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IRS: 14% or $300 Billion in Taxes Go Uncollected.

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Unpaid taxes: $2,680 per household

The IRS says cheaters are robbing the U.S. Treasury of about $300 billion a year, and lawmakers dream of capturing that money to fund programs without tax increases.

By The Associated Press

Think of the uses of $300 billion, the estimated annual gap between what taxpayers owe and what they pay.

It would more than cover the federal deficit for a year or the extra money that President Bush wants in 2007 and 2008 for Iraq and Afghanistan.

It would pay for the $125 billion that Congress has agreed to spend on Hurricane Katrina relief, with enough left for three years' worth of federal education programs.

Such are the dreams of lawmakers pressing the Internal Revenue Service to get more aggressive about reducing the so-called tax gap.

Skeptics, however, scoff at the notion there is a pot of gold waiting to be claimed. They say it is an illusion as long as nothing is done about the complicated tax system.

An IRS study last year concluded that the tax gap in 2001 was $345 billion. Of that, $197 billion came from underreporting on individual income-tax returns, and $88 billion from underreporting by corporations and the self-employed. The rest came from those not filing or not paying the proper amount.

That gap was narrowed to $290 billion after enforcement efforts and late payments were factored in. Still, that left the government collecting only 86% of the more than $2 trillion it was owed in 2001.

A point of 'moral fairness'

That translated into a "surtax" of about $2,680 per household in 2001, the national taxpayer advocate, Nina Olson, said at a recent hearing of the House Budget Committee. "That is an extraordinary burden to ask our nation's compliant taxpayers to bear every year," she said.

"It's not just a budgetary problem," the committee chairman, Rep. John Spratt, D-S.C., said. "It raises fundamental issues of moral fairness."

The new Democratic majority sees these uncollected billions as a major source of revenue that could be used to pay for education, health care and other priorities without busting the budget.

The IRS does claim some progress in cracking down on cheaters. The agency's commissioner, Mark Everson, said enforcement revenue climbed from $34 billion in the 2002 budget year to $49 billion in 2006. The audit rate for individual returns has gone from a little over one in 200 in 2001 to about one in 100 in 2006, with the returns of millionaires getting closer looks, Everson said.

The Bush administration, in its budget proposal for next year, provided $410 million for programs to reduce the tax gap and outlined 16 legislative changes it said would raise about $29 billion over 10 years.

The Senate Finance Committee chairman said he was "very, very disappointed" by the proposals. "We're not asking for the moon. We're asking for more than 1 cent on the dollar," said Sen. Max Baucus, D-Mont.

But Chris Edwards, the director of tax-policy studies at the libertarian Cato Institute, said the taxpayer compliance rate is one of the highest in the West, well above some European countries with thriving underground economies. The U.S. rate has held steady in the mid-80% level the past three decades.

He compared it to seat belt use, about 81% despite years of efforts to educate drivers.

Cheaters enabled by tax loopholes

Edwards, in an interview, predicted there would not be any real inroads in shrinking the gap until the tax laws were simpler. That is not expected to happen soon.

"Every new loophole adds additional incentives and ability for people to cheat," he said.

Everson agreed. "We will never be able to audit our way out of the tax gap," he said. Simplification would help, he said, but reducing the gap dramatically "will take some Draconian steps" that "risk imposing unacceptable burdens on compliant taxpayers."

Nonetheless, small steps are under way. The IRS hopes to garner $2 billion over 10 years from a program begun in 2006 whereby private collection agencies help pursue delinquent taxpayers.

The tax agency for the past decade has fostered voluntary tip reporting programs in the food and beverage industries, persistent sources of underreporting.

Take all the deductions you're entitled to, and if you don't cheat, chances are slim that you'll be audited.

The Treasury Department's inspector general for tax administration has estimated the IRS could pick up an additional $342 million over five years by seeking out tip agreements in the cosmetology and taxi-limousine industries.

In Congress, a bipartisan group of lawmakers is pushing one of the administration's proposals: requiring brokers and mutual fund companies to track and report to taxpayers and the IRS investment information related to capital gains taxes. That would make it easier for taxpayers fill out their returns and help close an annual gap in capital gains taxes estimated at $17 billion.

Olson, the taxpayer advocate, said the IRS must expand third-party reporting. There is little cheating when a person's company reports wages to the IRS, but compliance is less than 50% for income not subject to third-party reporting.

One example might be more reporting on gross proceeds from Internet auction and sales sites, she said, noting that 700,000 people regard eBay sales as their primary or secondary source of income.

Cracking down on tax avoiders also would keep honest taxpayers honest, she said.

