Schumer attacks wealthy individuals and businesses who avoid paying taxes

The middle class is paying for the loss

By FRITZ MAYER

WASHINGTON, DC — New York Senator Chuck Schumer lashed out last week at wealthy individuals and businesses who avoid paying taxes through what he called “offshore tax shelters and huge tax loopholes.”

On a conference call with upstate New York reporters, Schumer said individuals and corporations who funnel money through offshore accounts to avoid paying taxes cost the federal government at least $70 billion a year. He added that those who avoided paying taxes through other means contributed to a “tax gap” of $300 billion dollars per year. Middle class taxpayers, who don’t have the means to set up complicated tax dodges, he said, are picking up that gap.

In practical terms, Schumer said that taxpayers were paying 13 percent more than they would have to if everyone paid the taxes they owed. The senator broke the numbers down by NY counties. In Sullivan County, for example, there are 28,869 taxpayers who paid federal income taxes for 2005. They paid almost $62 million more than would be necessary if the IRS could collect all the taxes it was due.

Schumer’s remarks came a day after IRS commissioner Mark Everson testified at a senate subcommittee that the growing global economy allows wealthy taxpayers to hide money in offshore transactions that are nearly invisible to tax agents.

At the same hearings, two billionaires, Robert Wood Johnson IV, the owner of the New York Jets football team, and Haim Saban, the creator of the Mighty Morphin Power Rangers television show, told senators they used off-shore transactions to avoid paying taxes because advisers said it was legal. Off-shore transactions are not legal, and the men made settlement payments to the IRS.

In the conference call, Schumer said, “People who exploit these loopholes and evade taxes aren’t just cheaters, they’re criminals.” But such people and practices may get even less scrutiny in the future.

According to an article in The New York Times on July 22, the Bush administration plans to cut 157 of the IRS’s 345 estate tax lawyers, who review tax returns of the wealthiest U.S. taxpayers.

The Times reported that six auditors at the IRS, who are likely to lose their jobs when the cuts come, said the move was part of a behind-the-scenes plan to protect politically well-connected people from thorough tax audits.

Schumer and others in the senate want to increase the IRS staff, rather than decrease it. Legislation was passed out of the finance committee, where Schumer is a member, which would provide more than $700 million to put programs into place that would shrink the tax gap, such as simplifying the tax code so taxpayers can’t exploit complexities and hidden loopholes and increasing enforcement efforts. Schumer said the $700 million would bring many times that amount in increased revenues paid to the IRS.