Taxes

Treasury Report Says Rich Are Hiding Half Their Income

SK Ashby
Written by SK Ashby

Our tax code is rigged in favor of the wealthy by design. Wealthy shareholders pay lower tax rates on their investments than average people do on wages and some people with the financial resources funnel their personal income through shell companies to reduce their rates.

But even within a system that is already rigged in favor of the rich, the rich still find ways to hide their earnings and pay significantly less taxes than they're suppose to.

The Biden administration wants to collect more taxes that are already owed under current law to pay for President Biden's infrastructure spending proposal and that strategy is supported by a new report from the Treasury Department. The new report estimates that wealthy earners are hiding about half of their income.

The U.S. Treasury Department estimated that wealthy taxpayers as a group are hiding more than half their income outside of wages and salaries, a conclusion that aims to bolster the Biden administration’s call for Congress to approve expanded IRS funding and broad new financial-transaction reporting requirements. [...]

The Treasury’s plan includes requiring banks and financial institutions to report account flows -- information that the IRS currently doesn’t have. The idea is to make pass-through income more like wages, which employers must report to the agency.

Taxpayers report only 45% of their income when the IRS doesn’t have visibility into their earnings, the Treasury estimated. That compares with a 99% compliance rate for wages where employers are required to report to the IRS, the Treasury said.

The Biden administration estimates that increasing enforcement of current law and tax rates would raise as much as $700 billion in tax revenue over ten years.

Conservative critics say that's an overestimate, but if the rich really are hiding half of their earnings it could be an underestimate.

In any case, the richest people in the world are currently benefiting from a rigged system with big holes in it, but they will still be the richest people in the world if we close those holes and raise rates to pay for things the country needs. Superrich tech executives could pay another billion in taxes and they would literally earn that much back in a week or two.

It's difficult to wrap your mind around the sums of money we're talking about it, but some Americans are so rich (and getting richer by the hour) they wouldn't even notice the money is gone.