![]() crackdown on tax cheats, which was set to supply nearly one-fifth of the funding for the plan. The new agreement significantly changes how the infrastructure spending will be paid for, after Republicans balked at a pillar of the original framework: increased revenue from an I.R.S. Especially those who read the New York Times NYT story yesterday about the $1 trillion bipartisan infrastructure deal: You’d think that getting the fair share from the wealthy might be a goal on Capitol Hill. Plus, go after someone poor and how do they fight back? ![]() This is supposedly due to mistakes people make when claiming the EITC, which more than one tax expert has told me over the years is complicated and difficult to correctly file for. Accounting for tax evasion increases the top 1% fiscal income share significantly.Ĭurrently, people getting the Earned Income Tax Credit-who typically make less than $20,000 a year-are far more likely to be audited by the IRS than someone making $400,000. After correcting for this bias, we find that unreported income as a fraction of true income rises from 7% in the bottom 50% to more than 20% in the top 1%, of which 6 percentage points correspond to undetected sophisticated evasion. Consequently, random audits, which do not detect most sophisticated evasion, underestimate top tax evasion. Risk preferences and relatively high audit rates at the top drive the adoption of such sophisticated evasion technologies by high-income individuals. In our model, individuals can adopt a technology that would better conceal evasion at some fixed cost. We provide a theoretical explanation for this phenomenon, and we construct new estimates of the size and distribution of tax noncompliance in the United States.
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