U.S Wealthy Fail to Pay Taxes $160 Billion each Year

 US’s wealthiest 1% are failing to pay $160bn a year in taxes, report finds

This amounts to 28% of the ‘tax gap’, treasury report says, which Biden proposes closing by empowering IRS to pursue aggressively

Martin Pengelly

 

The wealthiest 1% of Americans are responsible for more than $160bn of lost tax revenue each year, according to a new report from the US treasury.

Natasha Sarin, deputy assistant secretary for economic policy, said: “A well-functioning tax system requires that everyone pays the taxes they owe.”

According to the treasury report, the wealthiest 1% of US taxpayers are responsible for an estimated $163bn in unpaid tax each year, amounting to 28% of the “tax gap”.

Sarin said that tax gap – “the difference between taxes that are owed and collected” – amounted to “around $600bn annually and will mean approximately $7tn of lost tax revenue over the next decade.”

The Biden administration proposes closing the tax gap by empowering the Internal Revenue Service (IRS) to more aggressively pursue unpaid taxes, at a cost of $80bn and in the process helping fund the president’s ambitious domestic economic agenda.

Republicans in Congress and lobbyists for business are united in opposition to the proposal to shore up tax enforcement.

“The sheer magnitude of lost revenue is striking,” Sarin wrote. “It is equal to 3% of GDP, or all the income taxes paid by the lowest earning 90% of taxpayers.

“The tax gap can be a major source of inequity. Today’s tax code contains two sets of rules: one for regular wage and salary workers who report virtually all the income they earn; and another for wealthy taxpayers, who are often able to avoid a large share of the taxes they owe.”

The treasury report may also focus attention on Americans outside the top 1% but still well off. According to the report, the wealthiest 5% of US taxpayers account for more than 50% of lost tax revenue annually. For the top 20%, the figure is 77.1%.

Sarin said that “for the IRS to appropriately enforce the tax laws against high earners and large corporations, it needs funding to hire and train revenue agents who can decipher their thousands of pages of sophisticated tax filings”.

Former treasury secretary Robert Reich, now a Guardian contributor, called the report a “bombshell” and said: “The IRS must have the funds to beef up enforcement. Every additional $1 of IRS funding yields $3 of tax revenue, mostly from the very rich who illegally avoid paying taxes owed.”

 

Read more.

https://www.theguardian.com/us-news/2021/sep/08/us-wealthiest-responsible-yearly-160bn-lost-tax-revenue

PANDORA PAPERS

 A new report in the Washington Post reveals Billions of Dollars hidden in off shore accounts of the super rich, avoiding taxes, ( the report is behind   a paywall)

Including in notorious off shore tax havens is the state of South Dakota,

Billions hidden beyond reach - Washington Post A massive trove of private financial records shared with The Washington Post exposes vast reaches of the secretive offshore system used to hide billions of dollars from tax authorities, creditors ... www.washingtonpost.com

Oct,3, 2021

Cost U.S. Taxpayers _ Viacom,

 ‘SpongeBob’ and ‘Transformers’ Cost U.S. Taxpayers $4 Billion, Study Says

A new report details ViacomCBS’s use of a labyrinthine tax shelter to sell rights to its shows and films overseas.

https://www.nytimes.com/2021/06/01/business/media/viacom-cbs-tax-scheme.html?

Major US Corporations paid no taxes in the last 5 years.

EXECUTIVE SUMMARY

Back to Contents

Profitable corporations are supposed to pay a 35 percent federal income tax rate on their U.S. profits. But many corporations pay far less, or nothing at all, because of the many tax loopholes and special breaks they enjoy. This report documents just how successful many Fortune 500 corporations have been at using these loopholes and special breaks over the past five years.

The report looks at the profits and U.S. federal income taxes of the 288 Fortune 500 companies that have been consistently profitable in each of the five years between 2008 and 2012, excluding companies that experienced even one unprofitable year during this period. Most of these companies were included in our November 2011 report, Corporate Taxpayers and Corporate Tax Dodgers, which looked at the years 2008 through 2010. Our new report is broader, in that it includes companies, such as Facebook, that have entered the Fortune 500 since 2011, and narrower, in that it excludes some companies that were profitable during 2008 to 2010 but lost money in 2011 or 2012.

Some Key Findings:

• As a group, the 288 corporations examined paid an effective federal income tax rate of just 19.4 percent over the five-year period — far less than the statutory 35 percent tax rate.

• Twenty-six of the corporations, including Boeing, General Electric, Priceline.com and Verizon, paid no federal income tax at all over the five year period. A third of the corporations (93) paid an effective tax rate of less than ten percent over that period.

• Of those corporations in our sample with significant offshore profits, two thirds paid higher corporate tax rates to foreign governments where they operate than they paid in the U.S. on their U.S. profits.

These findings refute the prevailing view inside the Washington, D.C. Beltway that America’s corporate income tax is more burdensome than the corporate income taxes levied by other countries, and that this purported (but false) excess burden somehow makes the U.S. “uncompetitive.”

Off shore funds

There was a criticism raised, a question raised about the figure I gave of  some $3 Trillion dollars in off shore accounts.
Here is supporting evidence.

Financial tax

This Forbes article describes some of the size of the problem.

http://www.forbes.com/sites/connieguglielmo/2013/08/01/apple-google-among-top-u-s-companies-parking-cash-offshore-to-reduce-taxes-study-says/

http://www.independent.ie/business/irish/eu-launches-probe-into-our-sweetheart-tax-deals-for-us-firms-29573181.html

http://www.theguardian.com/global-development/datablog/2012/jul/19/developing-world-offshore-wealth-external-debt

U.S. corporations.

http://www.uspirg.org/reports/usp/offshore-shell-games

note.  European corporations also have off shore funds, as do Asian corporations.  So, the above is only a partial- U.S. list.
The OECD study was also sent to the respondent.

and,

Tax Havens by the Global Elite.

http://www.icij.org/offshore/secret-files-expose-offshores-global-impact

Hiding money off shore.

$21 trillion: Hoard Hidden From Taxman By Global Elite

* Study estimates staggering size of offshore economy

* Private banks help wealthiest to move cash into havens

Heather Stewart, business editor

guardian.co.uk

21 July 2012

http://www.guardian.co.uk/business/2012/jul/21/global-elite-tax-offshore-economy

A global super-rich elite has exploited gaps in cross-

border tax rules to hide an extraordinary £13 trillion

($21tn) of wealth offshore - as much as the American and

Japanese GDPs put together - according to research

commissioned by the campaign group Tax Justice Network.

James Henry, former chief economist at consultancy

McKinsey and an expert on tax havens, has compiled the

most detailed estimates yet of the size of the offshore

economy in a new report, The Price of Offshore

Revisited, released exclusively to the Observer.

See article for details.