"If compliant taxpayers believe that everyone else is paying his or her fair share, they are likely to remain compliant," she said. "But no one wants to feel like a 'tax chump.' "

This article was reported and written by Jim Abrams for The Associated Press.

http://articles.moneycentral.msn.com/Taxes...rHousehold.aspx


"Credibility in immigration policy can be summed up in one sentence: Those who should get in, get in; those who should be kept out, are kept out; and those who should not be here will be required to leave."

"...for the system to be credible, people actually have to be deported at the end of the process."

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Testimony to the House Immigration Subcommittee, February 24, 1995

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I'm sure 12 million illegal immigrants own a large portion of that.


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Senator Barack Obama
Senate Floor Speech on Public Debt
March 16, 2006



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Why not ditch this worthless tax system we have and just do a straight 15% flat tax? No deductions, no shelters, no loopholes. You earn $10,000 you pay $1500. You earn 10 million you pay 1.5 million. No brackets and no progressive tax. That way everyone pays their fair share without gouging one bracket to subsidize another.

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Why not ditch this worthless tax system we have and just do a straight 15% flat tax? No deductions, no shelters, no loopholes. You earn $10,000 you pay $1500. You earn 10 million you pay 1.5 million. No brackets and no progressive tax. That way everyone pays their fair share without gouging one bracket to subsidize another.

It would never work because people who make less than $50,000 a year pay less than 8% of all income tax

payments. Those who make $100,000 and more pay a remarkable 65% of all income tax payments (and

of course they fall into a tax bracket where some of their income is taxed at a higher rate.)

If you fixed the rate at 15%, low-income families would pay more tax and high-income families would pay less

than they do today. This would have the effect of reducing overall tax revenues, because lower-income families

still pay ####-all compared to the wealthiest tax payers.


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Why not ditch this worthless tax system we have and just do a straight 15% flat tax? No deductions, no shelters, no loopholes. You earn $10,000 you pay $1500. You earn 10 million you pay 1.5 million. No brackets and no progressive tax. That way everyone pays their fair share without gouging one bracket to subsidize another.

It would never work because people who make less than $50,000 a year pay less than 8% of all income tax

payments. Those who make $100,000 and more pay a remarkable 65% of all income tax payments (and

of course they fall into a tax bracket where some of their income is taxed at a higher rate.)

If you fixed the rate at 15%, low-income families would pay more tax and high-income families would pay less

than they do today. This would have the effect of reducing overall tax revenues, because lower-income families

still pay ####-all compared to the wealthiest tax payers.

But if all the tax shelters and loopholes were closed the rich would in effect be paying the same if not more than they do now. You hear the stories of millionaires paying little or no taxes because of creative accounting. This would stop that. I think it would simplify things and make it fair. It would also stop all this class warfare when they adjust the tax rates and one side screams it is just a tax cut for the wealthy. Raise or lower it for all equally.

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But if all the tax shelters and loopholes were closed the rich would in effect be paying the same if not more than they do now. You hear the stories of millionaires paying little or no taxes because of creative accounting.

I don't think the stories are true -- at least the official numbers tell us otherwise.

As much as I like the idea of lowering the tax rate for the rich and increasing it for the poor :P

the poor are simply not going to cover the gap, because they are, well, poor. :)


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Gary, mawilson is right. The rich pay the lions share of the tax revenues so any tax 'reform' that reduced the total outlay from the wealthy would not work. The beast has gotten big and fat and if you take its chow away now or even put it on a diet, it will be unhappy.

Unless... you instituted a flat tax that exempt everyone with household income of $200,000 or less and then figured out the appropriate % required to levy on the rest to reach the required revenue goals.

Of course, if you did that, capital would flee and.... well, no one wants that. We likes our capital.


Man is made by his belief. As he believes, so he is.

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Unless... you instituted a flat tax that exempt everyone with household income of $200,000 or less and then figured out the appropriate % required to levy on the rest to reach the required revenue goals.

Of course, if you did that, capital would flee and.... well, no one wants that. We likes our capital.

I think that sounds like a good idea. Except then you'd have people making $199,999 with a higher net income than those making $200,000, and that's not fair. I like the idea of maybe setting the flat rate for incomes of $200,000 and up and then having a linear increase from $100,000 to $200,000 from 0% to whatever the flat tax would be.

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Unless... you instituted a flat tax that exempt everyone with household income of $200,000 or less and then figured out the appropriate % required to levy on the rest to reach the required revenue goals.

Of course, if you did that, capital would flee and.... well, no one wants that. We likes our capital.

