I hate to be the bearer of bad news, but Tax Day 2022 is exactly one month away. To get ready for Tax Day, the Taxpayers Protection Alliance (TPA) ha

I hate to be the bearer of bad news, but Tax Day 2022 is exactly one month away. To get ready for Tax Day, the Taxpayers Protection Alliance (TPA) has a countdown clock on our home page ([link removed]) . We also have several resources for folks on the website. Over the next month I’ll be sharing some (not so) fun facts. For example, A recent report ([link removed]) from the independent watchdog National Taxpayer Advocate found that the “IRS is in crisis.” As of January 2022, the IRS had more than 2 million unprocessed employer's quarterly returns and about 5 million pieces of taxpayer correspondence left to process. The IRS also made more than 11 million math errors, forcing taxpayers to respond and delaying refunds.

Countdown to Tax Day – Small Business Audits

You probably know Johnny Kampis as TPA’s Director of Telecom Policy. Johnny is an expert on all things telecom. Johnny is also a small business owner. Last year, Johnny opened Cullman Sportscards & Fun Shop in Cullman, Alabama, a store dealing primarily with sports and Pokemon cards. It is a dream come true for him to have a small business. When he met with his accountant to discuss his annual taxes, she warned him that as a small business owner he better have iron-clad records in case the IRS comes calling. Although small businesses create more jobs in the U.S. than other sectors of the economy, the IRS frequently goes after ([link removed])%20get%20audited%20most%20frequently.) mom-and-pop shops as targets of audits. Donald Williamson, a tax professor at American University’s Kogod School of Business, submitted written testimony to the U.S. House of Representatives
Committee on Small Business in 2016 that indicated the IRS algorithm for determining audits often targets small businesses disproportionately. “Employing this calculus, the IRS has concluded that small businesses are less likely to be paying their fair share of taxes relative to much larger enterprises,” Williamson wrote, “a surprising conclusion in light of frequent press reports of multi-national corporations allocating billions of dollars of profits to no- or low-tax jurisdictions to avoid U.S. income taxation. He called on the IRS and Congress to “streamline and simplify the small business audit process.”

But, if anything, the tax man cometh for small businesses more frequently. For example, Bloomberg ([link removed]) notes that the IRS increased tax audits for small businesses by 50 percent in 2021. President Biden’s administration announced a plan to go after businesses even harder moving forward. Biden asked for an additional $80 billion to help the IRS crack down on tax avoidance, supposedly from wealthy Americans and larger corporations. But some financial experts said the plan to boost enforcement staffing with a goal to generate an additional $700 billion in tax revenue over the next decade would yield more audits for small businesses. Luis Strohmeier, a partner at Octavia Wealth Advisors, told CNBC ([link removed]) that cash-based small businesses like retail and restaurants are
more likely to face additional scrutiny under Biden’s plan. “I think going after mom and pops, where the agent goes to see them, and they have all their receipts in a shoebox, just might yield something,” Strohmeier said.

While his fairly low-revenue business doesn’t use record-keeping quite so sloppy or archaic, like most businesses – or any American taxpayer, really – Johnny lives in fear of an IRS audit. Small business owners have to worry that if a single “I” isn’t dotted or every “T” crossed, the IRS will hammer us on some aspect of our tax returns. Perhaps that’s why the National Taxpayer Advocate found that small businesses in the U.S. spend about 2.5 billion hours preparing their tax returns and responding to IRS inspections of those returns, the time equivalent of 1.25 million full-time jobs. Williamson further noted in his testimony that small businesses spend more than $16 billion annually on accountants and attorneys to deal with the IRS. If the continuing pressure on small businesses ramps us as expected, we can expect to see those numbers rise and as owners unfortunately have to focus more of their time in dealing with the federal bureaucracy.

Windfall Profit Oil Tax - Making a Bad Situation Worse

Congress is notorious for making bad situations worse. For example, gas prices. According to data from AAA, the national average price for regular gas is now roughly $4.33 per gallon. In some states (like California), the average is as high as $5.74 per gallon. These figures represent a 51 percent increase from this time last year. Part of this has been attributed to the impact of the war in Ukraine. However, U.S. government policies toward spending and energy have no doubt been a major cause. The response of some members of Congress is to make the cost of gas even higher with a new tax. U.S. Sen. Sheldon Whitehouse (D-R.I.) and U.S. Rep. Ro Khanna (D-Calif.) have introduced legislation that would impose a steep “windfall” tax on American oil companies. The proposal would create a tax on profits that oil companies make above $66 per barrel. Those profits would be taxed at the staggeringly high rate of 50 percent. The proceeds from that tax would then be used to create another stimulus
check – $240 for individual filers and $360 for joint filers. This proposal is a disaster for a number of reasons and reflects the fundamental misunderstanding many Washington policymakers have about soaring gas prices. The first is the disregard for the role government policy has had on price inflation. The U.S. federal government has spent as much money in the last five years as it did in the prior eight years. The U.S. also imposed strict sanctions after the Russian invasion of Ukraine, which impacted global supply. To attribute price hikes to “corporate greed” as Sen. Whitehouse and Rep. Khanna did, is to ignore the impact of their own policymaking and to miss the point entirely.

