Republicans: The Party of the Tax Cheaters? |
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| Posted by Karen Traeger on Jan 23 2012 |
| Blog >> |
 By: Bob Lucore
Recently Mitt Romney’s waffling about whether or not to release his tax returns has been highlighted in the news. Another tax-related item, that has largely escaped attention, is a report released earlier this month by the Internal Revenue Service. IRS figures show that tax cheating robbed the public of about $385 billion during a single year. A closer look shows that the IRS is probably underestimating tax evasion, that tax cheating is most prevalent among the top-income brackets, and that Republicans have been in the forefront of preventing the IRS from enforcing tax laws.
Just how big is $385 billion? The IRS figures put the amount at just under 15% of the total taxes due for a typical year. The IRS only computes these estimates every five years, and the figures recently released cover the year 2006—but the agency believes that the percentage figure does not vary greatly from one year to the next.
As Bob McIntyre of Citizens for Tax Justice (CTJ) has often pointed out, the IRS calculations significantly underestimate the total amount lost to tax cheating. This is largely due to the fact that the IRS does not account for the huge volume of off-shore tax evasion schemes that have grown over time. So even though 15% is a lot of money, the real volume is much higher.
CTJ also points out—and IRS figures confirm—that most of the gap due to tax cheating comes from the under reporting of income by corporations and business owners. Those who rely on their pay checks for income are subject to withholding and employer reporting and have non-compliance rates of less than 1%. Self-reported income, such as that from dividends, capital gains and royalties, is 56% under-reported according to the IRS.
The tax gap could be substantially reduced by increased enforcement. IRS Commissioner Douglas Shulman has testified that the government gains $200 for every additional dollar invested in enforcement, modernization and management systems.
At a time when conservatives act as if they were hyper-focused on cutting deficits, one might think that investing in the IRS would make sense. However, Republicans in the House have chosen to attack the IRS and cut the agency’s funding. As Commissioner Shulman testified, the budgets such as that passed by the Republican controlled House last summer would increase the deficit by decreasing revenue, due to cutting the IRS budget by $2 billion.
Bruce Bartlett, who played important roles in economic policy-making for both Ronald Reagan and George H.W. Bush, recently complained that, “Republicans have been treating the I.R.S. like a political punching bag for years, cutting its personnel and restricting its ability to do its job.”
Today’s Republicans are apparently all too happy to be the party the represents the interests of tax cheaters.
Bob Lucore, a long-time ADA board member, is the former Director of Research and Policy for the United American Nurses and has worked for the Teamsters and the Department of Economic Research at the AFL-CIO. . He taught economics for several years at Centre College and Colorado State University and is currently a graduate student and research assistant in the School of Library and Information Science at San José State University.
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