I think that sounds like a good idea. Except then you'd have people making $199,999 with a higher net income than those making $200,000, and that's not fair. I like the idea of maybe setting the flat rate for incomes of $200,000 and up and then having a linear increase from $100,000 to $200,000 from 0% to whatever the flat tax would be.

Capital would flee. That's not good for anyone.

Another thing - while someone making $100,000 may be rich in Nebraska, they're barely middle class in New Jersey. So if the purpose is to tap the rich man, you're gonna have to introduce regional cost-of-living calculations into determining an individual taxpayers cutoff.

Go far enough down that path, and you end up with a tax code that is probably just as complex as it is today.


Man is made by his belief. As he believes, so he is.

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I think that sounds like a good idea. Except then you'd have people making $199,999 with a higher net income than those making $200,000, and that's not fair. I like the idea of maybe setting the flat rate for incomes of $200,000 and up and then having a linear increase from $100,000 to $200,000 from 0% to whatever the flat tax would be.

Or you could just leave the rich the heck alone and still tax the poor by introducing a consumption tax.

EU countries have a consumption tax in the form of the VAT, while in the US consumption (sales) taxes

are negligible. Consumption taxes are regressive (they tax the poor more than the rich), because

rich people typically save a larger percentage of their income than poor people. Consumption taxes

are also universal -- you can't escape it - even the illegals would have to cough it up when they pay

for things in cash.


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Unless... you instituted a flat tax that exempt everyone with household income of $200,000 or less and then figured out the appropriate % required to levy on the rest to reach the required revenue goals.

Of course, if you did that, capital would flee and.... well, no one wants that. We likes our capital.

I think that sounds like a good idea. Except then you'd have people making $199,999 with a higher net income than those making $200,000, and that's not fair. I like the idea of maybe setting the flat rate for incomes of $200,000 and up and then having a linear increase from $100,000 to $200,000 from 0% to whatever the flat tax would be.

Capital would flee. That's not good for anyone.

Another thing - while someone making $100,000 may be rich in Nebraska, they're barely middle class in New Jersey. So if the purpose is to tap the rich man, you're gonna have to introduce regional cost-of-living calculations into determining an individual taxpayers cutoff.

Go far enough down that path, and you end up with a tax code that is probably just as complex as it is today.

I suppose so. I don't think factoring in COL calculations would really be that big of a deal though. Bottom line, I don't think that households making less than $50,000 (in this area at least) should be paying any taxes at all.

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I don't think that households making less than $50,000 (in this area at least) should be paying any taxes at all.

In NJ, I'd agree. But $50,000 is good money in many parts of the country. They should be taxed there. A uniform tax code across this entire country is asinine. This country is too big and too diverse.


Man is made by his belief. As he believes, so he is.

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Well, I'm not an economist so I really don't know what the correct solution is. All I know is that our tax system is bloated, inefficent and unfair. The idea that the more you make the higher percentage you pay is wrong. I know several people that turned down better jobs because it put them in a higher bracket and in effect they would make less. Something about that just grates on me. I think everyone rich and poor should pay their fair share. I don't like the idea of penalizing people for succeding.

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I don't think that households making less than $50,000 (in this area at least) should be paying any taxes at all.

In NJ, I'd agree. But $50,000 is good money in many parts of the country. They should be taxed there. A uniform tax code across this entire country is asinine. This country is too big and too diverse.

That is what state and local taxes are for. You can't pro-rate federal taxes to take into account the different cost of living. Everyone, from those making 10K/year to 100M/year should pay something. A flat tax just seems like the fairest way to go.

The VAT is interesting as long as the federal tax system was scrapped. The more one makes the more they tend to spend so that would work there. To help the poor things like food and utilities should be exempt from the VAT.

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I know several people that turned down better jobs because it put them in a higher bracket and in effect they would make less.

That could never happen -- only the excess amount is taxed at a higher rate.

The following tax table is for 2006 married, filing jointly:

Taxable income Tax bracket

$0-$15,100 -----> 10%

$15,100-$61,300 -----> 15%

$61,300-$123,700 -----> 25%

$123,700-$188,450 -----> 28%

$188,450-$336,550 -----> 33%

$336,550-infinity -----> 35%

If a married couple made $150,000 in 2006, they pay:

$1,510 = 10% of $15,100

$6,930 = 15% of $46,200 ($46,200 = $61,300 - $15,100)

$15,600 = 25% of $62,400 ($62,400 = $123,700 - $61,300)

$7,364 = 28% of $26,300 (the amount over $123,700)

Altogether, $1,510 + $6,930 + $15,600 + $7,364 = $31,404

which is only about 20% of $150,000, not 28% (their tax bracket)


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