The wealthiest 1% have robbed the nation with $7 trillion in tax evasion over the last 10 years


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The good news for the IRS is that most Americans pay their fair share of taxes. A new analysis of incomes and returns suggests that tax compliance for low- and middle-income workers is “high.” As The New York Times reports, the same can’t be said of the rich.

Where the income received by the majority of Americans comes primarily in the form of paychecks, with taxes deducted at the time they are issued and totals reported directly to the Internal Revenue Service, that’s not true of the wealthy. Those at the top of the income pyramid are more likely to be rewarded in ways that aren’t as visible and certainly don’t have taxes carved out in advance. Add to that the number of loopholes and dodges available to those wealthy enough to employ experienced tax attorneys and accountants, and compliance among the wealthy is not high. It’s that other thing. The one that has created a “tax gap” with $7 trillion left on the table over the last ten years alone. 

That means that 18 months’ worth of the entire U.S. budget has been lost in a decade, simply to tax cheats. A new report from the Treasury Department gets more explicit about the source of this “tax gap” by pointing a finger right at the top of the income pyramid. It’s not just that the wealthy tend to underpay their taxes; the wealthiest tend to underpay by the greatest amount. That leaves the top 1% of Americans alone responsible for $163 billion a year that should be going to roads, schools, parks, and healthcare … but is instead going directly to their silk-lined pockets.

The purpose of the Treasury report is not just to make it clear that America is failing to collect anything close to a fair amount from those who pay themselves through a nest of LLCs, remote accounts, and false fronts, but to end this deception is going to take a dedicated effort—and more resources at the IRS. And the report spells out explicitly why one group of Americans are demonstrably complainant, and a much smaller group is not.

And yet, the way the current rules for the IRS are written, they’re required to spend a lot of their time picking for dimes in the returns of those who fall into the first camp, rather than searching for the billions being covered up in the returns of the later.

The combination of an ever greater income gap and the IRS’ inability to direct its resources to focus on the wealthiest returns means that it’s increasingly easy for the wealthiest to hide larger and larger amounts away and for fewer of their efforts to get caught. As a result, the IRS estimates that the current resources miss about 15% of the taxes owed each year—almost all of that from the wealthiest 1% of taxpayers.

That’s why President Joe Biden is currently pushing hard for additional funding at the IRS and for the ability to focus audits and investigations where they matter—on the people who have the money. It’s also why Republicans are pushing back, arguing that the IRS “can’t be trusted” and that attempting to secure the money owed is “an invasion of privacy.”

What’s being left on the table each year is enough to cover all unemployment payments, SNAP and other child nutrition programs, have a few billion left on the side for all foster care programs and children’s health programs—every one of which Republicans are sure to claim is too costly. What it would take to recover those funds is a tiny fraction of the benefits that would result.

But somehow, Republicans—or specifically, Republican donors—don’t want the IRS to spend more time looking at the wealthiest 1%. And there are 7 trillion reasons why.