If you didn't catch this on TaxProf, you should read it on Forbes. Janet Novack, Oct. 21, 2008, Rich Cheat More on Taxes, New Study Shows.
A new study based on unpublished Internal Revenue Service data shows the rich are different when it comes to paying taxes: They hide more of their income.
The previously unreported study estimates that taxpayers whose true income was between $500,000 and $1 million a year understated their adjusted gross incomes by 21% overall in 2001, compared to an 8% underreporting rate for those earning $50,000 to $100,000 and even lower rates for those earning less.
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The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains.
Obviously, this is just one more piece of evidence suggesting that more third-party reporting and other forms of enhanced enforcement need to be instituted for high-rollers and the types of income they tend to receive.
The Sept. 12, 2008 study, The Distribution of Income Tax Noncompliance, by Andrew Johns and Joel Slemrod, is available on the University of Michigan website.
[updated Oct. 28, 2008 to include link to study]
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