GAO Report Supports Baucus Proposals To Close Tax Gap
Senate Finance Committee Chairman Max Baucus (D-Mont.) welcomed this week the
Government Accountability Office’s (GAO) report on the 6th September,
2007, Joint Forum on Tax Compliance, which discussed methods to increase compliance
with tax laws. Though the report did not make any conclusions or recommendations, it did
list a number of options that forum participants agreed were viable methods
for cutting the tax gap, or the difference between what taxpayers pay voluntarily
and what the law says they ought to pay. Sen. Baucus has championed two of the
forum’s listed options: increased reporting of tax information and tax
preparer regulation. “This report underscores that the tax gap is a serious problem that is
not going to be easy to fix,” Baucus stated. “The complexity of
our tax laws and the increasingly global economy are driving the need to take
a good look at tax reform in order to maintain our nation's competitiveness,
improve tax compliance and reduce taxpayer burden. I am holding a series of
hearings on tax reform that will explore options to improve tax compliance and
ideas to improve tax administration that will help reduce the tax gap without
raising taxes on anyone.” The Joint Forum on Tax Compliance was a combined effort of the GAO, the Joint
Committee on Taxation (JCT), and the Congressional Budget Office (CBO) to start
a dialogue on options for closing the tax gap, which is the difference between
the amount that taxpayers pay on time voluntarily and what they should pay under
the law. The IRS estimates that the government lost USD290bn to the tax gap in 2001,
though forum participants agreed that these estimates are likely understated. All of the forum participants also agreed that the 84% of taxpayers who follow
tax laws have to carry the extra burden left by those who don’t. The GAO
predicted that closing the tax gap by a mere percentage point could produce
an extra USD3bn annually, and said that reducing the tax gap would improve the
nation’s fiscal stability. “Most importantly, this is about fairness – this doesn’t
raise anyone’s taxes,” Baucus said. “The sooner we get full
tax compliance, the sooner we can lower the tax burden for honest Americans
who abide by our tax laws. I look forward to working with the GAO, JCT, and
CBO to explore options for reform.” .
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