Tax Lawyer's Blog

Ezra Klein of Newsweek writes that the IRS should expend it’s new resources¹ on going after tax cheats:

A report released by Citizens for Tax Justice shows that between 1995 and 2005, the IRS’s budget was slashed by a fifth. Between 1995 and 2003, its enforcement division lost 36 percent of its staff. They were barred from conducting research on tax evasion, which meant they lost the ability to keep up with new tricks that accountants had discovered to game the tax code.

No one likes being audited, of course. But no one likes paying unnecessarily high taxes, either. And enforcement does work. Eric Toder, a tax-policy expert at the Urban Institute, says that each dollar spent on IRS agents returns about four or five dollars in recovered taxes.

There’s a good argument to be had over whether taxes should be higher or lower. But everyone agrees they should be fair. When they’re not, it raises taxes for those willing to pay them and increases the sense that the system is rigged. We can do better, but first we’ll need some agents.

I agree with Mr. Klein but go one step further and say that the government has no business raising anyone’s taxes until it closes the tax gap.²

Footnotes:

¹  According to Klein, the Congressional Budget Office (CBO) estimates that the IRS will need an additional $5 to $10 billion to enforce the tax provisions of the new healthcare reform bill.

²  The tax gap is the difference between the amount the IRS actually collects in taxes every year and the amount that it would collect if there were across-the-board compliance. CBO estimates this figure to be around $300 billion a year.

Related Posts:

• IRS Auditors to Target the Rich
• IRS Vows to Intensify Collection Aggressiveness to Close $300 Billion Tax Gap
• Tax Vox Proposal: Hire More IRS Agents to Close Tax Gap

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