Tax Avoidance On the Rise: It's Twice the Amount of Social
Security and Medicare
By Paul Buchheit
January 7, 2013
Three trillion dollars a year. That's how much the wealthiest
Americans avoid through the system of subsidies and schemes
and sweet deals that deprive middle-class workers of their
earned benefits. That's three times more than the deficit.
That's enough for a full-time job for every middle-class
household in America. Here are the distressing details:
1. Tax Expenditures: $1.25 trillion
These subsidies from special deductions, exemptions,
exclusions, credits, capital gains, and loopholes are
estimated to be worth 7.4% of the GDP, or about $1.1
trillion. They largely benefit the richest taxpayers.
Business subsidies bring the total to $1.25 trillion.
That alone is almost enough to pay for Social Security ($884
billion) and Medicare ($524 billion).
But there's so much more.
2. Tax Underpayments: $450 billion
According to the IRS, 17 percent of taxes owed were not paid
in 2006, leaving an underpayment of $450 billion. The largest
share of that came from underreporting of income.
3. Tax Havens: up to $250 billion
(a) It's estimated that between $21 and $32 trillion is
hidden offshore, untaxed. (b) 40% of the world's richest
individuals are Americans. That's $8 to $12 trillion of the
total. (c) The historical annual stock market return is 6%.
That's a return of $480 to $720 billion. (d) The 20% to 35%
tax loss amounts to a minimum of $96 billion, a maximum of
4. Corporate Taxes: $250 billion
For over 20 years, from 1987 to 2008, corporations paid an
average of 22.5% in federal taxes. Since the recession, this
has dropped to 10% -- even though their profits have doubled
in less than ten years. The missing 12.5% on $2 trillion in
profits amounts to $250 billion a year.
5. Financial Transaction Tax (FTT): $500 billion
The absence of an FTT constitutes tax avoidance. Not a penny
of sales tax is paid on U.S. financial transactions, which
have been estimated at about three quadrillion dollars
annually, or three thousand times the deficit. No sales tax
is paid despite the high-risk nature of "flash trading" that
can lose entire pension funds in a few seconds.
Just a half penny from every dollar of total U.S. financial
transactions would pay off the national debt -- not just the
deficit, but the whole $15 trillion debt. More conservative
estimates by the Center for Economic and Policy Research and
the Chicago Political Economy Group suggest FTT revenues of a
half-trillion dollars annually.
6. Payroll Tax: $300 billion
This extremely regressive tax costs the richest Americans
only a small fraction of what everyone else pays. If the
12.4% tax (half employer, half employee) were assessed on the
full $3.84 trillion claimed by the richest 10% in 2006
(instead of on $1.43 trillion: $110,000 times 13 million
payees), an additional $300 billion in revenue would have
7. Estate Tax: $100 billion
A repeal of the estate tax, which is designed to impact only
the tiny percentage of Americans with multi-million dollar
estates that have never been taxed, would cost the nation
about $100 billion per year.
The total surpasses $3 trillion. The figures may be on the
high end, and there may be some overlap, and wealthy
Americans may argue that much of it is legal. But the system
of loopholes and deductions and exclusions is a statement by
the rich that they don't have to pay for their lopsided share
of benefits, and that middle-income Americans should give up
their own earned benefits to pay the country's bills.
And if tax avoidance is legal it's because the people with
money have redefined 'legal.'
[Paul Buchheit is a college teacher, an active member of US
Uncut Chicago, founder and developer of social justice and
educational websites (UsAgainstGreed.org, PayUpNow.org,
RappingHistory.org), and the editor and main author of
"American Wars: Illusions and Realities" (Clarity Press). He
can be reached at [log in to unmask]]
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