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Sat Oct 11 2008

Columns

Molly Ivins

Of tax evasion and denials
February 11, 2003

AUSTIN, Texas -- And another thing CEOs should probably avoid ... Sprint Corp. has just fired its two top executives for (I love this part) a conflict of interest. It seems these worthy gentlemen felt perfectly entitled to pay zero taxes on more than $100 million in stock-option gains. Isn't that special? But that's not why they were fired.

They were fired because Sprint's accounting firm Ernst & Young set up these lucrative tax shelters. After the IRS disallowed the shelters, the execs were at war with their own company's auditors. Not nice.

It gets better. In return for giving the two execs what turned out to be very bad advice, Ernst & Young got $6 million -- paid by Sprint. Now the execs owe the taxes and penalties, but they no longer have the money, since Sprint's stock price hit the skids in the general implosion of telecommunications. Plus, they are no longer employed

Pretty big mess, and it's happening all over.

This raises several questions, including: Who put the Tabasco in the IRS's grits? When last heard from, the IRS was being slowly starved to death by successive Republican Congresses, the same way they did with the Securities & Exchange Commission, which lead to the inevitable Enron & Etc.

One dandy way to prevent an agency from doing its job is to simply cut its budget year after year. You may recall the Grand Inquisitor hearings during the Newt Gingrich era, when the IRS was called before a congressional committee and denounced for "Gestapo tactics." The Republicans then passed a "tax reform" act that should have been called the "Let's Hamstring the IRS So It Can't Make Rich People Pay What They Owe Law."

The result is that, since 1995, the IRS has focused most of its tax fraud investigations on the working poor, people who qualify for the Earned Income Tax Credit -- the only good idea Ronald Reagan ever had.

Former Treasury Secretary Paul O'Neill blamed the situation squarely on Congress. "We've been directed by Congress to examine the devil out of such returns," he told a congressional committee. "You think I like that? I hate that." O'Neill was most likely the Tabasco sauce in this case. Of course, he has since been fired by President Bush and replaced with a perfect example of an overpaid corporate executive.

The decline in auditing rich people and corporations actually started 14 years ago. Then, audits of the working poor increased by 48.6 percent in 2001. Those applying for the EITC have a one in 47 chance of getting audited, while those making ore than $100,000 have a one in 208 chance. In 1988, that number of was one in 9, according to the Institute for Public Affairs.

The inimitable B. Rapoport of Waco, Texas, puts it like this, "You earn $50,000 a year and you pay $9,000 in income tax. That won't send you to the poorhouse, but it sure as hell makes your budget tighter. Now I make more than a million a year, I pay $400,000 in taxes, that leaves me $600,000 to live on. It doesn't affect my standard of living at all; I'm still rich."

What is it with rich people that 60 percent of a $100 million is not enough? What kind of sickness is that? You make $100 million on stock options, do you honestly think you earned it? Did you work 10,000 times harder than a guy who gets $10,000 a year for digging ditches? Even a thousand times harder? A hundred? Ten?

It is no secret that the ultimate goal of the conservative movement in this country is to get rid of the IRS and the progressive income tax entirely. The right-wing foundations have been talking about it for years. It is genuinely difficult to understand the level of greed and venality that would make someone think everyone else should pay taxes on what they make, but that he doesn't have to.

John Grisham's new book, "The King of Torts," (good plane book) is as close to an explanation of what form of madness we are dealing with here as it may be possible to get. It is the instructive tale of a young public defender who sells out on an outrageous case and then proceeds to become obscenely rich on mass tort cases. He then loses it all, brought low by another trial lawyer. Those who hate trial lawyers will love the book, but I think it also underlines the socially useful function of the sharks.

In a perfect storm of irony, the rich people who tried to evade taxes (one of the Sprint execs came up with 700,000 deductions: Ernst & Young should get a medal for chutzpah on that one) are now suing their accountants, their lawyers and their banks because the scam didn't work. Oh goody, more business for rich trial lawyers.

If some Democratic presidential candidate really wanted to distinguish him or herself from the pack, he could try running on a platform of closing down offshore tax shelters and having everybody pay the taxes they owe. And be sure to use the word patriotism when you do it.

To find out more about Molly Ivins and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com. COPYRIGHT 2003 CREATORS SYNDICATE, INC.

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