Tax Evasion: The Real Costs

Source: David Callahan, Dēmos, April 15, 2011

Tax evasion will cost the U.S. government $305 billion in 2010 and has cost $3 trillion over the past decade. It is a major contributor to budget deficits and the accumulation of national debt since 2001. Tax evasion also costs state treasuries billions of dollars. Every tax filer will pay an extra $2,200 in 2010 to make up for the funds lost to tax cheating. Even modest success in reducing tax evasion would free up significant new resources for spending or deficit reduction. Yet last week’s budget deal nixed a proposal by the Obama Administration to strengthen the IRS’s enforcement capacity….Not everyone has an equal opportunity to cheat on his or her taxes. Employees who have income withheld have fewer options for tax evasion than people who are self-employed or have complex business or financial dealings. Likewise, large corporations with foreign subsidiaries and sophisticated accounting departments have more opportunities to cheat. In all, it is wealthier Americans who are most likely to cheat on their taxes.

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