In testimony before a hearing of the Senate Finance Committee on April 13, Internal Revenue Service Commissioner Charles Rettig said that the United States is losing approximately $1 trillion in unpaid taxes every year, maintaining that the agency currently lacks the resources to investigate and catch tax cheats.
The last official IRS estimate found that an on average $441 billion in taxes went unpaid every year between 2011 and 2013. Commissioner Rettig told the senators that these unpaid taxes are primarily the result of deliberate evasion by America’s wealthiest citizens and large, profitable corporations. The Biden administration has proposed increasing the IRS budget by 10.4 percent in order to hire the staff needed to better monitor and audit the tax returns of high-income individuals and corporations.
Between The Lines’ Scott Harris spoke with Chuck Collins, director of the program on Inequality and the Common Good at the Institute for Policy Studies. Here, he talks about his new book titled, “The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions,” which outlines the loopholes and other schemes used by the rich to avoid paying their taxes, while offering policy solutions to recover lost revenue.
CHUCK COLLINS: At the global level, the estimate is that there’s as much as $36 trillion hidden in offshore tax havens, trusts, shell companies by the wealthiest people in the world and what they call the ultra-high net worth folks, the people with $30 million or more. And in the U.S. it’s, you know, it’s pretty acute. We’re kind of now that one of the global centers for people bringing their money, not just wealthy people from the U.S. But from around the world, bring their wealth here.
But the real problem, Scott, is when wealthy people don’t pay their fair share, then it shifts the bill to everybody else. And even during the pandemic, we’re seeing more and more wealthy people moving their money into trusts and kind of slipping it into the shadows so that the rest of us are going to have to pick up the cost of the pandemic recovery. So that’s the biggest problem.
SCOTT HARRIS: How does tax avoidance directly or indirectly contribute to rising inequality here in the U.S.?
CHUCK COLLINS: Well, one way to think about it is to compare it to the 30 years after World War II, when wealthy people paid a much higher percentage of their income and wealth in taxes, and we used that revenue to make investments in infrastructure and affordable housing and access to education that helped build a middle-class, particularly a white middle-class, which benefited from some of those programs. So, you know, there’s one model which is wealthy people pay their fair share of taxes, and we use that revenue to create an opportunity society so other people can have opportunities, including the opportunity to be rich.
And then now we’ve been living through 40 years of the opposite, which is the middle-class is imploding, wages have been flat, more and more people are pushed into kind of economic precariousness and huge amounts of the income and wealth gains have floated upward. So it’s really the mirror alternative, really, to a society where people have opportunity and the middle-class is growing.
SCOTT HARRIS: Well, Chuck, what are some of the solutions you propose in your book and what is being debated now by the Biden administration and Congress to force the super-wealthy in this country to pay their fair share?
CHUCK COLLINS: Yeah. You know, I mean, what we’re talking about is incredibly relevant right now. First of all, President Biden has proposed beefing up enforcement on the wealthy. So he’s proposed an $80 billion investment over the next 10 years to put more agents on the beat who understand how these sophisticated tax dodges work and that’s really what’s necessary. So that’s very much in discussion and there are bold proposals to restore taxes on the rich income taxes and new taxes on wealth, like Sen. Elizabeth Warren’s wealth tax. Sen. Bernie Sanders has put forward a fix to the estate tax, which is our inheritance tax. And people always talk about the death tax and how terrible it is. Let’s be clear, no individual with wealth under $11 million or a couple with less than, at this point, $23 million, will pay the estate tax and it’s become porous and weak.
And Sanders has proposed fixing it and included in his bill are provisions to shut down some of these trusts, some of these loopholes, some of these transactions that people use to pretend that they’re losing money. So all those things are in motion currently being debated. I mentioned the Corporate Transparency Act passed at the end of last year, signed by President Trump, but with broad support from Republicans, law enforcement — pretty big coalition. Now we’re writing the rules for that Corporate Transparency Act and need to make sure it’s got some teeth. But all these things are happening. So the good news is we can fix the system. And, if we, the public continue to advocate and say to our elected officials, “Look, we don’t think taxes should be optional for the super rich and they should pay their fair share. And we should have a system where everybody plays by the same rules.”
Once we do that, once we start to clean up our own U.S. house, then we can join with other countries, pass treaties. But evenTreasury Secretary Janet Yellen said, “Look, let’s create a global corporate minimum income tax of 21 percent.” So no countries are being pitted against each other by corporations on “who will tax us less.” And that’s a really positive sign. So we’re, there’s a lot of things in motion, Scott, that I think if we succeed, we’ll shut this hidden wealth system down.
For more information, visit the Program on Inequality and the Common Good at the Institute for Policy Studies at Inequality.org.
