According to a new study released on Monday morning by IRS researchers and academics, the richest 1% of American households do not report about 21% of their income, primarily through complex tax avoidance strategies that enable them to avoid the federal government's increasingly rare audits of the wealthy. 

This discovery was found by two anonymous IRS researchers, Daniel Reck of the London School of Economics, and Emmanuel Saez of the University of California, Berkeley. This team has found that 6% of unreported income are among the wealthiest households who use maneuvers such as offshoring, pass-through businesses, and other avoidance strategies. 

The wealthiest 1% of taxpayers are shielding more than 20% of their earnings from the Internal Revenue Service, accounting for more than a third of all unpaid federal taxes. This costs the federal government about $175 billion in taxes per year. 

Years of IRS budget cuts, combined with the complexity of tax avoidance strategies available to the wealthy, have rendered avoiding tax obligations easier than ever before. They also say that these figures likely underestimate the true level of tax avoidance at the very top of the income scale.

In comparison to lower income levels, according to a 2019 report by ProPublica, the IRS has audited the poor at around the same pace as the wealthiest Americans in recent years, who have benefited the most from years of budget cuts and workforce shortages at the federal tax service.

Many plans exist to increase taxes on the wealthy. Let's start by collecting what the wealthy already owe. 

By Emilie Chi