IRS's Unintended Bias

Sometimes I come across a story that sends thoughts rambling in many different directions and this happened last week. I will then start this entry by asking forgiveness since it also promises to go all over the place.

This started with an article entitled “IRS tax audits may show unintended racial, ethnic bias.” And even after reading the article, I will agree that this it is indeed unintended. The bias largely comes about as a result of the IRS looking closer at tax returns that claim certain tax credits.

The fact that some of these credits are available to low-income taxpayers is what leads to this apparent bias. So then even if the IRS isn’t targeting any ethnic group, one must wonder why a breakdown by income shows a racial divide. This isn’t the place to get into why this may be, but it is just unfortunate no matter the reasons.

Then, however, I got to thinking about how this reflects upon how the IRS has stated in recent years that it is committing itself to tracking down more high-income taxpayers who have not been paying their full share. And doesn’t that just make more sense?

I mean, if the agency spends time chasing down low-income taxpayers who have claimed credits they may not be eligible for, what is going to be the outcome there? We are talking about a small amount of money that may be difficult to actually collect if it is determined to be owed. On the other hand, if you track down more high-income taxpayers, we are then talking about higher amounts of money with a higher probability of actually acquiring it if it is owed.

But then at the same time, is it any fairer to target those with higher incomes than it is to target those with lower ones?

In the end, this is one of those situations where there is no really good answer. On the one hand, a completely random audit system would seem the fairest. But on the other hand, this would result in more audits that clearly never had to happen and then never stand to result in getting money that is still owed.

And in those areas where this is no clear answer, you can be sure that this push-and-pull between different viewpoints will continue into the future. The only conclusion we should draw then is to continue doing the best we legally can under the tax system we are given. And that way, no matter how audits are determined, we can be comfortable that we can survive one.
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Warmly,

Josh Bousquet
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