The Tax Credit Trap

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Tax fraud by the poor amounts to some $9 billion a year. Corporations and the very wealthy, meanwhile, manage to avoid taxes to the tune of some $340 billion a year.

Nevertheless, the IRS spends a disproportionate amount of time and resources hunting down the former set of taxpayers—partly because they don’t have high-priced lawyers to argue their case, and partly because it’s just easier to determine fraud for the former group. A person claiming undue credits under the EITC isn’t going to be resorting to fancy loopholes or ultra-complex financial schemes. In fact, the agency was recently found freezing tax refunds for hundreds of thousands of poor Americans deemed “fraudulent”—most of whom were owed all of the money they claimed.

But here’s the thing. Part of the problem with low-income tax credits is that they’re unreasonably complex, as Dorothy Brown pointed out in the New York Times yesterday. The EITC’s instruction book runs to 50 pages, and even seasoned tax preparers often make mistakes calculating it. Nevertheless, low-income families are supposed to have this stuff down cold—and if they don’t, they risk being labeled “fraudulent” and persecution by the IRS. (Another problem, Brown might’ve noted, is that a whopping 40 percent of low-income taxpayers have never even heard of the EITC.)

As Brown says, the entire system is perverse, and instead of wasting money prosecuting low-income workers, Congress could simplify the tax credit and spend its time going after the corporations robbing the country of $340 billion a year—an amount, keep in mind, that could essentially close the federal budget deficit. Not that the Republicans in Congress are planning anything of the sort, but still.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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