This view of economics supposes that the relatively low prices for a barrel of oil until now have been because of corporate altruism on the part of the same companies now being maligned as greedy. The true explanation is a tad more complex than policymakers would care to admit. Oil companies are responding to global economic forces, which at the moment are making it more costly to bring supply to the market. Prices are rising, producers are incurring greater costs and markets are anticipating the need for new sources of supply. Another contradiction in the way Washington Democrats are approaching this issue is in their discussion of supply. In a public comment, White House press secretary Jen Psaki accused the oil industry of purposely refusing to drill so prices would go up. Psaki cited the fact that there are 9,000 permits not in use. This also misses the mark. While there are unused permits, the federal government has paused leases on federal lands for oil companies. Permits and leases
are only one part of a longer production process where the federal government has erected and maintained barriers to increased production.

At a time where U.S. Energy Secretary Jennifer Granholm has pushed oil companies to produce more oil, the administration has a pause on leases and Congress is trying to further dissuade more production. Rapidly ramping up production would create millions of dollars of risk for these companies. Costs will rise, and prices usually follow. Bills like the Whitehouse-Khanna proposal would obliterate the incentive to assume such risks. The messaging is not in sync with actual policy coming from Capitol Hill. Further, the guidelines set in the Whitehouse-Khanna bill are arbitrary at best. The $66 per barrel threshold is based on “the average price of oil between 2015 and 2019.” No justification was given for why that metric was used or why such a short window of time was used to generate it. In the midst of rampant inflation, a waning pandemic, and conflict in Eastern Europe, the current global market price sits at just under $100 per barrel. A $66 benchmark is out of touch with clear and present
realities in the market. The solution to lagging global oil supply is to incentivize production wherever possible, not to seek out ways to punish those who might produce. Higher prices are part of incentivizing said production. The solution to rising inflation is to cut government spending, not to create a new entitlement on the back of that aforementioned punishment. The Khanna-Whitehouse proposal on oil “windfalls” manages to consolidate much of what has gone sideways in Washington in recent years. Not only will it fail to address the current issues, it will exacerbate those problems.
BLOGS:

Monday: FCC Making Progress on More Accurate Broadband Maps ([link removed])

Tuesday: Oil Windfall Tax Makes a Bad Situation Worse ([link removed])

Wednesday: Taxpayers Protection Alliance Lauds FCC’s Pole Attachment Rulemaking Decision ([link removed])

Thursday: Setting the Record Straight: Biden’s State of the Union Drug Pricing Comments Are Wildly Misleading ([link removed])

Friday: Taxpayer Watchdog Begins Countdown to Tax Day Concerned with IRS ([link removed])


MEDIA:

March 10, 2022: The Baltimore Brew (Baltimore, Md.) mentioned TPA in their article, “Olszewski, elected on a pledge of transparency, tried to hobble his corruption investigator ([link removed]) .”

March 10, 2022: Patrick Hedger joined Springfield Happy Hour on KWTO (Mo.) with Nate Lucas to discuss the latest inflation numbers.

March 14, 2022: WBFF Fox45 (Baltimore, Md.) interviewed me ([link removed]) about the financial dealings of Nick and Marilyn Mosby.

March 14, 2022: WBFF Fox45 quoted TPA in their story, “New poll raises questions about Mosby's Future ([link removed]) .”

March 15, 2022: The Center Square ran TPA’s op-ed, “Oil windfall tax makes a bad situation worse ([link removed]) .”

March 15, 2022: The Livingston Parish News ran TPA’s op-ed: “OPINION | Time to deliver on real postal reform ([link removed]) .”

March 16, 2022: Law360 quoted TPA in their story, “Key Vote Still Uncertain For Biden's Wage Chief Pick ([link removed]) .”

March 16, 2022: WBFF Fox45 (Baltimore, Md.) quoted TPA in their story, “Should Safe Streets be centrally organized and managed? Taxpayer watchdog says yes ([link removed]) .”

March 16, 2022: Alabama Today ([link removed]) ran TPA’s op-ed, “Oil windfall tax makes a bad situation worse.”

March 17, 2022: WBFF Fox45 (Baltimore, Md.) interviewed me ([link removed]) about the SafeStreets Program.

March 17, 2022: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about spending in the Omnibus and oil taxes.

March 17, 2022: The Center Square ran TPA’s op-ed titled, “California appeals court sets bad precedent on state’s net neutrality law ([link removed]) .”

March 18, 2022: I appeared on KRC 550 AM (Cincinnati, Ohio) to talk about the infrastructure bill and vaccine mandates.

March 18, 2022: Townhall.com ([link removed]) ran TPA’s op-ed, “Despite Bloomberg’s Billions Fooling You, Harm Reduction Mustn’t Only Be Applied to America’s Opioid Epidemic ([link removed]) .”

Have a great weekend!
Best,

David Williams
President
Taxpayers Protection Alliance
1101 14th Street, NW
Suite 1120
Washington, D.C. xxxxxx
www.protectingtaxpayers.org ([link removed])

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