Forbes needs to be audited

March 17, 2023

By Tim Worstall

Forbes misrepresents IRS audit numbers in a way that supports democrat recommendations for changes at the IRS. Well, people can make mistakes. But every error – or misrepresentation – has the effect of making Senator Elizabeth Warren and her colleagues’ complaints and ideas about the IRS look good. It would be remarkable if all mistakes worked that way, wouldn’t it? That James Bond idea of once is happenstance, twice is a coincidence, and three times is enemy action comes into our thoughts.

The background here is the bill to increase the IRS budget to hire more agents to do more audits. Well, maybe that’s a good idea and maybe it isn’t. As usual, that’s not our point here, we’re about accuracy. If all the numbers get shaded to show that it’s an excellent idea then we’re not dealing with a neutral reporter on the subject.

For example:

Both the GAO and Trac attribute these disproportionate audits to the effects of reduced staffing. Budget cuts left the IRS with 1,400 staffers to examine the returns of 164 million taxpayers in the fiscal year 2022,

No. As the New York Times –  says:

Among the I.R.S.’s workforce of about 79,000 employees, 10,000 are actually agents. (Of those, 8,000 are revenue agents who audit tax filings and 2,000 are special agents who investigate potential tax crimes.)

That’s one error that makes Sen. Warren and a larger IRS look good. Confusing – because of course it must be confusion, right? – the number who conduct audits with those who investigate tax crimes.

From Forbes again:

From 2010 to 2019, the rate of taxpayer audits fell from 0.9% to 0.25% regardless of income, according to the Government Accountability Office. But audit rates decreased the most for Americans with incomes of $200,000 or more, the GAO found, with those making $5 million or more seeing the largest drop in audit rates, falling from 16% a decade ago to 2.4% last year.

No, that GAO report is here. The drop in audit rates over $5 million is 86%. That for $500k to $5 million is 87%, and for $200k to $500k, it’s  92% (Figure 1 on Page 7).

Now, it is possible to say that 16% or so to 2.4% is larger than the other falls. But the first two, the drop in all rates, and the drop in those over $200k are being expressed as percentages. To change the measure for the third – no doubt it’s just coincidence.


Meanwhile, an analysis of IRS data from Transactional Records Access Clearinghouse (TRAC) at Syracuse University found that households earning less than $25,000 annually were five times as likely to be audited by the IRS.

Five times what? The report that they’re quoting is here (Table 1). It’s not even those who earn less than $25k, it’s those who get the EITC tax credit who have the higher audit rate. It’s also a lower audit rate than those over $1 million in income. It is 5 times the audit rate for all individual tax returns. But that’s really not the impression we’re given, is it?

Ah, the third time.

We could – should – add one more point. From the GAO report, something should be included to give a balanced view of these numbers. It’s even in the press release, often the only part most journalists bother to read of a report:

Audits of the lowest-income taxpayers, particularly those claiming the EITC, resulted in higher amounts of recommended additional tax per audit hour compared to all income groups except for the highest-income taxpayers.

The IRS earns more tax revenue per hour of employee time by auditing those EITC recipients. So, logically, the IRS audits those taxpayers more. We do think the IRS has the job of maximizing tax revenue given the resources devoted to tax collection, right?

The numbers are quoted here to make Sen. Warren’s ideas look good. Well, maybe they are good. But the repetitive misrepresentation of numbers to make a political point in a supposedly factual report, well, that’s not good. Possibly even bias. Or, as Mr. Bond would say, enemy action.

Oh yes, even at Forbes.


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