The IRS estimates that between one and two million Americans are using offshore credit card accounts to avoid paying taxes. A New York Times story states that most of them “are believed to have incomes that would put them among the top 1 percent of taxpayers.”
The credit card scam is only the latest in a growing arsenal of weapons used by the rich to reduce their taxes. You or I couldn’t get away with it, because our employer reports our wages to the Government. But the IRS depends on the “honesty” of business owners and high-paid professionals to collect their taxes.
Of course, if the IRS checks those tax returns, the cheaters might get caught. But there’s not much chance of that. Only one of 160 returns is audited, according to the Times. Manhattan, the richest district in the country, has only 23 tax auditors, one-sixth of the 150 who used to be on the payroll.
There are also plenty of rich people who don’t even bother to file tax returns. The IRS doesn’t pay much attention to them, either.
How come? Because Congress has sharply reduced the IRS’ budget for tax enforcement. And the few auditors that remain have been ordered to go after low-wage workers instead of the high rollers. When rich people get caught cheating, they hire special tax lawyers who make a deal to pay the IRS pennies on the dollar. But working people can be subjected to years of wage garnishments to recover penalties and interest from minor errors.
Illegal tax-dodging schemes cost billions of dollars every year – money that could be spent on education, health care, etc. But the biggest rip-offs are perfectly legal.
For forty years, the rich have been getting loopholes and rate reductions that have cut their income taxes again and again. You and I get little benefit from these tax cuts – and other taxes that we pay, like payroll tax, property and sales tax, keep going up.
For example, the capital gains tax cut of 1997 most of all favored the 400 richest Americans, according to Times. They paid 22 percent of their income in taxes in 1998, down from 30 percent in 1994. That’s the kind of special treatment that enabled Ken Lay and other Enron officers, after looting their company (and consumers), to pay lower taxes on the loot. When Al Capone tried that, he went to jail!
A year ago, Congress passed another round of tax cuts for the rich. Most of these will take effect in the next three years, although Bush is trying to speed them up before mass opposition has time to build.
All this adds up. Rich households are supposed to pay 39 percent of anything they make over $288,000 per year. If all the legal and illegal tricks were stopped so they really paid at that rate, it would bring in an estimated $100 billion per year.
Until the 1970s, the top income tax rate was just over 70 percent. If that rate was restored for rich people’s income over $500,000, Federal revenues would increase more than $270 billion per year. That would be enough to eliminate all tax on incomes under $50,000 per year, and reduce the tax by an average of 50 percent on incomes between $50,000 and $100,000, and still leave $40 billion to spend on human needs.
A pro-worker tax program: Close the loopholes! Tax the rich! Get the IRS off the backs of working people, and put them to work catching, fining and jailing the millionaire tax dodgers! And this November, defeat candidates that support George Bush and his gang of corporate crooks!
The author can be reached at arthur.perlo@pobox.com
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