NEW YORK, March 22 (Xinhua) -- The top sliver of high-income Americans dodge significantly more in income taxes than the U.S. Internal Revenue Service's (IRS) methods had assumed, U.S. media cited forthcoming estimates from IRS researchers and academic economists to report on Monday.
Overall, the top 1 percent of households fail to report about 21 percent of their income, with 6 percentage points of that due to sophisticated strategies that random audits do not detect; for the top 0.1 percent, unreported income may be nearly twice as large as conventional IRS methodologies would suggest, The Wall Street Journal on Monday quoted the estimates as saying.
These strategies include offshore tax avoidance, which may have waned after stricter reporting requirements took effect about a decade ago. But many high-income Americans also use partnerships and similar entities to avoid taxes, and such a behavior may be increasing and becoming harder for tax authorities to find and untangle, said Daniel Reck, an assistant professor of economics at the London School of Economics, who is the estimates' lead non-government author.
"Such pass-through businesses -- where income passes directly onto their owners' individual tax returns and isn't taxed at the corporate level -- are a large and increasingly important part of the wealth of the top 1 percent, particularly the top 0.1 percent," said the report. Investment funds, real-estate businesses and closely held family firms across industries are often structured as partnerships.
IRS Commissioner Charles Rettig briefly referenced the research -- slated for release on Monday as a National Bureau of Economic Research working paper -- in congressional testimony last week as he urged lawmakers to give the agency more money for enforcement.
"It is not just a body count of how many people we have in enforcement," Rettig said, contending that each additional dollar spent on tax enforcement could yield five to seven U.S. dollars in revenue. "We need to have specialized agents." Enditem