It has never been a better time to be a tax dodger in America. That’s the opinion of many of our nation’s tax experts. Fixing the problem, however, has been an ongoing and uphill battle.
The Congressional Budget Office reports that between 2010 and 2018, the Internal Revenue Service saw a 20 percent decrease in its budget ($11.6 billion to $8.9 billion). According to The Washington Post, the cuts have led to 30 percent fewer employees in the IRS enforcement division.
Efforts to restore the IRS budget by the Biden administration have been resisted by Republicans who don’t seem to mind that the IRS, according to Commissioner Charles Rettig, is unable to collect approximately $1 trillion in unpaid owed taxes every year to the federal government because they don’t have the personnel to go after tax cheats.
During negotiations on how to pay for the infrastructure bill, Democrats wanted to pay for some of the improvements to our roads and bridges by giving the IRS the funding it needs to go after cheaters. Republicans were against that idea. It does appear that they are protecting their rich friends and campaign contributors from paying their fair share of taxes.
U.S. Sen. Angus King, Independent from Maine, asked, “Why is it fair to working Americans who pay their taxes to allow people who can afford fancy lawyers and accountants to cheat? I’m not talking about tax avoidance. I’m talking about outright cheating, hiding income.”
King is asking a good question, of course, and it seems a majority of Americans are asking the same question.
According to an IRS survey released this past June, 94 percent of Americans “completely” or “mostly agree” that every American has a civic duty to pay taxes. Eighty-seven percent said that it was not acceptable to cheat on any amount of their income taxes. Meanwhile, 69 percent of Americans believe the rich should pay more than they currently do, according to a survey by Americans for Tax Fairness.
Interestingly, both Democrats and Republicans agreed with this statement fairly evenly.
Not believing that wealthy taxpayers are paying their fair share is, according to The Pew Research Center, one of Americans’ “top tax frustrations.”
So who isn’t paying their fair share? Not surprisingly, the data suggests the worst offenders are the richest Americans. According to Forbes, the richest 25 people in America increased their worth by a total of $401 billion from 2014 to 2018. They paid a total of $13.6 billion in federal income taxes during the same time period, according to IRS records obtained by ProPublica.org. That’s a tax rate of only 3.4 percent compared to the average American, who pays about 14 percent.
The very rich also avoid paying their fair share of taxes as a result of tax laws that define and limit their taxable income. Thus, a rich person running their own company can pay themselves nothing and pay no taxes while earning assets in stocks and other investments from their company’s business that may be exempted from some taxes or have a lower tax rate. While they got “richer” in general wealth, their “income” didn’t increase and so neither did their tax bill.
According to a recent study published in Oxford Economics, rising stocks and other financial assets during the pandemic (from fourth quarter of 2019 through the first quarter of 2021) increased U.S. household wealth by $19 trillion. Most of this increase in wealth, however, went to the nation’s top two income brackets.
“Those in the top 1 percent of the income distribution saw their wealth increase 23 percent, while those in the bottom quintile experienced only a 2.5 percent gain in net worth,” according to the Oxford Economics study.
Think of what our nation could do with a trillion dollars of extra revenue each year. We could pay for the infrastructure bill currently being debated in Congress and have $400 billion left. If we dedicated the extra trillion dollars each year to the national debt, we could pay it off over the next 22 years.
We also could use the extra revenue to improve the health, education, and well-being of our nation’s children. For example, we could remove all the leaded pipes in local water systems that are poisoning our children. We could build hundreds of new schools and provide free health care to all of our nation’s children to ensure they get a healthy start in life. We could provide quality day care and early childhood programs for the children of working parents.
Instead of using this money to better the lives of our nation’s children, however, politicians in Washington have decided to protect the rich from paying their fair share of what it would take to make America great for all of its citizens.
Latest Carroll County Times Opinion
Tom Zirpoli is a professor and program coordinator for the Human Services Management graduate program at McDaniel College. He writes from Westminster. His column appears Wednesdays. Email him at email@example.com.