The IRS could recover $12 for every $1 spent on scrutinizing the ultra-wealthy's taxes
The IRS could recover $12 for every $1 spent on scrutinizing the ultra-wealthy's taxes
America's highest earners are pretty adept at not paying the taxes they owe. Scrutinizing them could yield a lot more revenue for the public.
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Could seems to be doing some heavy lifting here. What are you deriving that from?
They find that while it's much more expensive to audit the wealthiest tax payers, it's still a hearty return on investment. Auditing the top 1% yields $4.25 per dollar spent, and that number soars to $6.29 when auditing the top 0.1%.
Top 1%: $4.25 yield per $1
Top 0.1%: $6.25 yield per $1
What do these points actually mean?
What is the top one percent household income in the US in 2022?
In 2022, the threshold for a household to be top 1% was $570,003 in earnings.
Sure, that's hard to do by all standards, even silicon valley. The article goes out of its way to highlight the Top 1% and above are "adept" at evading taxes.
But what's this about Top 10%?
Summary bullet-point:
Economists find that every extra dollar spent on auditing the top 10% of taxpayers yields $12 in revenue.
Content:
And pouring even just a bit more money into auditing the rich could yield a lot more revenue, with every additional dollar yielding up to potentially $12 in revenue from the top 90th percentile of earners.
So, they really mean Top 10%.
Top 10%: $12 yield per $1
Weirdly enough, the article does not speak to this group beyond potential profit. No mention of tax evasion, no mention of avoidance, just profit. One must assume it's much easier to squeeze that ~33.2 million people (10% population) million via audits.
What does top 10% actually mean?
What was the top 10% household income percentile in 2022?
The threshold to be in the top 10% of household incomes in 2022 in the United States was $212,110.
That's... a bit odd. 212k household is pretty easy to do even here in Des Moines for any two professional or STEM earners.
Per SoFI, the average salary in the US is $60,575. Double that to approximate household and you're at $121,150. If we shift to median to help rule out outliers, $56,420/$112,840.
With a median of $112, it's hard to see how "top 10%" is only double. This screams of an outsize "middle" range. Shift back to the DQYDJ page and the chart shows exactly that: roughly linear scaling from the 10% mark up through 90%, with a severe spike at 99%.
It's quite clear something is up with the >=99% spike, worthy of audits and scrutiny.
The callout of 10% - despite significant drop in household earnings - makes a person wonder when the focus will shift to 15%, then 25%, etc. We've left the land of clear problem and seem to be opportunistically extracting revenue at that point.
First of all, I really appreciate you breaking down the article and the numbers like that. I can tell you spent time and effort on it, and it really helps put things into perspective.
Now, I'm going to vehemently disagree with the point you were getting at.
Weirdly enough, the article does not speak to this group beyond potential profit. No mention of tax evasion, no mention of avoidance, just profit. One must assume it's much easier to squeeze that ~33.2 million people (10% population) million via audits.
The only way for the IRS to "profit" is by going after people who should have paid $x in taxes, by law, but instead paid less than $x. By definition, they had to be avoiding paying their legally required share of taxes. Some on purpose, some by accident. The IRS is not going to go to a taxpayer and say "well, according to tax law you owe $23,819.25 for the fiscal year in taxes, but we want to profit so instead we're going to force you to pay $30,000." That's just not how taxes work. These people didn't pay what they owe.
I am fine with the top 100% of taxpayers being audited and forced to pay what they owe in taxes.
Just pay your taxes and it won't be an issue at all, regardless of where you fall on the income spectrum. It's a simple concept. Pay your taxes.
Now, I’m going to vehemently disagree with the point you were getting at.
The only way for the IRS to “profit” is by going after people who should have paid $x in taxes, by law, but instead paid less than $x. By definition, they had to be avoiding paying their legally required share of taxes. Some on purpose, some by accident. The IRS is not going to go to a taxpayer and say “well, according to tax law you owe $23,819.25 for the fiscal year in taxes, but we want to profit so instead we’re going to force you to pay $30,000.” That’s just not how taxes work. These people didn’t pay what they owe.
If we had a straightforward tax system where it was possible for a mere mortal to know, with confidence, exactly what was due, I would agree. We do not.
My point was that there was no call-out for "top 10%" not paying taxes, or otherwise evading taxes. There was for 1%/0.1%. The implication is the IRS would be extracting profit from those not intentionally evading taxes, instead those who - by all available indications - are already trying to do their part.
That should be concerning.
If that does pan out and isn't paired with a serious simplification of tax code, we're going to see a handful of things:
- Resurgence of the tax preparation industry and direct padding of Intuit's pockets
- Immense political blowback, the last thing blue team can afford
- Further compression of the working class from this additional burden
But, the article really doesn't go into that "10%" and I hadn't found much reference in the study either, so... we'll see.
Lets be honest, politicians want to seem like they are going after the ultra wealthy without actually going after the ultra wealthy, because they are either ultra wealthy themselves, or their donors / friends are.
We've known for decades that its the 99% vs the 1%
As a separate point, I agree that the headline is being somewhat disingenuous by calling the top 10% "ultra wealthy". $212,110/yr is still much more wealth than most Americans could ever dream of having, but it's not "ultra wealthy". Just "wealthy" or "very wealthy" imo.
But again, it doesn't matter whether you're "wealthy", "very wealthy", or even "not even wealthy at all". Pay your taxes.
$212,110/yr is still much more wealth than most Americans could ever dream of having, but it’s not “ultra wealthy”. Just “wealthy” or “very wealthy”
Entirely disagreed. Even in Des Moines, Iowa, it's well within the reach of literally any two individuals pursuing IT or other similarly-skilled positions. It's much easier in dense population centers.