It’s Not Like Tax Cheats Are Rare
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 — 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:
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.