Why I Pay Too Much in Taxes

[Clay Olbon II]

At 4:20 PM 5/6/96, E. ALLEN SMITH wrote:
>From:   IN%"frissell at panix.com"  "Duncan Frissell"  6-MAY-1996 16:04:24.96
>
>>Actually, as a percentage of income, tax evasion is probably more prevalent
>>among the poor than the rich.  Because they are less exposed.  Studies of
>>spending show that the poorest 20% of Americans spend twice their reported
>>income.
>
>        Quite. The poor can get away with this for multiple reasons, including
>being on more of a cash-based economy. But the largest reason is probably
>that the IRS doesn't care nearly as much about each individual at the low
>end of the income ladder as they do about any evasion involving a lot of money.
>Now, the low end tax evasion probably costs the government a lot more than
>the rich does... but it's also a lot harder to pursue.
>        -Allen

There are a couple of main reasons that the poor spend more than their
reported income.  First, many of the elderly are included in the "poorest
20%", since this is based on income alone and not net worth.  Many of the
elderly are spending down their retirement savings.  Another factor, of
course, is that welfare, food stamps, free/subsidized housing and other
transfer payments are not included in income calculations.  I have seen
reports that show that in many states, this is equivalent to a full-time
job paying ~$9/hr.  Not showing these as income helps keep the "official"
poverty rate high.  I'm not sure if social security is included in income
calculations for "poverty rate" purposes, anyone know?

        Clay

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