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Thursday, February 16, 2006

Who Cheats the Most on Taxes?

A new IRS report on tax cheating, the first in fifteen years, looks at which groups cheat the most on taxes and how much revenue is lost because of it:

Tax Cheating Has Gone Up, Two Federal Studies Find, by David Cay Johnston, NY Times: Historically, when income tax rates fall, so does tax cheating. But that is not what happened after President Bush started cutting taxes five years ago. A new report by the Commerce Department found ... a 37 percent increase in unreported income from 2000. In a separate report, the Internal Revenue Service looked at both unreported income and improper deductions and concluded that Americans shortchanged the government by $345 billion in 2001 — an amount almost equal to the projected federal budget deficit for 2007. ...

The I.R.S. report concluded that proprietors of small businesses, investors and farmers cheated the most. Workers who had 99 percent of their wages reported to the government and taxes withheld from their paychecks were the least likely to cheat. Mr. Everson acknowledged that the estimate is probably low ... The biggest single revenue loss came from proprietors of unincorporated businesses ... who shorted the government an estimated $68 billion in 2001. Cheating by partnerships, most of whose members are wealthy professionals or investors, was put at $22 billion, while cheating by landlords and those collecting royalties was estimated at $13 billion. In percentage terms, farmers cheated the most ... failing to pay the government $6 billion, or 72 percent of the taxes they should have.

    Posted by on Thursday, February 16, 2006 at 01:14 AM in Economics, Taxes | Permalink  TrackBack (0)  Comments (8)

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