IRS is Coming for Retirement Funds Now?

We’re told the IRS expansion is to hunt the rich and their fair share, but in reality they are coming for everyone else.

August 14, 2023

By: Bobby Casey, Managing Director GWP

IRS T​here was a bit Dave Chappelle did about the tax system, that is worth sharing here. I don’t think Chappelle is much of a Trump fan, but he had this observation to make, which was illuminating regardless of where you stand with Trump:

T​hat first debate, I’ve never seen anything like it. I’ve never seen a white, male, billionaire, screaming at the top of his lungs, “This whole system is rigged!” he said.

And across the stage was white woman, Hillary Clinton and Barrack Obama, sitting there looking at him like, “No it’s not…”

And I said, “Now wait a minute bro… it’s what he said!”

He said, “I know the system is rigged because I use it.”

I said, “Well, GODDAAAAMN!”

And then Hillary Clinton had punched him with the taxes, “This man doesn’t pay his taxes!”

H​e shot right back, “That makes me smart!”

And then he said, “If you want me to pay my taxes, then change the tax code. But I know you won’t, because your friends and your donors enjoy the same tax break that I do.”

T​his, my friends, is all you need to know about American taxes.

Every single law that is created in the name of catching the very worst among us, has not only never accomplished that much, but winds up catching some poor working class schmuck who was just minding his business.

Every one.

Take the TSA or the ATF (please!). The TSA has never known a success rate above 5%. Tragedy doesn’t begin to describe its failure, and the utter time and money dump it is. The ATF created a mountain out of a mole hill with Waco because of their abject failure at Ruby Ridge. They were hoping to take down the Davidians to justify their existence as an agency because they were that close to being dissolved. Somehow, the devastating outcome that was Waco, was parlayed into a justification to keep the ATF. No normal human being would see it that way, but that’s not who we’re dealing with.

Who loses the most when the Fed inflates the dollar or when they raise the minimum wage?  The poor and disadvantaged 100% of the time.

Look at the war on drugs? Has that brought down any cartels? Put another way, the US was off fighting in Afghanistan, for God knows why for TWENTY YEARS. For what? Something about terrorists and opium trade, supposedly.

S​o the US finally gets out of there, and the Taliban veritably shuts down opium production.

The Taliban government in Afghanistan – the nation that until recently produced 90% of the world’s heroin – has drastically reduced opium cultivation across the country. Western sources estimate an up to 99% reduction in some provinces.

Strange, right? Ya gotta ask, “What was the US doing there for 20 years, exactly?” Sure, we see in the news a few sacrificial “triumphs” and take-downs, but it’s just to keep people’s support for the task forces, and spending, and laws. If we didn’t get those rations, we’d start questioning the efficacy of these laws.

Same for taxes. How are tax codes and reforms sold to people? Well, the left generally sells it as “we’re coming for the rich, so they can pay their fair share”; and the right sells it as, “we are going to free up funds so more people can work”. At the very least, I’d say that the right plays to economic reality of lower taxes higher economic prosperity… albeit they fail in every other economic effort when it comes to actual policy.

T​he left just outright lies. They say they will “tax the rich their fair share”, but no they won’t. Joe Biden recently signed a bill authorizing the funding of 87,000 more IRS agents over the next ten years, the price tag for which is $80 billion in funding.

N​ow we can really hunker down on these offshore accounts and come after these wealthy tax dodgers?

O​h please. No sooner did they announce this steroidal boost to the IRS did they roll out their intentions to come after people who make more than $600 on pay apps like Venmo. This, by the way, has been delayed until 2024… but is not dead.

Here’s the thing: Johan Norberg explained Sweden’s tax and welfare model. The dirty little secret, as he calls it, is that Sweden squeezes the poor in their tax model, because they are loyal taxpayers. They can’t and won’t go anywhere. The rich can afford to flee, and will if pushed. And they don’t rely on the system as much as the poor.

Even Bernie Sanders when asked point-blank if he would tax the middle class to implement and pay for his programs, said, yes.

S​o while people like to pretend that the IRS is out there as loyal class warriors fighting to capture the wealth of the rich, that’s not them at all. In fact, the IRS prioritizes auditing the poor over the rich because they are the low hanging fruit.

Rich people can afford tax attorney’s that will drag things out past their statute of limitations. They will dispute all the finer points of tax law to the exhaustion and demise of the agents pursuing them.

T​he ROI just isn’t there. The money might be, but the juice isn’t worth the squeeze as it were.

S​o they go for the poor and even working class because they can’t afford the dispute. They just negotiate how to pay it off.

T​hey are not coming for the rich precisely for the reasons Chappelle and Norberg observed. So let’s stop pretending this is a thing.

I​’m not advocating that they do come for the rich. I’d rather they come for no one… or more specifically that the IRS be dismantled entirely.

But the fact remains, their crackdowns are for people who are in the US who can’t or won’t leave. Plain and simple. Dealing with lawyers and other jurisdictions is a time and money suck. The cost-benefit analysis is not complicated, and the evidence to support this continues to mount:

The Internal Revenue Service (IRS) said it is taking “swift and aggressive action” targeting compliance issues related to Employee Stock Ownership Plans (ESOPs), which are retirement arrangements where employees become partial owners of their company by owning its stock.

Who does this sound like the IRS has in its sights? I mean, let’s say they could’ve squeezed another couple hundred out of everyone… it’s a retirement fund for crying out loud.

I​f it’s that complicated, maybe figure out a simpler way to sort through it. But “cracking down” on stuff like this is not only bad optics, but counter-productive.

Since an ESOP can borrow funds from employers or third parties to purchase shares of the employer, ESOPs can be complex arrangements. In light of this complexity, the IRS said it’s taking tougher enforcement strategies to make sure that employers who sponsor an ESOP are complying with tax laws.

Some of the compliance problems flagged by the IRS include valuation issues with employee stock, prohibited allocation of shares to disqualified persons, and failure to follow tax rules for ESOP loans that cause such loans to be unlawful.

W​hen the IRS didn’t have all these new resources, they were still getting a bit over 80% of the revenue due. And for better or worse, under the Trump administration, the IRS saw enough tax receipts to obscure how inefficient they were in audits and collections.

Receipts are low. That’s a bad economic sign. But spending $80 billion on the IRS to compensate for that is not even in the same universe as the right solution.

T​he US is in trouble. Plain and simple. And you can see it in the tug of war between inflation and interest rates, and between their funding and defunding the IRS over the years. Take care out there, and do what you can to safeguard your assets.

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