Comment of the Day: Total US tax receipts are 16% of GDP– down from 20% in 2001. The US is one of the least taxed countries in the developed world.

This comment was attached to an article in the New York TImes. The article points out that some $570 billion dollars in taxes are not collected each year in the United States, in part because the IRS has been systematically starved of funds for enforcement. The agency has been “increasingly unable to detect or address blatant tax cheating by high-income filers and the largest businesses. In February, the IRS commissioner, Charles P. Rettig, told Congress that about $570 billion in taxes owed in 2018 were not paid. That tax gap is projected to total about $7.5 trillion over this decade.”

“From 2010 to 2019, lawmakers cut the IRS enforcement budget by more than 20 percent. But Mr. Biden and the Treasury Secretary, Janet Yellen, have pledged to rebalance tax enforcement, and this spring presents a chance to deliver. Any responsible recovery package would include a multiyear stream [of revenue] for rebuilding the IRS. Fully funding the agency would defeat tax cheats while raising revenue for critical investments. It would help the overwhelming majority of Americans who want to pay whatever they owe. It would help honest businesses better thrive and compete. And restaffing the IRS through restored funding would help fight corruption and strengthen the rule of law.”

“… the wealthiest are the prime beneficiaries of the status quo. Estimates suggest that the top 1 percent of filers account for [between 28 and 70 percent of the uncollected taxes]… The wealthiest households and the largest businesses often use a complex maze of financial arrangements and offshore entities that make it incredibly hard and time-consuming for the IRS to untangle what taxes are owed but not paid.”

We should note here that most wage-earners pay their full assessed share of taxes by virtue of money with-held from their paychecks automatically by their employers, whereas those with independent sources of income are free to keep all of their receipts if they wish, especially if they fail to report their income or use a “dodge” to avoid paying– an incentive to cheat on their taxes.

The Comment, by “Mike” of Tucson:

(One important point, not mentioned in the article, is that we are not heavily taxed in this country.)

1. Total US tax receipts (federal, state, local, excise, and social insurance) as a percent of GDP is one of the lowest in the OECD (Organization for Economic Co-operation and Development: 37 of the richest nations in the world) with only two nations lower, one being Mexico.
2. Federal tax receipts as a percent of GDP have fallen from 20% in fiscal year 2001 — which was the last time we had a budget surplus — to 16% today.
3. Corporate tax receipts are at historic lows at 1.1% of GDP, down almost half from 2001 and only 1/3 of the OECD average.

We are not a highly taxed country by any measure.

(personal note to explain lack of recent posts: I have been seriously ill– not with COVID– and am not fully recovered. New posts will appear on an as-able basis. Fortunately, I have been recently vaccinated against the dread virus.)

(photo by steve buissinne courtesy of pixabay.com)