Wealth, Power, and the Internal Revenue Service: Changing IRS Audit Policy through Litigation

Objectives . Although scholars have recognized that the wealth and power of litigants has substantial influence on litigation outcomes, there has been less recognition of the ability of the wealthy to sway agency policy through litigation. I argue that the wealthy, through lawsuits and the outcomes from the litigation, influence Internal Revenue Service (IRS) audits of the wealthy and the less affluent. Methods . I examine IRS state audit rates and use ordinary least squares regression with panel corrected standard errors. Results . I show that wealthy litigants can influence the IRS to decrease audits of the wealthy and increase audits of the less affluent. Conclusions . The wealthy appear to have the ability to influence IRS policy through lawsuits. Litigation can influence agency policy.