Tax Day: Who Pays, Who Evades

The lower your income, the more likely you are to pay your fair share of taxes–or even more than your fair share. Billionaires and big corporations still manage to evade taxes and Republicans in Congress continue to block funding for auditing them. Also: contrary to Republican propaganda, immigrants pay more than their share of taxes.

Immigrants pay billions and billions of dollars in taxes to local, state, and federal governments. Undocumented immigrants pay taxes. Undocumented immigrants pay for Social Security and Medicare, even though they will never see a dime of benefits. Their billions of dollars paid into these systems bolster Social Security and Medicare for the rest of us. 

America’s Voice summed it up:

“Despite cynical myths, the fact is that undocumented immigrants make significant tax contributions, including paying into federal programs that they can never access unless they can adjust their immigration status. Many of these essential workers are the backbone of industries like construction and agriculture, working to build homes and businesses, repair roads and bridges, and put food on our tables.  

“In 2021 alone, undocumented-led households ‘contributed $30.8 billion in total taxes, including $18.6 billion in federal income taxes and $12.2 billion in state and local taxes, based on data from the American Community Survey,’ Immigration Impact said in another report last year. Undocumented workers also contribute billions to Social Security, paying an estimated $13 billion into the system annually. The Social Security Administration (SSA) estimated ‘that unauthorized workers have paid a whopping $100 billion into the fund over the past decade,’ Vice reported in 2014. 

“Undocumented immigrants have been critical in helping sustain the fund, as acknowledged by the SSA itself. ‘We estimate that future years will experience a continuation of this positive impact on the trust funds,’ SSA officials said in 2013. So rather than ‘take’ benefits, as critics of immigration baselessly allege, undocumented immigrants are actually subsidizing you and me.”

And as for the billionaires and big corporations, here’s a quick summary from a previous blog post:

A couple of reports document what my dad always knew: the most wealthy and powerful corporations and individuals still get rich off all the rest of us. Robert Reich sums it up on BlueSky:

5 years of exec pay: 

Tesla: $2.5 billion 

T-Mobile: $675 million 

Netflix: $652 million 

Ford: $355 million 

5 years of federal income taxes paid: 

Tesla: $0 ($1M refund) 

T-Mobile: $0 ($80M refund) 

Netflix: $236 million 

Ford: $121 million 

Anyone else see the problem here?

Reich’s quick summary comes from “More for Them, Less for Us: Corporations That Pay Their Executives More Than Uncle Sam,” a detailed study published in March 2024 by the Institute for Policy Studies. In the bullet-pointed summary of its findings:

• 35 major U.S. corporations — including famous names like Ford, Netflix and Tesla — paid less in federal income taxes between 2018 and 2022 than they paid their top five executives. All 35 were cumulatively profitable over that five-year span.
• Among these 35 corporations, the total compensation reported for named executive officers over this five-year period was $9.5 billion. Their combined federal income tax bills came to a negative $1.8 billion — that is, rather than paying taxes, they received refunds.
• An additional 29 profitable corporations paid their top executives more than they paid in federal income taxes in at least two of the five years of the study period.
• 18 corporations in the study — despite reporting net profits over the five-year span — paid $0 in federal income taxes. Actually, except in one case, all paid less than zero because they got refunds. These 18 corporations that paid $0 in federal income taxes found the resources to lavish their executives with a cumulative $5.3 billion in pay packages.
• The 64 firms in the study posted cumulative pre-tax domestic profits of $657 billion between 2018 to 2022, yet paid an average effective federal tax rate of just 2.8% (the statutory rate is 21%) while paying their executives over $15 billion.

Of course, the problem is not just sky-high executive salaries and tax evasion. Even if these corporations were paying the corporate tax rate, that rate is lower than it has been in most of U.S. history. The “effective cumulative federal, state and local corporate tax rate” has been slashed from more than a 50 percent tax on profits in the early 1950s to less than 20 percent now. Before 1967, corporate income taxes made up more than 20 percent of federal income, but corporate tax cuts decreased their contribution to 8.7 percent in 2022.  

The August 2023 Executive Excess report, also from the Institute for Policy Studies, focused on the “Low Wage 100,” the 100 S&P 500 corporations paying the lowest median wage. Among its findings: “Low-Wage 100 CEO pay averaged $15.3 million and median worker pay averaged $31,672 in 2022.” 

As the photo at the top of this blog post notes, Lower tax rates help individual billionaires, not just big, profitable corporations. For the record, the highest U.S. marginal tax rate is 37 percent. That is the highest rate paid by individuals on the portion of their income in excess of $578,125 in 2023. That’s a big drop from 91 percent from 1951 through 1963.  

Even 37 percent is too much for the wealthiest taxpayers. Special preferences written into the tax code mean many pay far less. In an analysis that describes legal, illegal, and “gray area” strategies, Vox reports: 

“How much tax a wealthy person owes in a given year is a complex tapestry threaded with exemptions, deductions, credits, and obscure loopholes you’ve never heard of. The ideal is to owe zilch. If that sounds impossible to achieve, just look at the leaked tax returns of the wealthiest Americans that nonprofit news site ProPublica analyzed in 2021: Over several years, billionaires Elon Musk, Jeff Bezos, and Michael Bloomberg, among others, paid no federal income taxes at all.”

The über-wealthy get away with illegal and “gray area” maneuvers because the IRS has been starved of the money or resources needed to audit them. 

“’When I look at what we call our tax gap, which is the amount of money owed versus what is paid for, millionaires and billionaires that either don’t file or [are] underreporting their income, that’s $150 billion of our tax gap,’ [IRS Commissioner Danny] Werfel said. ‘There is plenty of work to be done.’

“Werfel said that a lack of funding at the IRS for years starved the agency of staff, technology and resources needed to fund audits — especially of the most complicated and sophisticated returns, which require more resources. Audits of taxpayers making more than $1 million a year fell by more than 80% over the last decade, while the number of taxpayers with income of $1 million jumped 50%, according to IRS statistics.”