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Paul Buchheit
NationofChange / Op-Ed
Published: Monday 27 August 2012
“The IRS estimates that 17 percent of taxes owed were not paid, leaving an underpayment of $450 billion.”

Add It Up: Taxes Avoided by the Rich Could Pay Off the Deficit

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Conservatives force the deficit issue, ignoring job creation, and insisting that tax increases on the rich wouldn't generate enough revenue to balance the budget. They're way off. But it takes a little arithmetic to put it all together. In the following analysis, data has been taken from a variety of sources, some of which may overlap or slightly disagree, but all of which lead to the conclusion that withheld revenue, not excessive spending, is the problem. 

1. Individual and small business tax avoidance costs us $450 billion.

The IRS estimates that 17 percent of taxes owed were not paid, leaving an underpayment of $450 billion. In way of confirmation, an independent review of IRS data reveals that the richest 10 percent of Americans paid less than 19% on $3.8 trillion of income in 2006, nearly $450 billion short of a more legitimate 30% tax rate. It has also been estimated that two-thirds of the annual $1.3 trillion in "tax expenditures" (tax subsidies from special deductions, exemptions, exclusions, credits, capital gains, and loopholes) goes to the top quintile of taxpayers. Based on IRS apportionments, this calculates out to more than $450 billion for the richest 10 percent of Americans. 

2. Corporate tax avoidance is between $250 billion and $500 billion.

There are numerous examples of tax avoidance by the big companies, but the most outrageous fact may be that corporations decided to drastically cut their tax rates after the start of the recession. After paying an average of 22.5% from 1987 to 2008, they've paid an annual rate of 10% since. This represents a sudden $250 billion annual loss in taxes. Worse yet, it's a $500 billion shortfall from the 35% statutory corporate tax rate. 

3. Tax haven losses range from $337 billion to $500 billion.

The Tax Justice Network estimated in 2011 that $337 billion is lost to the U.S. every year in tax haven abuse. It's probably more. A recent report placed total hidden offshore assets at somewhere between $21 trillion and $32 trillion. Using the lesser $21 trillion figure, and considering that about 40% of the world's Ultra High Net Worth Individuals are Americans, and factoring in an annual 6% stock market gain based on historical records, the tax loss comes to $500 billion. 

4. That's enough to pay off a trillion dollar deficit. Reasonable tax changes could pay it off a second time:

(a) A non-regressive payroll tax could produce $150 billion in revenue.

Get ready for some math. The richest 10% made about $3.84 trillion in 2006. A $110,000 salary, which is roughly the cutoff point for payroll tax deductions, is also the approximate minimum income for the richest 10%. A 6.2% tax paid on $1.43 trillion ($110,000 times 13 million payees) is about $90 billion. The lost taxes on the remaining $2.41 trillion come to about $150 billion. 

(b) A minimal estate tax brings in another $100 billion.

The 2009 estate tax, designed to impact only the tiny percentage of Americans with multi-million dollar estates that have never been taxed, returns about $100 billion per year. 

(c) A financial transaction tax (FTT): up to $500 billion.

The Bank for International Settlements reported in 2008 that annual trading in derivatives had surpassed $1.14 quadrillion (a thousand trillion dollars!). The Chicago Mercantile Exchange handles about 3 billion annual contracts worth well over 1 quadrillion dollars. One-tenth of one percent of a quadrillion dollars could pay off the deficit on its own. 

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. 

Add it all up, and we've paid off the deficit, almost twice. More importantly, the avoided taxes and a few other sensible taxes could provide sufficient revenue for job stimulus without cutting the hard-earned benefits of middle-class Americans.

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ABOUT Paul Buchheit

Paul Buchheit is a college teacher with formal training in language development and cognitive science. He is the founder and developer of social justice and educational websites (,,, and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at

triumph181, I think you've

triumph181, I think you've hit the answer. Tax those corporations as the people that they are or claim to be.

The more money you make the

The more money you make the more responsibility you have - - - or so they say
. . . . . Governor " bully boy christe" gave 102 million dollars to help a multi-national - - multi billion dollar corporation Panasonic to help it move from Secaucus - to Newark NJ.....Do anyone believe that they will be hiring skilled Americans or Foreign Trained Professions ( gee - what's that loophole - you know the immigration loophole that allows it.....can't hire un skilled Americans - Won't Pay to train them........HIRE FOREIGN....

American Values -

American Values - responsibilities ???

“The subjects of every state

“The subjects of every state ought to contribute toward the support of the government in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state." Adam Smith. Wealth of Nations 1776

reminds me of a refrain I

reminds me of a refrain I heard on one of the streets in NYC:
'The Middle Class can kiss
I'm in the Upper Class at last"
they sang with a chuckle!

