The more recent crop of folks that have made money in crypto don't tend to be among those ready to fight the IRS hard, they are softer targets. They are targeting the little guy on purpose.
1. Maximize collections. This is what they're doing: spending their resources on cases with the best expected ROI. If you have $1T in net tax misses, chase the easiest 75% and expect a 90% collection rate.
2. Deter high absolute tax avoidance. This is what you're suggesting: spend their resources to make a statement, even if the ROI isn't there. If you have $1T in net tax misses, chase the hardest 25% and expect a 5% collection rate.
I don't think you're wrong, as there's value in deterrence (i.e., sue the hell out of rich tax evaders, and even if you lose, maybe the next one will be less likely to push it).
Edit: really just wondering out loud, I don't have the answers here - our current system needs work
The problem with both of those is it isn't fair for some, specifically folks in the lower income brackets.
Flat tax is also funny. Because it doesn't mean getting rid of loopholes and deductions, it means taxing every dollar the same. Effectively raising the taxes on those making less. Right now we have a progressive tax rate. Where the first X dollars are taxed at A%, the next Y dollars at A+5%, and so on.
Deductions would still exist because at some point someone is going to make a good point that that money was just taxed. Or that the money went to the same goal as the tax would have. Deductions are there to find out what your taxable income is. It affects how much you owe because 10% of 900 is not the same as 10% of 1000.
Realistically you need to have an enforcement agency with some teeth because the wealthiest people can afford to move their own money around and skirt the rules, while poor people will be transacting with third parties that have an interest in collecting and remitting taxes. The grocery store would rather be in compliance with tax law, whether it's sales tax or income tax, but your private investment office doesn't have the same incentives.
For example, Bezos's $500M yacht might look expensive in absolute terms, but his net worth went up $74B last year. I'm sure that given the choice, he'd rather pay sales taxes than capital gains taxes.
I ignored deductions, including standard deduction. The point is the 0% capital gains rate isn't a magic loophole to channel billions through, it only has a small amount of room.
15% and/or 20% plus 3.8% is still less than the 22% to 32% range that a lot of people will fall into. And that 22-32% is on 100% of taxable income, there is no break on part of it.
The government is clearly incentivising long term capital gains here. The nice thing is it's easier than ever to get into a brokerage account and buy sensible funds without paying a lot of fees. Robinhood may have started it, but fidelity and maybe others will let you buy fractional shares in etfs as long as you're putting in at least $1. Mutual funds have let you do fractional shares for a long time too, but minimums are higher and $1,000 to get into a vanguard target date fund might be too much for some people.
Assuming 15% sales tax, no income tax collection.
Someone who makes 100k per year and spends nearly all pays ~15k via this sales tax or 15%.
Someone who makes 500k per year and spends 100k pays ~15k via this sales tax or 3%.
Someone who makes 10mm per year and spends 1mm pays $150k via this sales tax or 1.5%.
The lower income person pays a much higher rate, because they have to.
Secondly, they can accumulate more wealth much faster than they can spend. Plus they can play with things on a longer time horizon and move internationally. Like, say once the sales tax drops.
It's highly progressive: the average person owns zero of these things, and so would pay zero tax. It causes virtually no deadweight loss or economic distortion: the supply of these goods is heavily inelastic, in many cases totally inelastic, and so a tax will not disincentivize firms from producing more. And there's even a moral argument for it: these goods exist out there, in the natural realm, and so when somebody "owns" them it doesn't mean they created them through their own labor, it means that the government has granted them a monopoly to develop and use them, and the government should be compensated for enforcing that right.
Of course the DA's are gonna pick the easy wins with good optics and avoid hard targets and/or rocking the boat. That's just rational decision making.
You can either increase resources and create a police state or decrease the amount of prosecutable criminal behavior and have people complain that "there ought to be a law" about <pet issue goes here>.
Vast ressources will not necessarily prevent you from being convicted of tax evasion cf. Charles Kushner who evaded low 5 figures in taxes while being a centimillionaire.
I imagine they have some kind of algorithm or MI to assist in finding discrepancies based on historical wins/loses.
I doubt it's as simple as I made 10 million, therefore I am going to get audited eventually.
The automated flagging they use is tuned to find the common mundane violations, which tend to be by normal people with normal resources.
The tax strategies of the extremely wealthy are a good deal more sophisticated and don't lend themselves well to automated checks like these.
https://taxfoundation.org/irs-audited-12-million-households-...
Nope, they, unjustly, are not:
https://www.propublica.org/article/irs-now-audits-poor-ameri...
https://taxfoundation.org/irs-audited-12-million-households-...