According to the Treasury Department, the wealthiest Americans failed to pay as much as $163 billion in taxes per year. The report comes as the administration of President Joe Biden wants to increase funding for the Internal Revenue Service.
More Power To The IRS
Adding more power to the IRS can help narrow the so-called tax gap. The Treasury Department estimates the gap to total $7 trillion in unpaid taxes for a decade.
To help the agency, the White House proposed investing over $80 billion over the next ten years. The funds will cover hiring additional staff and upgrading existing technology.
The additional funding can also help introduce new information reporting requirements, which can give the government better insight into tax activities.
However, the proposal to add more powers to the Internal Revenue Service met with skepticism. Republicans and business lobby groups argued that new powers and additional staff are the last things the IRS needs. In addition, asking for more information can be seen as an invasion of privacy.
Democrats Need Funding For $3.5 Trillion Spending Package, Target Wealthiest Americans
Democrats hope to raise more funding to help pay for their spending programs worth $3.5 trillion. This week, the House Ways and Means Committee will start the process of drafting its ambitious plans.
This covers climate change as well as social programs such as family and medical leave, public education, and expanded Medicare.
The Treasury Department estimates that its plans to address the tax gap can raise $700 billion over the next ten years. Narrowing the tax gap is part of the Biden administration’s goal to establish an improved economy. Part of reducing the tax gap will involve subjecting the rich to more audits and enforcement actions.
IRS Needs Funding
Natasha Sarin, deputy assistant secretary for microeconomics, wants the wealthiest 1% to pay more to improve the IRS’ services.
“For the I.R.S. to appropriately enforce the tax laws against high earners and large corporations, it needs funding to hire and train revenue agents who can decipher their thousands of pages of sophisticated tax filings.
It also needs access to information about opaque income streams — like proprietorship and partnership income — that accrue disproportionately to high earners.”
The final report combines academic research on how the distribution of the tax gap went across the income scale. In particular, tax compliance rates remain high for low- and middle-income workers.
Americans under these brackets often have taxes deducted automatically from their paychecks. However, the wealthiest 1% managed to invoke accounting loopholes to shield them from full tax liabilities.
Tax Increases Won’t Apply To Americans With Less Than $400,000
Even as the Biden White House promised to raise more revenue via taxes, they pledged to spare Americans with lower incomes. In fact, individuals earning less than $400,000 per year will not see their audit rates go up.
However, some lawmakers think that improving the IRS wouldn’t help as much as the Democrats think. A Congressional Budget Office report last week said that expanding the enforcement capacity of the IRS.
Wouldn’t raise as much money. The analysis estimated that additional enforcement funds would raise $200 billion over a decade. In contrast, the Treasury Department hoped the funds would raise $320 billion.
Watch the CNBC Television video reporting that studies show that the wealthiest Americans fail to report 21% of income:
Do you agree that the IRS needs more funding to go after the wealthiest Americans? In addition, will giving the IRS more powers close the tax gap?
Let us know what you think about taxing the wealthiest Americans. Share your comments below.