NONSENSE. The numbers DO NOT

The numbers DO NOT add up. See for yourself in this video "Eat the Rich":
You could tax the rich to the brink of destruction and beyond and it would still fall short of supporting the current spending levels.
Massive cuts & deregulation are needed accross the board.

@SKYBLUE From your video...

From your video... "Many of us on the right know that the left only wins when they find one isolated sob story and sell that". He then proceeds to talk about paying the 2011 budget only with money from the very rich, using anecdotes. What problems do you have with this article? They're talking about the difference between 2012 expenditures and revenue, and how it would be different with certain changes (e.g. capital gains NOT being taxed at a much lower rate than wages, and without tax havens). Are there specific problems you see in their math, and could you point them out to me?

Income Tax Reform. Will

Income Tax Reform.
Will Rogers said: “The difference between Death and Taxes is Death doesn't get worse every time Congress meets.”

Thomas Paine urged that “everything beyond what a man's own hands produce" was a gift that came to him simply by living in society, and hence, "he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came."

Robert Reich said “Equal sacrifice means that in paying taxes people ought to feel about the same degree of pain regardless of whether they’re wealthy or poor. Logically, this means someone earning $20 million a year should pay a much larger proportion of his income in taxes than someone earning $200,000, who in turn should pay a larger proportion than someone earning $50,000.”

Here are the facts. Data from Edward Wolff confirms that from 1983 to 2007 the percentages of net worth and financial wealth for the top 1% remained steady. But the percentages for the rest of the richest 5% increased by almost 20%, while the percentages for the lowest 80% of the population DECREASED by almost 20%
These issues are difficult to address with Congress largely on the Payroll or Bribe side of the wealthy. At the very least congress should: Eliminate the tax break on (unearned income, capital gains, interest, and deferred interest etc. etc.) The richest Americans, who own most of the stocks, should not pay a smaller tax than everyone else.

In case you haven't heard: Freedom isn't free. Just ask the rich Republicans who seem to think it's fair that millionaires and billionaires get big tax breaks not available to middle class working families. After all according to the Rich and Powerful, "Earned Income" is for losers; winners have "Capital Gains" to keep them warm. So what if losers pay a higher rate of tax than winners. Somebody has to pay for all that freedom they…uh, I mean we…enjoy.

I say that any Income Tax Reform that continues to allow for Exceptions, Exemptions and Deduction will never be Fair and Equal. Too many Tax loopholes exist through which the Top 5.0% of American Tax-Payers the “Rich and Powerful” Individuals and Corporations, Companies, Institutions and Organizations squeeze through and pay NO TAXES.

Even if we made the INCOME TAX RATE on every individual who made over one million dollars be 99%, with the use of the Exceptions, Exemptions and Deductions [that Congress has and would create] they would not pay taxes.

The Entire Income Tax Code MUST Be Repealed and Replaced. By the elimination of ALL the EXCEPTIONS, EXEMPTIONS, and DEDUCTIONS and by making every source of Income [Wages, Bonuses, Benefits, Interest Earnings, Dividends, Deferred Gains, Deferred Interest and Capital Gains and any other Earnings or Gains] be subject to the same Tax Code and Rate no matter How it was earned, Where it was earned, or What it was earned from.

PLEASE note that the implementation of this Tax Code would significantly reduce the size of the IRS, reduce the amount of time to prepare your Taxes, and sorry to say it, but it gets rid of the need for Tax Preparation Companies.

The official numbers for people in Poverty or what the Federal Government say is the Poverty Income level doesn’t tell the full story. The situation of the poor is actually considerably worse than the Government reports. The official poverty line is calculated as simply three times the minimal food budget first introduced in 1959, and then adjusted for inflation in food costs. In other words, the American poverty threshold takes no account of the cost of housing or fuel or transportation or health-care costs, all of which are rising more rapidly than the cost of basic foods. So the poverty measure grossly understates the real cost of subsistence.

Proposed Poverty Income Taxes:
[1.0] Income earned from $.01 to $13,537.00 for a family of one would pay Zero Tax Rate.
[2.0] Income earned from $.01 to $23,689.00 for a family of two would be Zero Tax Rate.
[3.0] Income earned from $.01 to $30,478.00 for a family of three would be Zero Tax Rate.
[4.0] Income earned from $.01 to $37,267.00 for a family of four would be Zero Tax Rate.
[5.0] Income earned from $.01 to $44,056.00 for a family of five would be Zero Tax Rate.
[6.0] Income earned from $.01 to $50,845.00 for a family of six would be Zero Tax Rate.
[7.0] Income earned from $.01 to $57,634.00 for a family of seven would be Zero Tax Rate.
[8.0] Income earned from $.01 to $64,423.00 for a family of eight would be Zero Tax rate.

