Distribution of Income Tax Noncompliance

Source: Andrew Johns – Internal Revenue Service and Joel Slemrod – University of Michigan, September 12, 2008

From the Citizens for Tax Justice:
A new report by Joel Slemrod of the University of Michigan and Andrew Johns of the IRS finds that more income is hidden from the IRS by higher-income people. The report uses data from the National Research Program (NRP) Individual Income Tax Reporting Compliance Study for the 2001 tax year. This is the same data that was used to produce the famous conclusion that the tax gap (the difference between taxes owed and taxes paid) for that year was $290 billion. The authors supplement this data with estimates of additional unreported income by the IRS. They find that people whose real adjusted gross income (AGI) is between half a million and a million dollars fail to report 21 percent of their income on average. By contrast, those with real AGI between $40,000 and $50,000 fail to report just 7 percent of their income.

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