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Thursday, February 5, 2009

Oregon's tax gap: $1.25 billion

So says the state Department of Revenue in this new report.

Comments (24)

what's next?...a mine shaft gap?

Mind the gap! Hey, it's less than a quarter of the total.

Jack - speaking of taxes, check this out:

If Solis and her husband file a joint return, isn't the income from the sole prop supposed to be included on Schedule C? If so, it's part of the joint return and both of them should have been aware of the problem. Egads.

it says the misreporting level among small businesses -- the great whiners about the tax burden and in Oregon the prime movers of tax caps -- is like 58%. Sure some of that is honest error, but geez. Sounds like a lot of forgetting to ring up the sale.
Misreporting among farmers -- 75%
Attorneys do better -- about 7.5% misreport. Of course they have a lot more to lose if caught in deliberate evasion.

I didn't know Oregon had that many people working in the Obama administration.

it's part of the joint return and both of them should have been aware of the problem.

Lots of assumptions behind your judgment, and they are not borne out (one way or the other) by the article: for example: that a claim for unpaid income tax (and not some other tax like a state or local property, sales or payroll tax) is involved; that the business is a sole proprietorship reportable on Schedule C; that this married couple files jointly; and that each participates in the preparation of the other's portion of the return. There must be others as well. Aren't you exhausted, Curious (a curious name for this kind of behavior, by the way), after jumping to all those conclusions?

Not reporting taxable income: So what else is new? This is the United States, after all, where after 30 years of GOP indoctrination about "evil big government", the prevailing mindset may be summed up as "I want it but I don't want to pay for it", or more succinctly, "something for nothing". Now there's a motto we could put on our money.

"something for nothing". Now there's a motto we could put on our money

At the rate we're going, "something worth nothing" might be a more appropriate motto to put on our money.

Seeing as the tax code is filled with loopholes for avoiding taxes, put there by well-heeled special interests, is it surprising that businesses find ways to avoid paying taxes? The gap is probably largely made up of undiscovered loopholes that are discovered at tax filing time.

The chart in the report that really grabbed my attention was one showing the underreporting gap of people who have income that is subject to little or no information reporting. These people are proprietors, landlords, farmers, etc. who receive a large portion of their income in cash. Their underreporting gap exceeds 50%! Oregon's tax compliance and collection system truly is broken, and I feel like a chump for always paying my fair share when so many others are not.

I think the numbers on underreporting beg the question, how are they determined?

Looked at another way: Department of revenue's primary job is to collect taxes, right? Seems they're doing a piss-poor job.

Just sayin'....

Seeing as the tax code is filled with loopholes for avoiding taxes, put there by well-heeled special interests, is it surprising that businesses find ways to avoid paying taxes?

Those damn "businesses" again...

If only there were no "businesses" all the "individuals" would be paying less.

That's the truth.

...and I feel like a chump for always paying my fair share when so many others are not.

Looks like Geithner, Daschle, Killefer (and more to come, I'll bet) punk'd you, Crank.

Is this a SWAG?

From what I could see most of the "mis"-reporting was cash transactions. However, if they are comparing what they should get vs. Fed returns, if someone doesn't report a cash deal on his Oregon tax, why would he report it on his Fed tax?

cc - I'm not against business, just get mad as hell when I look at the check I write to the IRS each year, and realize it is not much smaller than taxes paid by many big Corps that have huge executive bonuses/salaries and huge profits.

cash transaction businesses are ripe with fraud. When I owned several pizza joints, I got my hands on the IRS field op manual for pizza joint audits. They found that 60% of pizza joints UNDER reported income by 40%.

Heck, one of the joints I bought, the owner pocketed ALL cash transactions.

Do away with cash and watch tax revenue climb.

Correct me if I am wrong, but isn't the budget shortfall $800M and they have $1.247B in revenue just sitting there. I am sure there are some unemployed collections people in the state that could be put to work.

they have $1.247B in revenue just sitting there. I am sure there are some unemployed collections people in the state that could be put to work.

A lot of the tax gap is unreported income in the underground economy. That stuff isn't "just sitting there" -- you have to work hard at enforcement in order to find it.

Agreed. The report details many "best practices" that can be used to collect money. It would be nice to see us try them.

I am sure the IRS could be of some help with the "cash" industries. With my pizza restaurants, they could tell me how much revenue I had by the # of lbs of flour I bought annually.

Personally, I'm actually looking forward to the underground economy vastly expanding as this economic collapse really gets under way. Our loving government seems hell bent on turning this deflationary depression into a hyperinflationary one via some of the largest expansions of government spending in our entire history.

The country is stone broke. You know it. I know it. There is no more money to give away to foreign bankers. There is no more money to give away to the professional community organizers and their friends.

There is no money to pay for huge infrastructure improvements.

Where do our Federal, State, and local governments plan on getting funding ?

China and others have stopped purchasing our debt, in favor of more sound investments like precious metals.

They are going to have to inflate the currency in order to pay for all this. Can't say I blame them, but it does not bode well for the huge masses of unemployed and soon-to-be unemployed people out there.

It would be a very good time to have a government job with access to the keys, or to make good friends with someone who does, as well as a very good time to brush up on skills such as the welding trades.

There is an entire country out there waiting to be sold for scrap to the highest bidder, and those bids aren't going to be all that high, folks.

Good post, Cabbie. However, the coming inflation will affect all of us, not just people who are unemployed. China has not stopped investing in the US; it has reduced its investing here. Fortunately for the US, we now have so much Chinese money

If you want to retain your wealth, it's time to figure out how to invest in the debt securities of other countries that will likely have more stable currencies that the US. The dollar will experience a rate of inflation that we haven't seen since the hyperinflation of the Weimar Republic.

Frank, why do you want corporations to pay so much?

Let say you own stock in a corporation and, after paying substantial payroll, property, and other taxes, this corporation is still able to eek out a profit. Your portion of the profit is $100. The corporation pays a 35% federal corporate tax on your $100 plus another 6.6% to the state of Oregon leaving about $61 which it pays out to you in a dividend. You are then taxed at 28% for federal and 9% for state income taxes leaving about $40 for you to spend. That is a 60% tax rate for corporate earnings (on top of all the other taxes corporations pay) that must be incurred for the privilege of risking your money.

There has to be a rate in which people would simply quit operating businesses that employ most of us. If 60% income taxes are as inadequate as you seem to think, I wonder how much higher you think the tax rates should be?

The real point though is that no matter how hard government tries, it is impossible to tax corporations. Sure they write checks but the real burden is still borne by people. They may be shareholders whose 401K's don't grow as fast as they might, employees who earn less or customers who pay more, but these "taxpayers" are still us. Corporations are simply groups of people producing goods and services for other people.

1st paragraph of my previous post: add ..."that they can't afford to ruin us by stopping their investments in US treasury debt."

Sorry, computer hiccuped and prematurely posted.

Frank; how many people do you employ? Those evil big Corps you refer to provide employment to a bunch of people who use their salaries to feed their families.


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