A 1% Tax Whopper!

I don’t need to tell you that Republicans govern exclusively for the benefit of millionaires, billionaires and corporate criminals.  They always have excuse for why they should raise YOUR taxes to cut them even more for the one percent.  This one is a whopper.  They say that the rich should pay less because, otherwise, they will cheat more on their taxes.  Really!  I’m not kidding!  However, like their claims on virtually everything else, Republicans are lying about this too.

Any tax system that subjects rich people to high taxes is asking for trouble. Or so the politicians who cater to people of means incessantly argue. The higher the tax rate on high incomes, the argument goes, the greater the incentive the rich have to waste time and energy figuring out ways to evade paying taxes.

“Conservatives tend to talk about noncompliance as if it were solely a function of tax rates,” as former Reagan administration policy aide Bruce Bartlett noted last week, a perspective that makes tax evasion “yet another excuse to cut taxes.”

In 2001 and then again in 2003, that convenient excuse helped the Bush White House chop away at the taxes the IRS expects rich people to pay. The tax rate on top tax-bracket income slipped from 39.6 to 35 percent, and the rates on capital gains and dividends both dropped to 15 percent, from 20 and 39.6 percent.

According to rich people-friendly right-wing ideology, these cuts should have boosted tax compliance, since, as Bartlett points out, “the return to evasion fell.”

What did happen? Tax evasion between 2001 and 2006, a new IRS study documents, actually increased. In 2001, $290 billion in individual and business taxes due went uncollected. In 2006, $385 billion.

Need some context for all these billions? The 2006 federal budget deficit red ink totaled $248 billion. If the IRS had been able to collect every dime cheating taxpayers cost Uncle Sam in 2006, the federal treasury would have ended the year $137 billion in the black.

Who’s doing all this tax cheating? Not average Americans.

Average Americans get most of their income from wages and salaries. Almost all this income faces paycheck withholding. The result: Only 1 percent of the taxes due on wages and salary, the new IRS study reports, goes uncollected.

Rich Americans, by contrast, collect huge chunks of their annual income from capital gains, business ownership, and other sources of income that face neither rigorous reporting mandates or withholding.

Tax evasion for the income category that includes capital gains and private equity partnerships, the IRS calculates, ran at an 11 percent rate in 2006, ten times the evasion rate for wages and salaries… [emphasis added]

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There you have it.  When Crawford Caligula lowered the tax rates for the 1%, they became more likely to cheat, not less.  If Republicans expect us to accept their rationale, we should raise their taxes, to decrease their cheating.  The Buffet Rule is an excellent start!  Frankly, I don’t think it makes the 1% more or less likely to cheat.  This smokescreen is just a 1% Tax Whopper from the Republican Party.