At this point we are all convinced that despite the fact they pay the bulk of taxes while fifty percent of Americans pay no income taxes, millionaires and billionaires (defined by our divisive President as families earning over $250,000 a year) are not paying their fair share. So called tax loop holes are now considered tax avoidance despite each and every provision of the IRC being passed by Congress and signed into law by a President. Public employee unions enter the fray denouncing the “wealthy” as underpaying taxes and yet public employees benefit from the greatest and most costly tax loop-hole of all; free employer paid employee benefits especially health benefits while these workers have the most generous and costly programs of all paid for by the taxpayers they profess to support.
Not paying ones fair share is indeed a problem. As the following report notes the IRS estimated a few years ago the gap between the taxes paid and what should have been paid at $345 billion for one year. That kind of money would go a long way in dealing with budgets and deficits. All it would take is for all Americans to be honest and pay their fair share… remember, cash is taxable income.
Millionaires and billionaires may have resources to maximum the value of the tax code, but their income is tracked, frequently publicly reported in corporate filings and reported directly to the IRS. Contrary to popular opinion, the wealthiest pay taxes on their taxable income whereas that is not always the case with those Americans who do not have a third-party reporting their earnings.
While it Is SOP these days to blame someone else for just about everything, more Americans should be looking in the mirror before they start camping on Wall Street.
IR-2006-28, Feb. 14, 2006
Washington — Internal Revenue Service officials announced today that they have updated their estimates of the Tax Year 2001 tax gap based on the National Research Program (NRP).
The updated estimate of the overall gross tax gap for Tax Year 2001 – the difference between what taxpayers should have paid and what they actually paid on a timely basis – comes to $345 billion. This figure falls at the high end of the range of $312 billion to $353 billion per year, an estimate released last March.
IRS enforcement activities, coupled with other late payments, recover about $55 billion of the tax gap, leaving a net tax gap of $290 billion for Tax Year 2001.
“The vast majority of Americans pay their taxes accurately and are shortchanged by those who don’t pay their fair share,” said IRS Commissioner Mark W. Everson. “The magnitude of the tax gap highlights the critical role of enforcement in keeping our system of tax administration healthy.”
The complexity of the tax law is also a significant factor in causing the tax gap, which can be seriously addressed only in the context of fundamental tax reform and simplification…
As with prior estimates, the updated estimate of the tax gap shows that the largest component of this gap, more than 80 percent, comes from underreported taxes. Underreported income tax is the largest component of this (see attached Tax Gap Map for Tax Year 2001). Nonfiling and underpayment of tax comprise the rest of the tax gap.
Though the net misreporting percentage varies by category of income, the rates reflect that compliance is highest where there is third-party reporting or withholding.
“Simply stated, compliance is highest where there is third-party reporting,” Everson said.
For example, one percent of all wage, salary, and tip income is misreported, contributing an estimated $10 billion to the tax gap. In contrast, nonfarm sole proprietor income, which is reported on a Schedule C and is subject to little third-party reporting or withholding, has a net misreporting percentage of 57 percent, contributing about $68 billion to the tax gap…
Categories: Observations on life