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Richest 1% of Americans underpaid taxes by $163 billion, Treasury says

Wealthy households underpay their federal taxes by $600 billion annually, according to the Treasury Department’s new analysis of what’s known as the “tax gap.”

Most workers have federal income taxes automatically withheld from their paychecks, meaning the federal government has precise information about their earnings, but higher earners with more non-wage income can more easily avoid reporting it.

“Today’s tax code contains two sets of rules: one for regular wage and salary workers who report virtually all the income they earn; and another for wealthy taxpayers, who are often able to avoid a large share of the taxes they owe,” Natasha Sarin, the Treasury Department’s deputy assistant secretary for economic policy, said in a Wednesday blog post.

The top 1% of households “choose not to pay” more than $160 billion per year, Sarin wrote. “For the IRS 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,” Sarin wrote. “It also needs access to information about opaque income streams ― like proprietorship and partnership income ― that accrue disproportionately to high-earners.”

Biden has proposed $80 billion in additional funding for the Internal Revenue Service, which the Congressional Budget Office has said would yield $200 billion in additional revenue.

In its previous estimate of the tax gap, the Treasury Department estimated it missed out on $441 billion before enforcement efforts and late payments for tax years 2011 through 2013. Charles Rettig, the IRS commissioner, said earlier this year he thought the tax gap could be as much as $1 trillion annually.

ARTICLE: PAUL MURDOCH

MANAGING EDITOR: CARSON CHOATE
PHOTO CREDITS: BUSINESS INSIDER

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Paul, 37, is from Scotland in the UK, but currently lives and works in Bangkok. Paul has worked in different industries such as telemarketing, retail, hospitality, farming, insurance, and teaching, where he works now. He teaches at an all-girls High School in Bangkok. “It’s a lot of work, but I love my job.” Paul has an active interest in politics. His reason for writing for FBA is to offer people the facts and allow them to make up their own minds. Whilst he believes opinion columns have their place, it is also important that people can have accurate news with no bias.

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