US Loses Tax Revenue Because of Math Error
July 2, 2014 Taxation in USA
WASHINGTON D.C. – A few simple math errors are costing the US billions in tax revenues, and are helping wealthy business owners to pay less tax than employees with comparable incomes.
The US government could lose out on as much as USD 5 billion in tax revenues due to an error in the mathematical formula applied to the calculation of Social Security and Medicare taxes paid by business owners, according to information in a new report released on June 1st by the US based non-government organization the Tax Policy Center.
The disparity in taxes paid is caused by unintended differences in the formulas detailed in the Federal Insurance Contributions Act and the Self-Employment Contributions Act, which apply to earnings for employees and business-owners respectively.
The formula for the calculating the tax obligation of business owners and employees should have provided the same results at comparable income levels, but, due to at least three separate mathematical errors, self-employed individuals can enjoy much lower tax obligation and more tax deductions, especially at higher income levels.
The experts of the Tax Policy Center estimate that if action was taken now to correct the mathematical error, the government could see a USD 5 billion boost in tax revenues over the next 10 years alone.
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