An extensive piece by the editorial board of the New York TimesSunday revealed that if the Internal Revenue Service was able to fully collect the funds the United States is owed from wealthy Americans who refuse to pay their taxes. The Times calculated it and revealed it totals $1.4 trillion.
“The burden of taxation is increasingly warped because the government has no comparable system for verifying income from businesses,” the board said. “The result is that most wage earners pay their fair share while many business owners engage in blatant fraud at public expense.”
While some class warriors are fighting for economic equality using the phrase “pay your fair share,” in this case, some aren’t paying at all.
Humphreys County in Mississippi is home to a few thousand people, but it is the most audited place in the United States, ProPublica reported in 2019. The reason is that it’s easier. The average household income in the county is $15,900, the Census showed. Auditing them is easy, because it isn’t as if they can afford expensive attorneys to fight back. Wealthy people who owe millions in taxes can, however.
If a taxpayer owes $4 million in taxes but pays a lawyer $50,000 to fight it, they still come out with a profit. Auditing people with means is expensive and the IRS isn’t being funded enough to hire the lawyers necessary to fight back, a 2019 GQ report said.
An 2019 analysis revealed that the IRS calculates “Americans report on their taxes less than half of all income that is not subject to some form of third-party verification like a W-2,” the Times explained. “Billions of dollars in business profits, rent and royalties are hidden from the government each year. By contrast, more than 95 percent of wage income is reported.”
Unreported income is the largest reason that the federal government has unpaid federal income taxes that will total more than $600 billion this year. It will equal $7.9 trillion over the next 10 years.
“The government has a basic obligation to enforce the law and to crack down on this epidemic of tax fraud,” the editorial board argued. “The failure to do so means that the burden of paying for public services falls more heavily on wage earners than on business owners, exacerbating economic inequality. The reality of widespread cheating also undermines the legitimacy of a tax system that still relies to a considerable extent on Americans’ good-faith participation.”
The piece closes by referencing an analysis from November 2019 that said the investment in the IRS would ensure they could collect $1.4 trillion. The price tag comes in at $100 billion.
“The logic of such an investment is overwhelming,” said the board. “The government can crack down on crime, improve the equity of taxation — and raise some needed money in the bargain. There are many proposals to raise taxes on the rich. Let’s start by collecting what they already owe.”