Wage Earners Scrutinized More Than Wealthy Taxpayers In US

by Mike Godfrey, Tax-News.com, Washington

10 April 2002

A New York Times article published on Monday has revealed that the US Government subjects wage-earning taxpayers to far greater scrutiny than those whose income comes from their own businesses, investments, partnerships, and trusts.

The report by David Cay Johnston, the NY Times columnist who sparked the furore over offshore incorporation a couple of months ago, alleges that tax evasion among the latter group of taxpayers is becoming more prevalent, and reveals that the Internal Revenue Service has brought the matter to the attention of Congress several times.

The newspaper conducted a series of interviews with current and former revenue officials and an examination of IRS statistics, including audit rates and staff deployment figures. The results of the investigation, according to Mr Cay Johnston, showed that the working poor are subjected to far greater scrutiny of their tax affairs, and are audited far more often than wealthy taxpayers, in whom a (perhaps unwarranted) degree of trust is placed as regards reporting of income.

Meanwhile, an Associated Press report has suggested that the US tax burden is falling increasingly on the wealthy. The article, published on Tuesday, revealed that in 1999 (the most recent year for which complete IRS statistics are available), the 6.3 million taxpayers with incomes in the top 5% paid more than 55% of all income taxes, whereas taxpayers in the bottom half of the earnings scale paid around 4% of total income taxes.

'This trend is not going to reverse,' Scott Hodge, the Executive Director of the Tax Foundation, explained to the AP. 'This will be the demographic for the 21st century taxpayer.'

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