What was bad news for Tom Daschle, Nancy Killefer, Tim Geithner and now Hilda Solis might be good news for the federal government. Their recent tax woes --
Their recent tax woes — by which we mean their getting caught not paying their (or their spouses’) taxes — mean that the IRS is probably right about (or even underestimating?) the extent to which Americans — both individuals and corporations — cheat on their taxes. (In its latest tally, the IRS estimates that the 2001 tax gap — the chasm between taxes owed and taxes actually collected — was $345 billion.)
Why is that good news? Because much of that could be retrievable.
As Te-Ping Chen at The Center for Public Integrity points out this week, every dollar the IRS spends on tax enforcement returns five dollars. Chen also offers a few reasons why the IRS hasn’t closed the gap in recent years:
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One reason is a slump in IRS staffing. Over the past decade, the number of agents that perform audits has dropped by over a third. Meanwhile in 2007, in what the Syracuse University-based Transactional Records Access Clearinghouse calls a “historic collapse,” only 26 percent of corporations holding at least $250 million in assets had their books inspected — compared to more than 70 percent in 1990. (The fact that Congress outsourced debt collection to private agencies in 2004, costing the government $37 million more than such agencies manage to collect, hasn’t helped either.)
Sen. Kent Conrad (D-N.D.), who chairs the Senate Budget Committee, has been screaming from the rafters for years about how Congress needs to find some way to close the tax gap. Daschle & Co. might just provide the impetus for lawmakers to start trying in earnest.