Fix the Tax Gap, Fund the IRS

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Although the framework of the bipartisan infrastructure plan has been largely agreed on by a group of both Democrats and Republicans, it was only a matter of time before the more extreme elements of the GOP tried to undermine the deal. And right on cue as the bipartisan working group is attempting to finalize the bill’s details, some conservative groups are now demanding that the deal not include increased funding for IRS enforcement. This demand is absolutely ridiculous – here’s why.

Taken at face value, their claims that spending more money on IRS funding is not fiscally responsible are plainly absurd. Spending money on IRS enforcement brings in significantly more money – it’s a net positive investment. That’s why it’s being used as a pay-for, not as something that has to be paid for.

On a deeper level, being opposed to giving the IRS more money for enforcement is essentially an open endorsement of allowing millionaires and billionaires to commit tax fraud without any consequences. As a recent report from the Treasury Department revealed, wealthy Americans currently get away with an incredible amount of tax evasion every single year in the United States. In 2019 alone, $580 billion that was owed to the IRS was not paid. Over the next ten years, experts predict that this “tax gap,” or the gap between what taxes are owed and what taxes are paid, will reach over $7 trillion, or 15% of all taxes owed. That is, to put it plainly, a lot of money. And most of it is being kept by rich people. 

Just the top 10% of earners account for over 61% of the total tax gap. This shouldn’t come as a surprise, because the richer you are, the more complicated your finances become, and the more difficult it is for the IRS to tell if you’re skipping out on paying your fair share. While average people are required to have money withheld from every paycheck, rich investors are supposed to decide for themselves how much to send in and send a check to the IRS every year. Not surprisingly, this leads to a huge amount of abuse.

And because the IRS doesn’t have enough investigators with the necessary expertise to go after rich people with complicated finances, they audit poor people at a higher rate – not because it’s more important to go after them, but because it’s easier.

So how did this happen? We got to this point because conservatives in Congress have systemically and deliberately underfunded the IRS to the point where between 2010 and 2017, it lost 43% of its tax technicians and 44% of its revenue officers. This notion left the IRS with the same amount of enforcement officers as it had in the 1950s when our economy was one-seventh the size it is now. That is unacceptable.

The increased IRS funding is really the only piece of the bipartisan infrastructure bill’s funding package that is worthwhile, so it’s no wonder conservative groups are attacking it. But in the face of their attacks, Congress needs to stand strong on this issue. The U.S. government’s inability to stop tax evasion has been a growing problem for decades, but in its current state, the IRS is almost fully incapable of properly identifying and punishing criminal tax evaders. The system we have very clearly isn’t working – it’s beyond time to fix this problem and put a stop to criminal tax evasion by properly funding the IRS. 

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