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Surprisingly Unsurprising: Another Way Sequester Helps The Rich & Hurts The Rest Of Us

April 30, 2013

The sequester has not proven to be quite the political liability for Republicans that Democrats had hoped. To some degree, this has been because the GOP has effectively managed to convince the public that if it isn’t entirely President Obama’s fault, it is at least a bipartisan failure. (“Washington just can’t get anything done!”) More importantly, though, they’ve come to realize that the sequester they may have feared at first won’t hurt them because it doesn’t hurt their wealthy backers. Keep in mind that the Bush tax cuts, which would have completely gone away, have been mostly made permanent — and continue to overwhelmingly benefit the wealthy. No further tax hikes appear to be seriously on the table for the foreseeable future, and the cuts contained in the sequester barely touch the rich. In fact, the one thing that may have created some discomfort — FAA cuts — has been quickly remedied.

The most painful of cuts are already affecting groups such as the long-term unemployed, low-income Americans in need of affordable housing, public-sector employees, seniors in need of food or energy assistance, preschool-age children in Head Start programs, victims of domestic violence… And as the full impact of the sequester sinks in, the recovery takes a dip, and unemployment surges again, this list will only grow. Note, though, that the wealthy are not on the list. Heck, over the course of the “recovery” so far, the top 7% have seen a 28% increase in wealth, while the bottom 93% have seen a net loss of 4%. Austerity is not hurting these folks.

But it gets worse:

Special IRS amnesty programs for illegal offshore tax evasion have brought billions of dollars to the U.S. government and opened a wealth of new information about criminal tax fraud for investigators, according to a new report by the Government Accountability Office. But paltry IRS funding — compounded by budget cuts required by sequestration — is undermining its ability to combat tax cheating. (HuffPo)

So not only does Republican intransigence to new taxes protect the wealthy, but the sequester cuts are working to insure that offshore tax evasion goes unpoliced. And we’re not just talking chump change.

Since 2009, the IRS has recovered roughly $5.5 billion in unpaid taxes and penalties through amnesty programs targeting Swiss banking customers. These programs are being efficiently and effectively managed, according to the GAO, but an independent investigation by Sens. Carl Levin (D-Mich.) and Tom Coburn (R-Okla.) estimated that the government still loses at least $100 billion a year from offshore tax evasion.

“That’s probably the tip of the iceberg,” said Rebecca Wilkins, senior tax policy counsel at Citizens for Tax Justice.

In the grand scheme of the Federal budget, $100 billion is not necessarily huge* — but just think how many meals on wheels could be fed or Head Start programs saved with those funds.  Instead, that money can sit in foreign banks and grow.  This is of little comfort to Americans.

* As List of X reminds us in the comments below, the entire sequester only “saves” us $85 billion. 

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One Comment leave one →
  1. April 30, 2013 1:57 pm

    $100 billion is huge by any measure. The whole sequester debacle raged over $85 billion of cuts.

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