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Paul Buchheit
NationofChange / Op-Ed
Published: Monday 7 January 2013
If tax avoidance is legal it’s because the people with money have redefined ‘legal.’

Tax Avoidance On the Rise: It’s Twice the Amount of Social Security and Medicare

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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 percent 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 percent 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 percent. That's a return of $480 to $720 billion.(d) The 20 percent to 35 percent tax loss amounts to a minimum of $96 billion, a maximum of $252 billion. 

4. Corporate Taxes: $250 billion 

For over 20 years, from 1987 to 2008, corporations paid an average of 22.5 percent in federal taxes. Since the recession, this has dropped to 10 percent—even though their profits have doubled in less than ten years. The missing 12.5 percent 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 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 the12.4 percent 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 been realized. 

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. 

Conclusion 

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.'



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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 (UsAgainstGreed.org, RappingHistory.org, PayUpNow.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

Nation Wide Sales Tax On All

Nation Wide Sales Tax On All Products and Services. Forces Illegal Immigrants to pay their fair share as well. They use our roads, they get govt assistance, they use our hospitals, infrastructure, Incarceration into our Prisons, Jails, Deportation Costs, Medical, etc, etc,. It's about time they were accounted for.

This also forces the rich to pay a little more in taxes on "everything" they buy.

Oh so you think illegal

Oh so you think illegal immigrants don't pay taxes? You must be with the 48% of Americans don't pay taxes camp.

Oldhat, I have said for over

Oldhat, I have said for over a decade that Progressives will one day embrace flatter and simpler taxing systems for just this reason. It would help quite a bit.

The $3T figure is certainly high, but there is little doubt that a complete systemic overhaul would produce a LOT of additional income if done well. That's why this liberal/progressive Democrat has embraced the Simpson-Bowles framework. It's like turning over all the rocks and staring in wonder at all the things that sudden crawl out into the sunlight.

Until Congress is no longer

Until Congress is no longer allowed to be paid by rich folks and corporations we will never have a democracy.

If you put up with it you deserve it.

Like monopoly we quit playing

Like monopoly we quit playing long into the night because Im too drunk and tired so we quit and start a new game the next day. So why not change all of our money and our electronic transfers. This way the money overseas will be useless unless turned in and taxed. Their cash holdings would be useless unless turned in and all wire transfers would be taxed. Then get a fair use tax in for purchases and end all of the loopholes get rid of the irs it is a menacing group that is used for force. Other countries would want some of the overseas money as well as the old money would be useless so to convert us dollars to chinese yuan their would be a fee this way no one can escape the tax. Piss on a sparkplug
its that risky but necessary.

don't have to raise the taxes

don't have to raise the taxes on the wealthy, just end the loopholes, deductions and other tax avoidance legislation and let them pay their share of the tax bill.

a flat tax ?

a flat tax ?

The working class could

The working class could legally avoid paying federal income taxes because there is no law that says anyone deriving their income from exchanging their time and skills for pay has to file. However, should you voluntarily chose to file it had then damned well better be correct because the laws surrounding the tax code and penalties then applies. The S.C. has ruled on this (16th) amendment several times stating no new powers of taxation are enshrined therein, letting workers off the hook! Maybe if all the workers in America didn't file they would get some attention???

Interesting. One way to

Interesting. One way to camouflage the unfairness in (and thus inefficiency of) our tax system is to make it so complicated that no one (with the possible exception of conjurers, crooks, and corporate lawyers) can understand it. What goes in, who pays, what comes out, who benefits. It's all smoke and mirrors. If this system doesn't lead to a taxpayer revolt, and soon, nothing will.

This does not surprise me at

This does not surprise me at all. Given the way government handles such things, unfortunately, if a "solution" is ever enacted into law, it will probably involve hiring additional IRS agents to police the proceeds of garage sales.

1] so he wants to do away

1] so he wants to do away with eic,standard deduction, child care credit?
2]rangel ,gaither,daschle,peeloski
5] chase financial transactions oversea [make 3+4 more attractive]
6]phony amount but removing cap is feel good move
7] do away with captive charities deductions

So why is this allowed to

So why is this allowed to happen and why isn't one elected official telling the American public the truth? Are they not supposed to protect the people who has elected them? Seems like there trying to protect someone and its not John Q Public. All we hear is social security and medicare and medicaid are the problem and that has to be cut to save everything. not one mention of those things you listed. Is there anyone in the House,Senate or Congress with the stones to say to the public what is really wrong?

Has anyone done research on

Has anyone done research on the $32 trillion parked in offshore accounts to determine who are the owners, how much of that is windfall from Bush tax cuts , how much of that is tax avoidance by the 1%? Why is the FBI not investigating that pot of money?

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