting with her fellow committee members shortly after McCarthy’s remark, told reporters she found it “pretty childish.”
“We’ve got serious business here. We have important work to do,” she added.
The back-and-forth comes after a series of clashes last week following Pelosi’s veto of two of McCarthy’s GOP picks to serve on the Jan. 6 investigation: Reps. Jim Banks of Indiana and Jim Jordan of Ohio, both of them avid Trump defenders. The move prompted McCarthy to withdraw all of his appointees to the select committee in protest, describing the investigation as a partisan effort designed to hurt Trump and the party ahead of next year’s midterms. Republicans, however, largely opposed a bipartisan Jan. 6 commission earlier this year.
Cheney was part of Pelosi’s initial wave of names tapped to serve on the panel that will examine the deadly events of Jan. 6, when Trump supporters breached the Capitol in an attempt to disrupt certification of the ex-president’s election loss, forcing lawmakers and then-Vice President Mike Pence to flee.
Following the GOP boycott, Pelosi on Sunday named Kinzinger to the Jan. 6 committee, giving Democrats two House Republican members who they say boost their panel’s bipartisan credibility.
Kinzinger, wearing a tie patterned with elephants, also called McCarthy’s comments “childish” during a break in the select panel prep session.
“He can call me whatever names he wants,” Kinzinger said, adding that the bottom line is “I’m a Republican.”
Still, McCarthy’s jab signals a remarkable shift from earlier this year. Cheney once served as his leadership partner before her frequent Trump criticisms prompted her colleagues and fellow leaders to eject the Wyoming Republican from a role that is responsible for the conference’s messaging.
These days, some of Cheney and Kinzinger’s fellow Republicans are openly speculating about their future in the House GOP conference. Asked whether the duo should face sanctions from their party for accepting Pelosi’s appointment to the inquiry, McCarthy said only that “we’ll see.”
But Kinzinger shrugged off the subtle threat on Monday: “If the conference decides” to punish him and Cheney, he said, it “says more about them than it does about us.”
Kinzinger also didn’t rule out calling his fellow Republican members to testify before the select panel, saying it was “important” to hear from them if they had relevant information. Discussions are still ongoing about the scope of Republican staff for the inquiry, he added, but he lauded former Rep. Denver Riggleman (R-Va.) as a model for those hires.
No matter how actively McCarthy tries to tether Cheney and Kinzinger to Pelosi, who frequently appears in GOP attack ads, they both have strong conservative voting records to counter his attacks. House Majority Leader Steny Hoyer noted as much, while arguing Monday that Cheney and Kinzinger are “real Republicans.”
“If anybody looks at the voting records of Mr. Kinzinger and Ms. Cheney, they will know that they haven’t voted with Speaker Pelosi except on the most bipartisan of bills,” Hoyer said. “These are people who come from conservative Republican districts who have represented Republican values. The difference is, and this is the key, they both believe in the truth. That ought not to be a partisan issue.”
Nick Niedzwiadek contributed to this report.
Bipartisan infrastructure talks in dire state ahead of pivotal week
The bipartisan infrastructure negotiations entered their darkest phase in more than a month on Monday, with the parties openly feuding over policy and former President Donald Trump urging Republicans to drop the effort altogether.
Democrats and the White House on Sunday night offered a proposal to Republicans proposing a deal on highway and public transit funding, as well as several other unresolved areas. That offer was intended to address all outstanding disputes — and was immediately rejected by Republicans.
The GOP sent out a list of areas where that Democratic offer broke from previous agreements among the bipartisan senators writing the bill on Monday afternoon, the latest in a running list of bleak sign for the talks ahead of another pivotal week of negotiations in the Senate.
The comprehensive offer “we received from the White House and [Majority Leader] Chuck Schumer was discouraging since it attempts to reopen numerous issues the bipartisan group had already agreed to,” said a GOP source familiar with the negotiations. “If this is going to be successful, the White House will need to show more flexibility as Republicans have done and listen to the members of the group that produced this framework.”
Two additional sources close to the talks, one in each party, confirmed the dire state of negotiations on a signature priority of President Joe Biden. Each blamed the other side for reopening debate on items once considered settled.
White House press secretary Jen Psaki said she is “confident” an agreement can be reached. But many struck a more dour tone in private. And Democrats said the frantic past few days was kicked off by Republicans rejecting an increase in IRS enforcement to pay for the bill.
“It takes a lot of chutzpah for Republicans to make accusations about keeping words when the biggest hole blown in the [financing] was made by them reneging on their agreement about enforcing the law on wealthy tax cheats,” said a Democrat familiar with the negotiations.
