CLOSING THE RICH TAX LOOPHOLES
Closing the rich tax loopholes. In paying for the spending proposals that President Biden wants, closing loopholes designed to allow the rich to avoid paying federal income tax is one of the pillars of the plan. To do this, Biden has proposed increasing the IRS budget by $80 billion, with an estimate that it will bring in $2.2 trillion over a decade. Biden had promised on the campaign trail to increase the corporate tax rate and his proposals do. They would return the top income tax rate to 39.6% from 37% under Trump’s Tax Cuts and Jobs Act. Individuals making over $453,000 a year and couples making more than $509,000 a year would pay a large portion of the tax. It would also raise the corporate tax rate to 28% from the current 21%, which was passed by the Tax Cut and Jobs Act. Who would end up paying this portion of the tax, not corporations. The corporations simply pass the costs on to customers, employees, and shareholders. And even though that sounds bad compared to the language of the Tax Cuts and Jobs Act, the reality of the Tax Cuts and Jobs Act is that those same corporations went on a share buyback spending spree, giving top corporate executive major bonuses, and the amount they actually spent investing in the economy, creating jobs was marginal at best. Closing the rich tax loopholes.
The $80 billion increase at the IRS will give it the needed resources to go after the tax cheats who have the largest amount of taxes owed to Uncle Sam. A recent study by economist Gabriel Zucman including IRS researchers, found that tax dodging, especially by the top 1% was a significant driver of lost revenue for the U.S. The study found the top 1% tended to underreport their income by as much as 20% to the IRS. The White House said that amounts to $175 billion annually in lost federal revenue. That’s an awful lot of money that could be used to rebuild America after the Covid crisis.