We all know the wealth of many feeds the few. Rich folks in the U.S. have a majority stake in the countries wealth. "So what?" some may say, since they certainly pay the most taxes too, so it's fair, right?
Well, remember that little 'oopsy' that happened recently? The 'sub-prime crisis'? Ring a bell? That was, in a large part, the result of the banks over-extending themselves for the sake of profit. Holding lesser and lesser amounts of capital against larger and larger amounts of debt. It isn't exactly like not paying your taxes, but it is a big cheat, right? Well we all know the rich cheat on their taxes, too, and a 2001 IRS study pretty much proves that
Income level : $500,00 to $1 million
Avg. that adjusted gross income was understated on 2001 tax return: 21%
Income level : $50,000 to $100,000
Avg. that adjusted gross income was understated on 2001 tax return: 8%
Those with true incomes of $200,000 or more received 25% of all income, but accounted for 40% of net underreported income and 42% of underreported tax in 2001..
.. The Slemrod/Johns analysis uses unpublished data from special research audits the IRS conducted on a sample of 45,000 individual returns filed for 2001. It was the IRS' first such research effort since 1988, and it led the agency to estimate the 2001 gross "tax gap" at $345 billion.
Three Hundered and Forty-Five BILLION dollars slip through the cracks, remaining in the coffers of the rich. That's roughly half the $700 billion bailout, or well over half of the cost of Iraq war to this point.
So how do they do it? Well, when you are your own boss, it is a lot easier to fudge your W-2, so to speak:
The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains.
"The distribution of noncompliance lines up pretty closely with who gets income that's hard (for the IRS) to keep track of,'' Slemrod says. Still, he notes, the distribution of income by source doesn't explain all the increased noncompliance at higher income levels.
In its 2001 tax gap study, the IRS estimated that individuals underreported business income by 43% overall. Sole proprietors, who report self-employment income on schedule C of their tax returns, underreported their income a stunning 57%.
By contrast, the IRS found, 99% of all wages were reported by individual tax filers. The obvious explanation is that workers have no choice--their employers report their earnings to the IRS and withhold taxes on them.
So the next time you're listening to a rich guy moan about how his creed shoulders so much of the tax burden, tell him he's a damn cheat and a liar.