Wealthy taxpayers have one big advantage with the IRS (that has nothing to do with Trump’s tax reform):
New research argues the ultra-rich paid a lower overall tax rate for the first time ever last year than the other income groups. “There are a lot of advantages to being rich, and this is one of them,” said Mark Mazur, director of the Urban-Brookings Tax Policy Center. The more money you make, he said, the more money you have to pay someone to find ways to legally avoid paying tax.
The wealthy also have a slew of savvy professionals to help them navigate a complicated tax system, according to Internal Revenue Service statistics. Nearly 69% of taxpayers earning between $200,000 and $500,000 a year used a professional tax preparer versus 85% of those earnings between $500,000 and $1 million, and 92% of people earning at least $1 million.
Why the rich don’t file their taxes like everyone else The wealthy obviously have more complicated returns, and that can cause problems. IRS data for this tax season, as of July, showed a $1.13 trillion tax liability for all individual returns. Tax liability for taxpayers worth at least $1 million accounted for 14% of that total bill. Including liabilities incurred by those who earn between $500,000 and $1 million, that percentage rises to 25%.
Kyle Pomerleau, chief economist at the right-leaning Tax Foundation, said there’s a big difference between illegal tax evasion and tax avoidance “which is totally normal and legal.” Tax avoidance is finding the ways within the law to keep taxation at its smallest amount. That, after all, is what the paid professionals are there to do.
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