FOLLOW THE REAL BIG MONEY / THE NEW YORK TIMES EDITORIAL ( VERY HIGHLY RECOMMENDED READING )

Editorial

April 24, 2011

Follow the Really Big Money

Things are going well for the wealthy. The top income tax rate is lower than at nearly any time since the 1930s. President Obama, who promised to repeal Bush-era tax cuts for the wealthy, agreed to extend them for another two years. And Republicans are pushing to slash trillions in public programs in order to cut the top rate more.


Amid these bountiful breaks, the Obama administration is at least trying to ensure that the beneficiaries of this largess pay the taxes they owe. The Internal Revenue Service has opened a Global High Wealth Industry office to investigate the tax compliance of monumentally rich Americans. It is following up on its victory against the Swiss bank UBS — which handed over data on 4,450 Americans with secret offshore accounts — by opening investigation offices in Panama, China and elsewhere.


The numbers attest to this new vigilance. The I.R.S. last year audited the tax returns of 2,458 taxpayers who earned $10 million or more, up from 1,553 in 2008. Audits of taxpayers making $1 million to $10 million jumped by half over the period, to 21,660. If you made more than $1 million, your chances of being audited in 2008 were about 1 in 23. Last year, they were about 1 in 13. The odds of the average taxpayer being audited are about 1 in 100.


Most estimates put the tax gap — the difference between what should be paid and what is paid — at more than $400 billion. Academics say most of the cheats are in the top tax bracket, so it is good to see the I.R.S. investigators focusing there. The country would be in even better fiscal shape if Congress and the White House stopped giving the rich so many tax breaks.