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  • Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--and Cheat Everybody Else
    Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--and Cheat Everybody Else
    by David Cay Johnston
  • The Cheating of America: How Tax Avoidance and Evasion by the Super Rich Are Costing the Country Billions--and What You Can Do About It
    The Cheating of America: How Tax Avoidance and Evasion by the Super Rich Are Costing the Country Billions--and What You Can Do About It
    by Charles Lewis
  • The Great American Tax Dodge: How Spiraling Fraud and Avoidance Are Killing Fairness, Destroying the Income Tax, and Costing You
    The Great American Tax Dodge: How Spiraling Fraud and Avoidance Are Killing Fairness, Destroying the Income Tax, and Costing You
    by Donald L. Barlett, James B. Steele
  • Reward: Collecting Millions for Reporting Tax Evasion, Your Complete Guide to the IRS Whistleblower Reward Program
    Reward: Collecting Millions for Reporting Tax Evasion, Your Complete Guide to the IRS Whistleblower Reward Program
    by Joel D. Hesch
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« Aiding Tax Cheats by Hobbling the IRS | Main | Corporations and the Swiss Cheese Tax Code »
Friday
Apr152011

Tax Evasion: The Staggering Cost

AuthorDavid Callahan

Tax evasion will cost the U.S. government $305 billion in 2010 and has cost $3 trillion over the past decade. It is a major contributor to budget deficits and the accumulation of national debt since 2001. Tax evasion also costs state treasuries billions of dollars. Every tax filer will pay an extra $2,200 in 2010 to make up for the funds lost to tax cheating. Even modest success in reducing tax evasion would free up significant new resources for spending or deficit reduction. Yet last week's budget deal nixed a proposal by the Obama Administration to strengthen the IRS' enforcement capacity. 

In estimating the tax gap, the IRS found that the largest share of tax evasion—over 50 percent—was by individuals with business income. A more detailed breakdown of losses in 2008 by the scholar John Slemrod and IRS analyst Andrew Johns found that the single biggest source of lost revenue was from proprietors of businesses who don't report the full amount of their income. Other big cheaters include professionals whose income comes through S corporations, partnerships, and real estate.

The study by Slemrod and Johns found that misreporting "generally increases with income, although it peaks among taxpayers with adjusted gross income between $500,000 to $1,000,000, and is lower than the peak ratio for individuals with income above $1,000,000."

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DateFriday, April 15, 2011 at 4:55PM |

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