The talks seem in danger of collapse given the public acrimony and finger-pointing on Monday, after a fruitless weekend of discussions. The group of 10 senators leading the talks will huddle again on Monday evening, in an attempt to rescue the fragile negotiations.
The bipartisan group of lawmakers hoped to reach a final agreement by early this week after a vote to advance undrafted legislation failed last week. But that appears unlikely, with several issues outstanding. Among the biggest sticking points is transit, but broadband has also become a point of contention. The bill’s finances are also viewed as shaky.
A Democratic source familiar with the bipartisan discussions said that Democrats’ counteroffer included accepting the GOP proposal for highways in exchange for the Democratic proposal on transit. But Republicans dispute that characterization. A GOP source familiar with the negotiations said the choice isn’t binary and that the GOP offer on transit “was met with silence for three days.”
Funding for water infrastructure also remains unresolved, according to a Democratic source familiar with the talks, who accused Republicans of backing away from the original agreement. That source said that Sen. Mitt Romney (R-Utah) had reneged on a deal and “proposed something completely unworkable.”
A spokesperson for Romney called that “laughably false” and said Schumer is seeking $15 billion more than a previous agreement.
Senate Environment and Public Works Chair Tom Carper (D-Del.) and Sen. Tammy Duckworth (D-Ill.) both raised concerns about the funding last week, with Carper suggesting he would have a hard time supporting the package unless certain funding conditions were met. The snafu illustrates the tricky challenge the group of rank-and-file senators led by Kyrsten Sinema (D-Ariz.) and Rob Portman (R-Ohio) has in navigating around committee chairs.
As bipartisan negotiators aim to finalize an agreement, Trump said that Senate Republicans “are being absolutely savaged by Democrats on the so-called ‘bipartisan’ infrastructure bill’” and urged them to wait until they take back the Senate in 2022 to “regain a strong negotiating stance.” Trump tried unsuccessfully to cut a deal with Democrats on infrastructure, sidelining negotiations once his impeachment investigation began.
Although the bipartisan group and the White House announced an agreement last month on a bipartisan framework, translating it into legislative text is proving difficult. Schumer wants to pass the bipartisan bill and begin the process for Democrats’ $3.5 trillion social spending package before the Senate leaves for the August recess.
Eleven Senate Republicans wrote Schumer last week to tell him they’d be ready to move forward as soon as Monday, provided the bill was mostly completed and its finances were in order. Neither condition was met as of midday, with senators convening late in the afternoon.
Mortal Kombat 11 Surpasses 12 Million Copies Sold WorldwideGame Informer
Mortal Kombat 11 is the latest entry in a renowned franchise that has spanned decades. The game features a sizable roster with (literally) bone-crushing combos, a solid single-player story mode, and a continuously burgeoning multiplayer scene. Like many of the other NetherRealm titles that have come before it, Mortal Kombat 11 has reached an impressive milestone; it’s surpassed 12 million copies sold worldwide.
According to an emailed press release, NetherRealm Studios Creative Director Ed Boon expressed heartfelt words after learning about Mortal Kombat 11’s latest achievement. “When Mortal Kombat launched nearly 30 years ago, I never dreamed it would grow into the franchise it is today with more than 73 million games sold,” Boon said. “We have some of the most passionate fans in the world, and we appreciate the support they have shown us over the years.”
It’s not particularly surprising that Mortal Kombat 11 has found this level of incredible success. After all, the franchise is one of the industry’s biggest video game dynasties – even Mortal Kombat Mobile has over 100 million installs! – that has spawned many television shows, animated movies, and live-action films, including the latest one that Brian Shea reviewed. However, additional content updates have stopped now that NetherRealm is moving to its next project. What the next chapter in the Mortal Kombat franchise will look and play like remains to be seen, but based on how beloved the IP is to millions of fans around the globe, it’ll likely be another well-earned success story for Ed Boon and co.
Andrew Reiner enjoyed his time with Mortal Kombat 11 despite some loot problems, concluding his review by stating, “Mortal Kombat 11 may have loot issues, but the combat has never been more rewarding. You can finish the entertaining story mode in one sitting, but getting the gear for the character you want could end up being more of a time-stealing tale than the one the game tells.”
Mortal Kombat 11 is available on current- and last-gen consoles as well as Switch, Stadia, and PC. Mortal Kombat 11 Ultimate is a more expanded version of the game that launched towards the end of last year; be sure to play that for the complete experience.
What do you hope to see in Mortal Kombat 12? Or, more broadly, what do you hope to see in NetherRealm Studios’ future games?
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