Why a robust IRS beats what we’ve got now; CFO needlessly raising alarms about tax enforcement

Patronis announced that he’ll ask the Legislature during the regular session that opens in January to require any vendors that do business with the state to report whether they’re also providing AI services to the IRS.

We couldn’t watch this performance in real time — the Florida Channel didn’t cover it, and Patronis didn’t livestream the event on his Facebook page; requests lodged with Patronis’ office for a video recording went unanswered.

But in a press release, Patronis observed that his event transpired on Friday, the 13th of October.

“The idea of the IRS using Artificial Intelligence to go after law abiding taxpaying citizens is like something from a 1980s sci-fi horror movie. My constitutional duty is to protect Floridians, so for the upcoming session we will propose legislation to survey all state vendors to assess whether they’re providing AI services to the IRS,” he said.

Web portal

Patronis has already opened a web portal for people and businesses to report interactions with the IRS, with the data thus accrued intended for dissemination to members of the Florida congressional delegation, so they can do something about it in Washington.

“To the degree we can identify who these vendors are and get better details on the level of service they’re providing, the more effective we’ll be at reining in the IRS’s targeting of Florida,” Patronis said.

U.S. Sen. Scott fanned the flames.

“It’s no secret that Washington has weaponized the IRS against Americans. The thought of 87,000 more IRS agents is terrifying. I’m fighting to reverse this terrible decision by the Biden administration and in Florida, we will arm our small businesses with the tools they need to fight back,” he said — again, in a written statement disseminated by Patronis’ office.

Let’s take a breath here.

First of all, you have nothing to worry about unless you’re involved with a hedge fund, private equity, a real estate investor, or a large law firm. That’s who the AI initiative will target, according to reporting by The New York Times.

That’s who benefits from the baroque accounting machinations that obscure income that the program will attempt to leverage artificial intelligence to untangle.

“These are complex cases for I.R.S. teams to unpack,” IRS Commissioner Daniel Werfel has said, according to the Times. “The I.R.S. has simply not had enough resources or staffing to address partnerships; in a real sense, we’ve been overwhelmed in this area for years.”

Using the technology, the agency has already identified 75 large partnerships with assets of $10 billion for additional scrutiny with more to come — all with the aim of extracting their fair share of the costs of running the United States.

Relax

If that’s not you, relax. As former IRS Commissioner Charles Rettig observes in Bloomberg Tax, “Enhanced AI will be effective in helping to determine returns that should be examined as well as returns that shouldn’t be subjected to examination, lessening the burden on compliant taxpayers.”

Taxes are always a good dead horse to flog, especially for Republicans, and especially for Republicans like Patronis who reportedly are considering running for governor in 2026.

Earlier, Patronis vowed to “defund the IRS,” as the Phoenix reported in September, referring to $80 billion allotted to the agency in 2021’s Inflation Reduction Act. And he attacked plans to lower the reporting threshold for business transactions through third parties like PayPal to $600, down from $20,000 if conducted through at least 200 transactions.

“They’re hiring an army of agents, and they’re going to come after the state of Florida,” Patronis complained. “We have got to stop this politically motivated political process from attacking law abiding Americans, law abiding Floridians.”

The lower threshold comes via the 2021 American Rescue Plan. “The change under the law is hugely important because tax compliance is higher when amounts are subject to information reporting, like the Form 1099-K,” the IRS said last December.

As for those 87,000 new tax collectors swarming innocent Floridians like the Gestapo? That’s hooey, too.

The Inflation Reduction Act included that $80 billion for the IRS, with $45.6 billion earmarked for enforcement, again according to Times reporting. (The amount got trimmed during this year’s budget negotiations.) That 87,000 figure refers to IRS staffing over a decade, and the two biggest categories will be customer-service representatives and seasonal help during tax time.

Tax gap

The U.S. Treasury Department has identified what it calls a “tax gap” that was worth $600 billion as of 2019 and is projected to hit $7 trillion over 10 years, amounting to 15% taxes owed, according to an analysis published in 2021.

“These unpaid taxes come at a cost to American households and compliant taxpayers as policymakers choose rising deficits, lower spending on necessary priorities, or further tax increases to compensate for the lost revenue,” the analysis says.

Enforcement will target people earning more than $400,000 per year — “who earn income in opaque categories like partnership and proprietorship income, where misreporting rates are high,” according to Treasury.

“Further, the tax code will be fairer when it no longer benefits opaque sources of income relative to wage labor. In sum, effectively tackling tax evasion can decrease the amount of resources expended on underpaying tax liabilities, limit distortions, and encourage more socially responsible behavior,” the analysis says.

Who’d be against that?