For those who are not in the Proposed Poverty Income Level the Tax Rates would be 25.0%.

I would also create a Financial Transaction Fee of $ .25 on each and every Financial Transaction, to generate from $1 to $3 Trillion in Revenue to “Reduce the Deficit and to Invest in our future, our Infrastructure and our middle class.”

U.S. Corporate Income Taxes that were actually paid (the effective rate) fell to a 40 year low of 12.1 percent in fiscal year 2011, despite corporate profits rebounding to their Pre-Great Recession heights. The United States of America both tax its Corporations less and raise less in revenue from corporate taxes than its foreign competitors.

Therefore; under my Corporate Tax Rate Corporations would pay 15.0% Income Tax Rate with NO Exceptions, No Exemptions and the NO Deductions. Or they can pay the same Tax Rates as an Individual, seeing as the Supreme Court has ruled they have the same Right to Freedom of Speech, therefore they should have the same Right to pay the same Income Tax Rates. Corporations should not make Business decisions based upon the Income Tax Loop-holes; they should be based on what is the best thing for the Corporation, Employees and the Investors. The top 500 Corporations, Companies, Institutions and Organizations within the Fortune 500, Pay No Taxes today. This Income Tax Plan would ensure that all Corporations, Companies, Institutions or for Profit Organizations that earned a Profit would PAY TAXES.

If Congress wants to provide an incentive to Corporations, Companies, Institutions or Organizations, Congress can do so by creating a Specific Tax Credit for A Specific Corporation or Company, with specified amounts and for specified time limits.

Everything is lopsided now -

Everything is lopsided now - the poorest paying the biggest percentage of taxes - which, of course, doesn't do much for the budget!
It's obvious that corporations (and their lobbyists) and the 1% are controlling the country now - and have spent the past 30-40 years de-powering the middle class, workers, unions - everything that built this country and made it great. "Reganomics" and his administration started the trend that takes from the poor and gives to the rich - and made it economically profitable for corporations to send all the jobs overseas. We've got at least a double whammy going on here - send the money overseas (jobs) and give the rich and biggest corporations (oil) the best tax breaks, and then give "welfare" (i.e taxpayer money) to the bankers! Screw the worker right and left.

Poorest paying the biggest

Poorest paying the biggest percentage of taxes??? 47% of all wage earners pay NO income tax. Ten percent of the top earners pay 70% of all taxes.

People like you keep

People like you keep repeating a lie that would be true IF you simply inserted the word "federal" before "income tax." Those 47% pay through the nose in state taxes. I have helped many low-income people with their taxes, and every one of them who pays NO federal tax may pay upwards if 17% of their incomes in state sales and property taxes, especially in states like Washington, which has no state income tax.

One section of the article covers tax havens. That's what Washington and Texas are: onshore tax havens where billionaires pay NO state income taxes. That's just like Greece, where the shipping oligarchs pay NO income taxes. And most people have no idea why Washington and Greece are in trouble. Texas has substantial income from oil, so it doesn't suffer as much as Washington, but is it any surprise that good ole boy GWB would come from Texas, where he bankrupted two oil companies before he got his first paying political job, and think tax cuts for everybody would be peachy?

That's not even including the relatively obscure fact that $35,000 of every $100,000 paid by a millionaire in state taxes is refunded to the taxpayer. The states that don't have income taxes lose out on that huge benefit, but legislators who never liked math in high school don't understand that. Only the millionaires who want to keep the whole $100,000 understand it.

Uh, hmm, these numbers don't

Uh, hmm, these numbers don't even agree with Obama's accounting people. The fact is the debt exceeds 16 trillion dollars. Heard that number before? That number exceeds the total revenue produced in the US! Heck, it exceeds all the money produced in Europe. If every dollar, gold watch, swimming pool and Rolls Royce touring car that you think the "rich" have were confiscated, it wouldn't pay for the operation of the US government for a week! And the debt would still be exactly the same size. . .unreduced by even a cent!


That is correct, our debt is roughly 16 trillion dollars, but our deficit (the difference between money coming in and money going out, and what the article talks about) is 1.1 trillion (

Here, by the way, is a visualization of our debt-to-gdp:

Another thought, because

Another thought, because Citizens United states that corporations are people, what would a 1040 look like based on citizen BP, Apple or Exxon? The income taxes would take care of the deficit in a flash.

