A lot of time is wasted in Washington debating whether or not we should raise taxes on the rich. A new paper finds that maybe we should spend some time on getting the rich to pay the current tax rate. (WSJ)
“Overall, the paper estimates that the top 1% of households fail to report about 21% of their income, with 6 percentage points of that due to sophisticated strategies that random audits don’t detect. For the top 0.1%, unreported income may be nearly twice as large as conventional IRS methodologies would suggest, the researchers wrote.”
This isn’t all that surprising. A 2020 report by the Treasury Inspector General for Tax Administration found that the IRS failed to audit more than 897,000 wealthy individuals who skipped out on filing tax returns over a three‑year period – and these individuals owed nearly $46 billion in taxes. (TIGTA)
Normally I am not a fan of an increase in government spending, but if an increase in spending creates more revenue its kinda of hard to argue with that logic. So would it? Natasha Sarin and Larry Summers think so. A 2019 report they co-wrote argued that increasing the IRS budget over the next 10 years by $100 billion would raise $1.15 trillion in revenues over that period. (TN)
Just a thought, before we raise or lower taxes why don’t we make sure to maximize the current tax rate. According to economist Art Laffer there is an optimum tax rate that maximizes tax revenue. This idea is called the Laffer curve. Both sides should support this. If everyone paying taxes hurts the economy Republicans can argue the rate is too high. If it has no impact on the economy, Democrats can argue there is still room to raises taxes. However we can’t know the answer to these until everyone is paying taxes.
