The richest Americans are failing to pay hundreds of billions in taxes they owe the government, a new U.S. Treasury report contended Wednesday.
The report said the top 1% of taxpayers last year failed to pay about $163 billion in taxes, accounting for about 28% of the total of $600 billion in unpaid taxes, while the top 5% failed to pay a total of $307 billion, 53% of the overall sum.
The Treasury called the $600 billion in underpayments a "striking" total equal to about 3% of the country's annual economic output of nearly $23 trillion. The sum is equal to all the taxes paid by the country's lowest-earning 90% of taxpayers.
The wealthiest taxpayers account for the biggest part of the tax evasion, the report said, because they have the financial resources to hire accountants and tax advisers "who help shield them from bearing their true income tax liability."
It also said that wealthy taxpayers often have "opaque" income sources from business partnerships, proprietorships and rental income. By contrast, most working Americans have federal income taxes deducted from regular paychecks and forwarded to the government by their employers.
"The United States collects less tax revenue as a percentage of [gross domestic product] than at most points in recent history, in part because owed but uncollected taxes are so significant," the Treasury Department's Natasha Sarin wrote in the report.
"These unpaid taxes mean policymakers must choose between rising deficits, lower spending on important priorities, or further tax increase to compensate for lost revenue — which will only be borne by compliant taxpayers," she wrote.
Authorities have long been aware of tax evasion by the wealthiest U.S. taxpayers, but legislative efforts to correct the problem have almost always failed.
President Joe Biden, as part of his plans to boost the economy with new spending to expand the country's social safety net, is calling for higher taxation on corporations and individuals earning more than $400,000 a year. Perhaps more importantly, he wants beefed-up tax enforcement staffing at the Internal Revenue Service, the country's tax collection agency.
But some lawmakers, especially Republicans, so far have balked at increasing the size of the tax agency's staff. Congress is in the midst of debating Biden's $3.5 trillion social safety net proposal, in addition to separate legislation for $1 trillion in infrastructure spending.
The fate of the proposals is uncertain.