China would execute these tax

China would execute these tax evaders. Not a bad idea considering the harm they are doing to their fellow man. We don't have to be that drastic but very long prison sentences and confiscation of all their wealth is not unreasonable. Those in office taking bribes (or the equivalent of) need severe punishment. Just allowing it to happen without any gain is as bad. What would anyone do to a thief that takes food from your table or the roof over your head, not to mention your livelihood. These tax evaders are doing that to our entire middle class and more. Stand up people.

Btrwy, excellent idea except

Btrwy, excellent idea except that the oversight is in the hands of the perpetrators. At some point the mobs with pitchforks will probably be the cure to the current situation.

Well said! We really need to

Well said! We really need to pressure Washington to force the corporations and wealthy of this country to pay their fair share. "trickle down" is the biggest con job ever served to the public in the past few decades.

All great ideas it is just so

All great ideas it is just so damed hard to get a change for the better. We ought to identify tthe money overseas and have an overseas tax on that money if youdont like it denounce your citizenship and move somewhere else we wont miss them anyway. The ftt tax is a good idea because as most laws the rich will twist the law to their favor. Increase the tax on imports from all countries Walmart does so why cant we as our nation crumbles we need more funds thats a fact. If that does not work then the wealthy must come to realize a revolt will cause greatfinancial harm. Starting a county and State bank will let the wealthy know that we are seriously going to get rid of the old ways and start new. Why should our schools owe the high interest our goverment owe high interest every citizenowes high interest it is just to lopsided.

The awful truth is that the

The awful truth is that the deficit is a bogus "creation" by the 1% who have the ability, the funds and the knowledge to pay it off without losing sleep but won't. Why not? Because having a deficit serves their purposes. What purposes? If I were part of the 1%, I could tell you; but I'm just one of millions of "David" fighting "Goliath." Overthrow possible? You bet. Overthrow likely? That's up to all the Davids out there exercising their rights. Rock the vote.

How would our nation's budget

How would our nation's budget look if we had had any political will to prosecute and fine the perps that brought us the mortgage meltdown. How things might be different had Blankfein or Dimon or any of their ilk had been made to do a lengthy stay in a Federal prison. Just reversing w's tax cuts and the fines for the scum that runs the "too big to fail" Wall St. crime syndicates would produce some real results, at least for a little while.

AMEN. There is not one

AMEN. There is not one person in this country who makes less than $75,000 a year in this country who would get away with what those fat cats on Wall Street just got away with!

Long federal prsion sentences

Long federal prsion sentences could go a long way in motivating the filthy rich to pay their fair share of taxes.

When our corrupt Treasury Secretary Timothy Geithner's nomination was allowed to proceed after it was revealled that he was a serial tax evader who failed to even file income tax returns during the Bush/Cheney years when he was president of the NY Federal Reserve Bank and Asst. Treasurt Secretary. we should have handled it like our Founding Fathers would have.

Money is created by

Money is created by governments. Money is given value by governments. Governments, at least ours is an enpowerment of the peoples will. Therefore money is public property service provide to the people by the people. A simple use fee or use tax per dollar for the use of a public property service would be the fairest of solutions. The more money you use, the more use fee/tax you pay. So to say that person making $10,000 a year pays the same use fee/tax percentage as a person making $1 million a year as will a corporation or business that uses $1 trillion in revenues that year. Not an income tax. Simply a usage fee for the priviledge of using the peoples currency.

it sounds simple enough ...

it sounds simple enough ... dang, that would so put thousands of tax lawyers out of work though. ...

Norman Allen's picture

Who owns the $32 trillion

Who owns the $32 trillion offshore accounts that don't pay any taxes? Isn't that the stolen money from dotcom bust, the mortgage bust and the oil wars? Concentrate on that money and you got the traitors, the schemers, the thieves of the society. After sifting through the accounts, bring the holders to public trial and get the people's money back from them.

Norman Allen, The problem is

Norman Allen, The problem is who's policing any of this? Certainly not our Government!

I'm voting for you for

I'm voting for you for president!

Well, of course they could...

Well, of course they could... If we had maintained the tax structure from the Clinton era, our national debt would have been paid off by now. And that's not even including closing loopholes for the wealthy and big corporations, that's just getting rid of his tax cuts for the wealthy.

NHsolarguy, That tax rate and

NHsolarguy, That tax rate and the elimination of the Debt didn't sit well with the rich and they made sure that their guy got in, via hanging chad and other questions of Florida voting, and changed things around. In the mean time, their guy also got to appoint some Supreme Court Justices that would do their bidding and now we're in the pickle we're in.

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