By David Callahan
The views expressed are his own.
At a time when the U.S. government needs every dollar of revenue it can get, alarm bells should be sounding in Washington about a new IRS study showing that the Treasury is losing a fortune to tax evasion.
The study, released last Friday, found that the government missed out on $385 billion in uncollected taxes in 2006, the most recent year for which the IRS has complete data. If we extrapolate the IRS’s assumption that the U.S. government only collects about 85 percent of total tax liabilities, the revenue lost by the Treasury in the past decade exceeds $3 trillion.
That is serious money–nearly equal to all the new federal debt incurred during the Bush years. And without tougher action against tax cheats, the U.S. government stands to lose trillions more over the next decade.
Many of the biggest tax cheats are wealthy earners. While most working stiffs–the W-2 crowd–get their taxes automatically withheld from their paychecks, business owners and self-employed professionals have lots of ways to cheat. And cheat they do: Unpaid taxes by businesses and corporations accounted for nearly half of the total tax gap in 2006.
These figures only reinforce the public’s view that the U.S. tax system is unfair. According to a poll released last month by the Pew Research Center, 57 percent of Americans said that what bothers them most about taxes is that the wealthy don’t pay their “fair share” (compared with 28 percent who cited the complexity of the system and 14 percent the amount they paid as their top gripe).