Opinion: Jack Liu: How to get the rich to pay their taxes

This is what happens to the US government. Every year, hundreds of billions in taxes The outstanding debts are not paid, and this “tax gap” leaves fewer resources to pay our country’s bills. Most workers, whose employers withhold taxes and report their income, pay what they owe. It is very disproportionate rich People who find creative, sometimes illegal, ways out that door. And they get away with it, in part, because Department of Internal Revenue He lacks the resources to pursue them.
As part of a plan to rebuild the IRS after a decade of decline, President Biden has a reasonable idea solution: Require financial institutions to report additional information about taxpayers, which can then be used by the IRS to determine who may be evading taxes.
This requirement will be straightforward, and the additional burden on the banks will be minimal. Banks will simply add the two numbers they already have—the total annual inflows and outflows for each account—to an existing form that they submit to the IRS. Individual taxpayers won’t need to do anything, no details Transaction data will be shared.

Reporting this data is critical because it gives the IRS an alert when the taxpayer’s true financial position—as reflected in overall account flows—different from what was reported.

Third Party Reports – Independent information that helps the IRS verify tax returns – Increases tax compliance from less than 50% to more than 95%. For the wealthiest taxpayers, income often falls outside current reporting streams. This is the single largest source of the tax gap low vision income, such as royalties, capital gains and certain types of Commercial income, which flows disproportionately to the wealthiest nation. Roughly one-fifth to half of that income goes Unreported, so having vision is essential to fill this deficiency.
These additional reports are necessary to activate the IRS. the number of auditors Checking returns have been greatly reduced over the years, less than 1% of the partnership (such as LLCs) are audited every year. But it needs investments to rebuild the audit staff and upgrade old computers It can only achieve its full potential if paired with the right information.
Improved reporting also addresses severe economic and racial inequalities in tax enforcement. Complicated returns for high-income taxpayers can be reviewed hundreds of hours for each return. With not enough staff, and no clue as to where to target audits, tax authority About to check a low paid worker Who receives the earned income tax credit as someone in the top 1%, even if the amount at risk is much lower.

It’s infuriating that the wealthy, who are more likely to avoid paying taxes, get a pass so often. Improved reporting, along with more agents trained in deciphering complex tax returns, will allow the IRS to target sophisticated enforcement actions rather than focus on low-income taxpayers.

Lobbyists who want to protect the status quo argue that improved reporting will discourage people of color from using the banking system. These allegations are false. They ignore that the policy is carefully designed to protect privacy and places no burden on individuals, in fact it will raise revenue to pay for initiatives that encourage families of color to become bankers. For example, monthly child tax credit payments can be deposited directly into bank accounts.

Better tax enforcement will advance the interests of honest taxpayers, who deserve to know that others are paying what they owe, and honest business owners, who face unfair competition from tax cheaters. This is why there is a bipartisan group of ex-treasury secretaries, including myself, make friends He. She.

Congress must adopt this important ruling. Doing so will generate significant revenue and create a more equitable tax system, where all people – not just ordinary American workers – pay what they owe.

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