At a time when the nation’s deficit still poses a challenge and the government seems to have a hard time dealing with it, news such as that of the IRS show there’s one significant issue it needs fixing. If only for 2006 alone, taxpayers owe the government $385 billion, the data for 2008 – 2011 would be staggering.
According to a report from the Internal Revenue Service (IRS), U.S. taxpayers owe the government $385 billion in unpaid taxes for 2006. Reuters writes the amount is up about a third from the tax gap five years before. Despite the increase, IRS states that voluntary compliance remained steady at about 83 percent for both 2006 and 2001.
The IRS estimates that the gross tax gap was $450 billion in 2006, almost $100 billion larger than what it was in 2001. The net tax gap was $385 billion in 2006, compared with $290 billion five years before.
However, despite the obvious increase of the amount of tax not paid on time and never paid, the tax agency said that “the tax gap is largely in line with the growth in total tax liabilities. In addition, some growth in the tax gap estimate is attributed to better data and improved estimation methods”.
On the other hand, Bloomberg writes that if the IRS had collected all of the taxes owed in 2006, the United States could have had a surplus of as much as $136.8 billion. The deficit, the United States, recorded that year was $248.2 billion.
As expected, the tax agency’s report fueled reactions with politicians, arguing on ways to increase compliance through tax code reform. Democrat Senate Finance Committee Chairman Max Baucus, said the “report shows that closing the tax gap needs to be a major focus of tax reform”. Baucus has also emphasized that the government must try hard to recover the lost funds, particularly at a time when the federal budget is being squeezed for every dollar of savings.
Michelle Dimarob, spokeswoman for House Ways and Means Committee Chairman Dave Camp, believes “the best way to increase compliance is to reform the tax code to make it simpler”.