Why is a rundown Mississippi county the most heavily audited in the US?

Clumps of white fluff drift across the highway on the west side of the Mississippi Delta town of Belzoni. Cotton now grows from the beds of former catfish ponds.

When catfish ponds in the self-proclaimed Catfish Capital of the World dried up, jobs went with them. Humphreys county, where Belzoni is located, has an unemployment rate double the national level.

‘It’s not fair’: workers outraged that Donald Trump pays less tax than them

Read more

But it is not entirely a forgotten southern backwater – at least, not to one government agency. Last year ProPublica reported that the Internal Revenue Service audits Humphreys county taxpayers at a higher rate than anywhere else in America.

About 12 out of 1,000 tax returns are audited each year in the county, according to the ProPublica analysis. That’s 53% higher than the national average and raises the question of why such a place is the subject of such IRS attention, rather than the haunts of millionaires and billionaires, like Manhattan and its one-time resident Donald Trump. But in the most heavily audited county in the US, the recent shock news that Trump paid just $750 in federal income taxes in 2016 and 2017 was no surprise, said Joe Jackson, who was elected mayor of Belzoni last month.

“Most people around here are kind of adjusted to the idea that the rich get richer and the poor get poorer,” he said. “That’s not surprising to people in our area.”

The local economy was already in a shambles when the coronavirus hit. The catfish industry was nearly wiped out around 2008 when restaurants across the US started buying cheaper fish imported from Asia. Ethanol demand drove up the price of corn, which is fed to catfish, at the same time. But the pandemic has made things worse. There are only a handful of restaurants in town, but they are now closed to discourage social gatherings, Jackson said.

Many of the storefronts on Hayden Street, the main drag in Belzoni, are closed and, the paint is chipping from the catfish sculptures outside the police station, city hall and pharmacy. Yet the county’s residents have been targeted by the IRS for claiming a tax credit that aims to lift working parents out of poverty.

The IRS audits about 300,000 taxpayers who claim the earned income tax credit, or EITC, each year. These taxpayers are targeted more often than high-income and high-wealth taxpayers because the audits of EITC claimants are easier to do, according to a 2019 letter written by the IRS Commissioner.

An analysis by Kim Bloomquist, who retired from the IRS Office of Research in 2018, found that the IRS’s policy has resulted in higher rates of tax audits in poor communities of color than the rest of the country. Eight of the most heavily audited counties in the country are in Mississippi. In Humphreys county, 76% of the 8,000 residents are Black.

The IRS audits most EITC claimants by mail, but wealthy taxpayers are typically audited in person and the audits require more training. In the 2019 fiscal year, about 80% of individual taxpayer audits were done by mail. But 52% of the $6.9bn recovered from these tax audits came from audits done in person, which are typically performed on wealthier taxpayers.

The IRS commissioner, Charles Rettig, wrote that the IRS needs more money to hire and train auditors in order to balance the number of audits across all income levels. Between 2010 and 2017, the IRS budget was cut by about $2bn. The budget cuts shifted the focus of IRS audits from high-income taxpayers to low- and middle-income EITC claimants, according to Bloomquist’s research.

Bloomquist acknowledged Rettig’s reasoning for why the IRS audits more EITC claimants, who tend to be more rural, lower-income taxpayers. Auditing millionaires and billionaires can take years, as in the case of Trump.

“It’s an excuse but it’s not a good excuse,” he said.

One of the few open establishments in Belzoni is the Catfish Museum. The museum includes placards about the height of the catfish industry, ceramic catfish sculptures and posters from the annual World Catfish Festival, which was canceled this year because of the pandemic. What was once a homage to the biggest industry in town is now a history museum.

Cotton and other row crops have started to fill in where catfish ponds once were. But there’s little stable work in the area, said Latoya Skinner, who runs a tax preparation service in Belzoni called Tax Genie. Most workers are self-employed and do side gigs to get by, which makes it difficult to produce the documentation necessary for the EITC.

“If 50% of the town doesn’t know how to produce the documentation, it doesn’t mean they didn’t have the business. It just means they don’t have the documentation,” Skinner said.

In 2016, the Democratic presidential nominee, Hillary Clinton, received 72% of the vote in Humphreys county. As the last day to register to vote approached in Mississippi, Humphreys county Democratic party chair, Joyce McNair, held registration events across the county.

McNair went through a tax audit about a decade ago. The audit was brought on by a paperwork mistake. The National Research Program estimates that about half of EITC returns have errors. Going through an audit was stressful, she said.

Most years McNair pays between $3,000 and $4,000 back to the federal government in taxes. That is far more than Trump’s $750. “I have an issue with someone who is making more than quadruple my income paying less in taxes,” she said of Trump’s federal income taxes. “The average American is paying more.”

But there are some signs of hope in Belzoni, despite what seems like tough times and an unfair treatment by a federal government that is meant to help, not hinder, such struggling communities.

Joann Wilson and her husband, Joseph Wilson, bought one of the local Belzoni restaurants about six months ago. The restaurant, previously called the Lunch Basket, was a buffet. But the couple ripped out the buffet table before they reopened as Da Soulfood Palace. Among Belzoni cooks making the best fried catfish is still “a competitive thing”, Joann Wilson said.

Wilson’s batter recipe is a tightly held secret that she doesn’t write down. “It’s just in my head,” she said.

They hope to put the buffet table back when it’s safe to do so.

“We’re turning a profit, but it could be a lot better,” Joseph Wilson said.