Like greedy pigs rolling in slop, Democrats are holding out their hands for more tax dollars despite a surplus of hundreds of billions assessed but never collected. The problem for responsible taxpayers is that public money has no value. Lawmakers can always come back to the trough for more. Dreaming up reasons to tinker with the tax code is a lot easier than collecting what we are owed by deadbeats who make up the tax gap.
Instead of focusing resources on tax collections, White House charges of unfairness to the middle class culminated in cries to implement the Buffett Rule despite combined revenue losses from tax debt and federal overpayments that total over one-half trillion dollars.
IRS tax gap numbers show hundreds of billions still to be paid.
In January 2012 the IRS released its $450 billion gross tax gap estimate for 2006. $65 billion was deemed unrecoverable by IRS tax collections.¹ $57 billion of the tax gap came from nonpayment of the combined Social Security and Medicare self-employment tax.²
Too many taxpayers don’t like paying their self-employment tax.
Why do we have so many self-employment tax deadbeats? In 1994 the compliance rate for Social Security and Medicare taxes was 95.8-96 percent for those not self-employed, but an appalling 41.3-44.4 percent for Americans working for themselves.³
If past experience is any indication, most of the individuals who owe delinquent self-employment taxes are making far less than wealthier Americans blamed for not contributing enough and eligible to have their incomes trimmed by the president’s Buffett Rule. In 1999 the Government Accountability Office raised alarm about growing self-employment tax delinquencies. The agency reported that only 15.7 percent of those not paying their self-employment tax had incomes over $50,000 and nearly 60 percent had incomes less than $30,000.4 Despite their unpaid tax debt, we were paying out $105 million per month in either Social Security or Social Security disability benefits to these delinquent taxpayers.5 The problem persists, as seen by the uncollected self-employment taxes buried in the newest tax gap figures.
Tax gap deadbeats avoid a stain on their credit.
The 2011 fiscal year closed with $373 billion in taxes still owed to the IRS. IRS tax collections deemed $110 billion to be unrecoverable.6 Surprisingly, the IRS is legally barred from reporting tax deadbeats to credit bureaus because of federal privacy laws.7 While the wealthy pay more in taxes than any other group, tax deadbeats contribute to the federal deficit in their own unique way. In 2006 closing the tax gap would have wiped out the deficit and left us with a $50 billion surplus.8
Buffett Rule pays for social policies that demand too much from the middle class.
The Obama version of the Buffett Rule is based on the presumption of fundamental unfairness. It does not address the issue of government demanding too much from taxpayers on behalf of those who contribute little or nothing. Middle class taxpayers, some of whom are struggling to be self-employed after losing well-paying jobs they will never replace, are being subjected to state and local tax hikes (see: Illinois Raises Income Tax, Then Hikes Benefits) while they listen to a surfeit of ideas on how to spend on student loan forgiveness, mortgage relief, low-income health care, educational benefits for illegal residents, and public pensions. If they are paying attention, they will hear agenda-laden statements like this one from an IRS official that sounds like it was written by Obama campaign staffers:
Wealthy people who unlawfully hide their money offshore aren’t paying the taxes they owe, while schoolteachers, firefighters and other ordinary citizens who play by the rules are forced to pick up the slack.9
All taxpaying Americans have been picking up the tab for salaries, pensions, and benefits for public employees who have been poster children for Democrats demanding we turn the Buffett Rule into law. Many of us are too young to collect what we are owed from Social Security or to take part in Medicare but are involuntarily paying our fair share through our employers with no expectation of a return. Is it any surprise that the self-employed are reticent to voluntarily dump their hard-earned incomes into these programs?
Both Social Security and Medicare lose vast sums to waste and fraud. Benefits are paid out to those who were never intended to be on the beneficiary rolls. This does not excuse the failure to pay self-employment or any other taxes, but it should give federal officials pause to think about how many Americans stung by four years of Obama will refuse to pay what they owe in the years to come. Meanwhile, we have over one-half trillion dollars lost to improper federal overpayments10 and to tax debt owed the IRS. Perhaps when the election is over and Congress is spinning its wheels and making speeches about the fiscal cliff, someone will take the time to pass a bill allowing the IRS tax collections folk to list tax debts on the credit reports of deadbeat taxpayers.