According to William Gale and Aaron Krupkin of Brookings more that $15 of every $100 is not paid in taxes to the federal government. Pay that money and most of the annual federal deficit would disappear.
Who pays? When someone else reports your income, there is little room for cheating. Those with payroll taxes pay. Not a lot of tax evasion with social security. Corporations pay. To the extent that the tax laws actually require them to pay, Gale and Krupkin say corporations pay their taxes.
Who doesn’t pay? People who report their income on their own. People who own their businesses or farms. People for whom there is no accountability regarding their income. Gale and Krupkin say 60% of farm income and sole proprietorship income is not reported to the government.
The richer these sole proprietors are, the worse the problem is. The top 10% earn 44% of the income in this country. They are responsible for 61% of evaded taxes. The top 1% earn 18% of the income in this country. They are responsible for 28% of evaded tax. (They probably feel justified – all that talk about taxing the rich, after all).
You could make a dent in this problem if the Internal Revenue Service were funded. Funding for the IRS has decreased while its responsibilities have increased. As a result, audits have decreased – exacerbating the problem.
You would expect the law and order party, the party that wants to moderate the tax burden on everyone would increase the funding of the Internal Revenue Service. You would be right. When the Democrats win the White House and both Houses of the United States legislature, we can expect an increase in funding for the IRS.