Beautiful Virgin Islands

Thursday, Oct 30, 2025

The richest 1 percent dodge taxes on more than one-fifth of income

The richest 1 percent dodge taxes on more than one-fifth of income

The richest Americans are hiding more than 20 percent of their earnings from the Internal Revenue Service, according to a comprehensive new estimate of tax evasion, with the top 1 percent of earners accounting for more than a third of all unpaid federal taxes.
That’s costing the federal government roughly $175 billion a year in revenue, according to the findings by a team of economists from academia and the IRS.

The data comes as Senate Democrats consider raising taxes on the ultrawealthy to reduce inequality and fund their legislative priorities. President Biden, in a sharp reversal from his predecessor, has signaled that he wants to raise taxes on the wealthy, corporations and estates.

The researchers say that years of IRS funding cuts, combined with the increased sophistication of tax evasion tactics available to the rich, have made shirking tax obligations easier than ever. And they say that these estimates probably understate the true extent of tax evasion at the top of the income spectrum.

To catch tax cheats and measure evasion, the IRS randomly audits returns. But such reviews turn up very little evidence of evasion among the extremely wealthy, in part because the rich use sophisticated accounting techniques that are difficult to trace, such as offshore tax shelters, pass-through businesses and complex conservation easements.

The IRS attempts to correct for this through a number of statistical methods. But the new study finds that even the IRS’s standard corrections underestimate the true extent of tax evasion among the rich.

The researchers were able to demonstrate this after the IRS and Justice Department initiated a crackdown on tax evasion in 2008. That effort led to the creation of the Offshore Voluntary Disclosure Program, which allowed taxpayers to disclose previously hidden offshore assets and pay a penalty in exchange for immunity from prosecution. According to the IRS, tens of thousands of taxpayers took advantage of the program before it shut down in 2018.

Hundreds of those taxpayers, as it turns out, had also been randomly audited before the creation of the program. The researchers matched those audits with the subsequent disclosures, and found that IRS auditors missed the offshore assets roughly 93 percent of the time.

These riches sheltered overseas, moreover, were concentrated almost exclusively among the very top earners.

The study also uncovered evidence of widespread underreporting of income among proprietors of pass-through businesses, whose revenue is taxed on their owners’ returns. “Up to 35% of the income earned at the top is not comprehensively examined in the context of random audits,” the authors found.

Factoring in underreporting from overseas tax shelters and pass-through businesses alone, the authors produced an estimate of the true distribution of tax evasion in the United States. Taxpayers in the bottom half of the income spectrum evade taxes on around 7 percent of their income. Among the top fifth of taxpayers, however, avoidance rises to around 10 percent.

But evasion peaks among the richest 5 percent, who have an income of at least $200,000 and who, as a cohort, capture more than one-third of total national earnings. Taxpayers in this group hide more than 20 percent of their income from tax collectors.

In total, nearly $1 out of every $12 earned in the United States is sheltered from federal income taxes because of the sophisticated evasion techniques of people earning more than $200,000 a year.

“The IRS needs a lot more resources from Congress,” said Daniel Reck, a lead author of the study, via email. He said the agency should “invest in more comprehensive examination strategies, involving audits of individuals, pass-through businesses, and other private entities (charities, trusts, etc.). It needs to hire and train large numbers of experts to conduct those more comprehensive examinations.”

“They can absolutely do all of this, but budget cuts have severely curtailed their ability to do it,” he added.

Since 2010, total funding for the IRS fell by about 20 percent, according to recent congressional testimony by IRS Commissioner Charles Rettig. The number of enforcement staff employed by the agency fell 30 percent over the same period.
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
UK and Vietnam Sign Landmark Migration Deal to Fast-Track Returns of Irregular Arrivals
UK Drug-Pricing Overhaul Essential for Life-Sciences Ambition, Says GSK Chief
Princesses Beatrice and Eugenie Temporarily Leave the UK Amid Their Parents’ Royal Fallout
UK Weighs Early End to Oil and Gas Windfall Tax as Reeves Seeks Investment Commitments
UK Retail Inflation Slows as Shop Prices Fall for First Time Since Spring
Next Raises Full-Year Profit Guidance After Strong Third-Quarter Performance
Reform UK’s Lee Anderson Admits to 'Gaming' Benefits System While Advocating Crackdown
United States and South Korea Conclude Major Trade Accord Worth $350 Billion
Hurricane Melissa Strikes Cuba After Devastating Jamaica With Record Winds
Vice President Vance to Headline Turning Point USA Campus Event at Ole Miss
U.S. Targets Maritime Narco-Routes While Border Pressure to Mexico Remains Limited
Bill Gates at 70: “I Have a Real Fear of Artificial Intelligence – and Also Regret”
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Saudi Arabia Unveils Vision for First-Ever "Sky Stadium" Suspended Over Desert Floor
Amazon Announces 14 000 Corporate Job Cuts as AI Investment Accelerates
UK Shop Prices Fall for First Time Since March, Food Leads the Decline
London Stock Exchange Group ADR (LNSTY) Earns Zacks Rank #1 Upgrade on Rising Earnings Outlook
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
Essentra plc: A Closer Look at a UK ‘Penny Stock’ Opportunity Amid Market Weakness
U.S. and China Near Deal to Avert Rare-Earth Export Controls Ahead of Trump-Xi Summit
Justin time: Justin Herbert Shields Madison Beer with Impressive Reflex at Lakers Game
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
Giuffre’s Memoir Alleges Maxwell Claimed Sexual Act with Clooney
House Republicans Move to Strip NYC Mayoral Front-Runner Zohran Mamdani of U.S. Citizenship
Record-High Spoiled Ballots Signal Voter Discontent in Ireland’s 2025 Presidential Election
Philippines’ Taal Volcano Erupts Overnight with 2.4 km Ash Plume
Albania’s Virtual AI 'Minister' Diella Set to 'Birth' Eighty-Three Digital Assistants for MPs
Tesla Unveils Vision for Optimus V3 as ‘Biggest Product of All Time’, Including Surgical Capabilities
Francis Ford Coppola Auctions Luxury Watches After Self-Financed Film Flop
Convicted Sex Offender Mistakenly Freed by UK Prison Service Arrested in London
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
×