In today’s New York Times story about how America loses more than a quarter trillion dollars in tax revenue each year to cheating, the paper claimed, “The I.R.S. said that 80 percent of taxes owed but not paid by individuals were a result of underreporting of income, often by people working in the service sector.”
It was hard for me to believe that 80 percent of about $200 billion was being stolen mostly “by people working in the service sector” (waiters underreporting tips, fast food workers underreporting income, etc.), as the Times suggests. If that were the case, I would think service sector workers in America would be far more well-off than they are today.
So I went to the primary source, the IRS’s new report, and found that yes, it is true that “noncompliance from underreporting account for more than 80%” of the missing tax revenue. However, page 10 of the report breaks down that statistic a bit more. It shows specifically that the underreporting of “business income” accounts for about $100 billion of the tax gap, and underreporting of “wages, salaries, tips, etc.” account for just $18 billion. “Business income,” remember, is defined as money made by sole proprietorships, S corporations, etc. The category includes wealthy lobbyists, sports agents and high-paid political consultants — not exactly what you think of when you hear the phrase “working in the service sector.” In fact, I can find absolutely no data in the IRS report which justifies the New York Times suggesting that the problem “often” emanates from those “working in the service sector.”
What’s my point? Simple: the media often reinforces dishonest stereotypes designed by conservatives to help the right-wing pursue its ideological agenda. The New York Times’s error plays into the right-wing’s “persecuted rich” myth, reinforcing the idea that the rich are overtaxed, and it is working class people who are ripping off the system.