How everything for the common good depends on tax revenue

OK, we know you don't want to read about taxes. But hear us out: Revenue from taxes and fees is what makes communities thrive.

How we fund public services around the country affects your life and the work you do every day-but in truth, how we fund public services affects everyone. And how we fund services affects public employees first, according to Gary Feist, a tax auditor for North Dakota who also chairs the AFT Public Employees program and policy council and heads its tax and revenue subcommittee.

The Trump administration has been cutting funds for the Internal Revenue Service, Feist told the PPC, to the point where less revenue is being collected nationwide, and federal programs are under threat. Because most state revenues are linked to what happens at the federal level, these funding cuts have eroded basic tax enforcement over the past decade. For high-income earners and large corporations, the chance of being audited dropped dramatically between 2010 and 2020, from about 25 percent to about 5 percent. And as a result of the federal government shutdown last fall, there are no statistics on enforcement for 2025.

With fewer people working at the IRS, auditors are stretched thin. Nonfiling, underpayment and underreporting enforcement, as well as taxpayer services, all are feeling the pinch. Feist said taxpayers have told his office they've been on hold for hours after calling the IRS's toll-free number.

Tax audits work

Federal tax audits yield a high return on investment, Feist said. For instance, auditing a C corporation (a corporation taxed separately from its owners) brings in $5 for every dollar spent. So why cut the number of auditors? The reason is a $4 billion cut in enforcement, which yields a $14.2 billion direct loss in federal revenue, Feist said. Total lost revenue, direct and indirect, is $56.8 billion per year.

He gave two state examples as well. In Minnesota, taxpayer compliance and voluntary filing yields $134 for every dollar spent. In Maryland in 2019, collections totaled $689 million, versus $34.7 million in operating expenses.

"You could really fund public services with this," Feist pointed out. "That's why it's so important."

In Montana, noted Benjamin Kuiper, who works in the state department of revenue, the governor wants both new tax cuts and to find new sources of revenue, which work against one another.

Putting such pressure on state employees eventually leads to high turnover, Feist observed, and then newer employees may in turn be accused of not doing their jobs sufficiently when the problem is lack of experience.

The thing that makes him most angry is businesses that collect sales tax from customers but don't turn it over to the state, instead using the money to ease their own cash flow, said John DiSette, president of the Administrative and Residual Employees Union in Connecticut. "I'd think that would anger anybody and everybody," he said.

'No tax on tips'

Another sticking point for responsible revenue collection is the "no tax on tips" trend. One of the most infuriating things about the "no tax on tips" provisions in Republicans' big, ugly bill, which President Donald Trump signed into law last July, is that these provisions didn't really help the average person, Feist pointed out: The law really only helped people at the top.

Feist knows this because he understands actual numbers instead of optics. The whole economy of his state, North Dakota, lives or dies on revenues from oil and gas production, and until a surge in oil prices over the past few days because of Trump's war in Iran, oil prices had been low. Even with suddenly higher oil and gas prices, the state is not expecting to close its $1.5 billion hole in a $22 billion budget.

To make up for the shortfall and the loss of federal grants, the state is offering employees an early retirement incentive. This would stretch public services even thinner, Feist lamented. Under the existing system, the money is just not there.

Even if all the fat cats and giant corporations were to come into compliance, they'd still be paying relatively less than the average person. "It's the rich people who are going to be paying less because they have very complex tax systems," observed Kuiper, a member of the Montana Federation of Public Employees.

A lack of auditors

PPC member Randi DiAntonio, vice president of the New York State Public Employees Federation, asked for easier ways to highlight these facts.

"It's hard to talk about a lot of numbers," she said. "Is there a way to take this great info and condense it? We'd say: This affects this and hurts you."

In New York state, she said, tax audits have collected billions of dollars. During fiscal 2022-23 alone, auditors collected $3 billion in unpaid taxes. Yet, the expertise to become an auditor is sorely lacking.

"In PEF, auditors are one of our job titles we can't fill," DiAntonio said. "There's not enough of them. And then we got 'DOGEed'" by Elon Musk's slash-and-burn attack on federal programs in the first year of the Trump administration. "We're losing out on billions of dollars, I am sure, in addition to that. And that just continues until we do something about it."

Another leaky container for federal dollars is Medicaid. You often hear people complaining about Medicaid fraud, said Diane Byrne, president of Colorado WINS, a statewide coalition of unions, including the AFT. Actually, she said, Medicaid fraud is most prevalent among rich people who own two multimillion-dollar homes, not poor people. "People who already have so much are the worst perpetrators."

One solution: Any tax change on the ballot in Colorado now has to come with a chart showing the changes for each demographic. If people see that a tax increase hits only people in the top income brackets, they'll vote for it. Palm cards should include a little chart, she said, showing at least two data points.

A single, worldwide tax

Experts at Public Services International, a worldwide union the AFT is affiliated with, are trying to figure out how nations can collect corporate taxes more efficiently. Offshoring has long been a hiding place for big corporate profits. For example, U.S. tax authorities have assessed Microsoft for $34 billion, the largest amount in history, covering 2009-2013. The software company had offshored much of its profits to Puerto Rico, knowing full well that the practice was wrong. Similarly, Apple went to Ireland and did the same thing-but Ireland said, "We're going to assess you."

PSI and the United Nations are trying to implement equal and fair taxation around the world. One equitable approach would be to source corporate revenues to where they are earned-perhaps by placing all corporate and subsidiary revenues in a single pot. Of course, the Trump administration opposes any changes that would hit giant corporations.

A protracted fight

Unions have fought against tax noncompliance for generations. There are, of course, companies that try to hide behind a facade of innocence.

Feints by Amazon: "It's so complicated! How are we possibly going to know how to do any of this?" Or: "We think we probably owe the European Union but we don't know how to do math!"

Generally, people say they are against taxes but for public services, Feist said. And the truth is that compliant taxpayers need not pay more. It's the tax cheats who need to pony up.

"If we collected all the taxes that are actually due," he said, "we'd be able to fund all the public services we need."

To address the revenue challenges that affect every public employee and the people they serve, the public employees PPC is planning to draft an AFT resolution on revenue before the next meeting of the AFT's executive council in May. A related topic the PPC may tackle is tech companies like Palantir financing large-scale research and development on surveillance technology that may violate the U.S. Constitution's provisions for privacy.

PPC members talked about how individual taxpayers contribute their share of taxes-and companies should pay their fair share, too. And they discussed how to bring tax inequities to the public's attention, including publicity campaigns, podcasts and ballot initiatives.

Whether it's underfiling, underreporting or underpaying, everyone-including the billionaires and the biggest companies-must be induced to pay their share of the taxes that keep public services afloat. If they don't, they must be exposed.

"It's not tax fraud, it's tax theft," Byrne said. "Why should I stand for it when a big corporation commits tax theft against my state?"

[Annette Licitra]