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- New IRS data shows that some of America's highest earners are just not paying taxes.
- Sen. Ron Wyden of Oregon requested data from the IRS on taxpayers who are not filing returns.
- Nearly 1,000 taxpayers making over $1 million aren't paying up and could owe billions.
The average American taxpayer pays $16,615 in income taxes annually — but for some of the wealthiest Americans, that number is zero. That's because they're simply not paying up.
IRS data requested and released by Sen. Ron Wyden of Oregon, the chair of the Senate Committee on Finance, shows that over 10,000 high earners making at least $200,000 a year owed at least $100,000 each in unfiled taxes going back to tax year 2017.
Nearly 1,000 taxpayers who make over $1 million annually didn't file taxes multiple times from 2015 to 2020, according to an IRS memo viewed by Insider. Those taxpayers owe a total of over $34 billion as of May 2023. Out of that high-earner non-filer group, 58 earned at least $10 million and owed over $16.5 billion combined.
According to IRS data, taxpayers earning at least $10 million paid an average of $7,914,363 in income tax in 2020 — meaning that the IRS and the American public are missing out on a whole lot of money.
"Over the last decade, Congressional Republicans have led the push to cut IRS resources in order to let wealthy tax cheats off the hook — and according to this data they've succeeded," Wyden wrote in a letter to IRS Commissioner Danny Werfel. "Odds are, if you're a wealthy tax cheat that doesn't even bother to file a tax return, you'll get away with it."
It's no secret that America's ultrawealthy often pay less in taxes than one might expect, both through legal elements of the tax code and other times through underreporting their income. The IRS and economists found in 2021 that the top 1% of earners don't report nearly a quarter of their income and that the top 0.1% of earners underreport at nearly twice that rate. The Treasury Department has found that the top 1% of American earners evade $163 billion in taxes annually, with the top .05% dodging $120 billion every year.
Scrutinizing the returns of the ultrawealthy pays off: A paper from economists at the Department of the Treasury, Harvard University, and the University of Sydney found that every extra dollar spent auditing the top 90th percentile of earners yielded up to $12 in revenue. That paper looked at IRS audits from 2010 and 2014 and found that a dollar spent on auditing the top 0.1% of earners could yield up to $6.29.
But auditing the ultrawealthy is more expensive and time-consuming, and those audits have plunged in recent years. In 2012, 13.6% of Americans earning at least $10 million saw their individual-income returns examined; by 2018, that number fell to 9.2% — with the IRS recommending $177,176,000 in additional taxes from that group.
Some of that decline can be chalked up to reduced funding for the IRS, whose budget has been slashed over the last decade or so. An infusion of cash from the Biden administration's Inflation Reduction Act has helped turn that around somewhat, with the agency now clawing back $38 million from 175 millionaires and pursuing 1,600 more taxpayers who still owe millions.
"This data makes clear that despite current political narratives peddled by my Republican colleagues, it remains exceedingly rare that wealthy individuals are subject to prosecution for willful failure to file violations, and thousands continue to evade responsibility for failure to file," Wyden wrote. "I urge the IRS to initiate enforcement actions against every single millionaire non-filer as part of its ongoing effort to use Inflation Reduction Act funding to restore fairness in tax compliance."